Universal Service - Funding

Funding

Most countries fund their USO by requiring the incumbent operator to be the designated USO provider or USP. USPs often held a previous legal monopoly protection. The USO is thus funded by rates/tariffs, and also by scale and scope economies. The risk of such an approach under allowing competitive entry is that a cross-subsidy exists and thus new entrants can potentially cream-skim (enter in only profitable routes or lines). One response is that some countries have a Universal Service Fund and have all their telecommunications industries pay a part of their net earnings into it. This fund has different names in different countries:

• Chile has the Telecommunications Development Fund (FDT),
• India has the Universal Service Obligation Fund (USOF),
• Pakistan has the Universal Service Fund Company (USF Co.),
• Taiwan has the Universal Service Fund (USF), etc.