The Original Meaning Of The Universal Obligation

The original idea of Universal Service Obligation was to provide equal and affordable access to means of trade and communication and bridging the regional conflicts (Dr. Beth Simone Noveck). It refers to the telecommunication system that connects a particular geographic region or majority of the citizens to public telecommunication networks (Further Guidance – related to Universal Service Obligations in Telecommunications in Jordan). It is the source of bringing awareness and providing updated information to general public by expanding affordable telecommunication services. These services also include access to Internet and fax facility.

The Universal Service Obligation is defined as services available for every one under identical conditions at an affordable cost. The services specified here refer to facilities that can be provided through a network. This makes service the goal while the network becomes the means of achieving it. The element of providing these services on identical condition to every one means they should be available without any discrimination among citizens and in geographical regions. This also includes the non-discriminatory factors and condition in quality and reliability of the service and service provisions. The availability of these of these services should be at affordable price and there must be no monetary hurdle for the users to subscribe to these facilities[1].

According to European Parliament the universal service is defined minimum service of specified quality to all users everywhere and, in the light of specific national conditions, at an affordable price”[2].

The definition given by European Union for universal service as “minimum set of services, of specified quality to which all end-users have access, at an affordable price in the light of national conditions, without distorting competition”[3].

The original objectives

The purposes for implementing telecommunication networks are

• It is accepted as basic and essential right of common citizen. It is recognized as necessity for personal and business communication. Through telecommunication, common public gets awareness to all type of information and details, which includes government, social, educational and medical services. The access to telecommunication services is the demand and permit of full participation in 21^st
• It is necessary for the political, national, cultural and economical adherence. An effective telecommunication system is the basic and preliminary requirement of every market or nation-state created.
• It promotes relationship between economics and telecommunication development. A strong telecommunication system provides economic growth and enables the countries to reap the benefit of modern economy, which includes Internet and e-commerce facilities.
• It promotes development outside the thickly populated areas especially of industrialized countries, by easing the traffic and population through telecommuting in urban regions.
• It is used to exterminate the inequality among urban and rural regions. This objective is more practicable in low-income countries[4].

Financing of the Universal Service Obligation

To improve and maintain the universal services and make them available to every one and every where, the telecommunication required a planned system of financing and funding. It was necessary to determine the cost and funds required for the system. The main source of funds was the substituting the local residential phone rates by long distance and business rates. This was made possibly practical by regulating the closed network monopoly that existed in the past. In addition to these easily approached subsidies, some more subsidies, like schools and libraries, were targeted for further financing[5].

Initially the funding was done through fixed elements such as line rents and connection charges. In UK, the member States of European Union were allowed to finance any net costs of universal service obligations. They did so by using public funds under transparent conditions or by setting up a sector-specific fund. All existing sources active in the market had to contribute to these funds[6].

                The mechanisms currently used to finance the universal service are:

• Market based reforms: It includes privatization of telecom providers, applying competitive and low cost pricing.
• Mandatory Service obligations: It was done through licensing and implementing laws and regulations.
• Cross subsidies: This was done between or with in services provided by controlling operators.
• Access deficit charges: These are paid by communication to support the access shortage of incumbents.
• Universality Funds: By collecting revenues from various sources, independently generated these funds[7].

Variation in definition of universal service from country to country

The definition of Universal Service Obligation varies from one country to another due to different reasons. In some countries the definition is established as a part of national telecommunication development plans. In these definitions, target dates and service levels are included. While in some countries, state planners and policy makers establish certain level of universal service and are included in development plans and telecommunication policies[8].

Some definitions of the universal service were unrealistic and missed the target and objectives in developing and interim economies. To make the planned levels of universal service more effective; they should be linked with realistic accomplishment procedures. These definitions also include mandatory service obligations of a designated Universal service provider[9].

The realistic definition matches the local conditions of a particular place. It portrays the local economic and sector conditions and major factors include level and distribution of national income. The distribution of country’s population also plays an important role. The requirement of resources to render telecommunication services to same number of citizen will depend on whether the majority of people are living in modern areas or they are widely thinly distributed in rural areas. National geography, topology and security matters are also the reasons and important factors for variation in definition in different countries[10].

The basic difference between Universal service and universal access is that the former refers to the system of exclusively private or individual access while shared and community or public access is referred as universal access. Generally, in the definition of access, the voice-grade fixed access to PSTN is included however many other definitions broaden this requisite by including value-added services, like Internet access, to enhance the scope of universality regime[11].

The adoption of universal service instead of universal access by developed countries 

Universal service and universal access both were useful and beneficial for society but the modern and developing countries are adopting universal service system due to its exclusive private and individual access. They emphasize more on individual public and private access rather than shared access because they believe that universal service is more tending for advanced features, which evolve market condition and public demand. Providing fixed and shared access to public is obsolete and considered out dated in developing countries and they focus more on expansion of universal access, which is far more practical. They concentrate on implementation of new access service, rather than support pre-existing services. They aimed on expanding these services to distant and high cost areas as well as to low-income subscriber’s community. Their priority was to provide public access rather than private households access. The strategy of developing and advanced countries is to provide connection to fixed network to support voice telephony and fax transmission, public telephones, free access to emergency services, itemized billing and free access to operator and directory assistance[12].

To provide and maintain universal access to unserved and remote areas, the financial models are developed to determine the cost and feasibility of expansion. These models calculate the difference between the cost of service provide in particular areas and the planned telecommunication earnings available in these regions.

Liberalisation movement and its effect on universal service obligation 

Developed and advanced countries wanted to expose their goods to the world market and take benefit of the cheap and low-cost labour available in under developed countries. To achieve their goal they used the means of International financial Institution and regional trade agreements to reduce the tax and duty, and to ease environmental and labour standards. These variation and developments predicted increased production and export. It also opened doors to employment, larger investment and bigger profit, which will lead to better and improved standard of life. The merger with world economy is regarded as powerful means of economic growth and results in reduction of poverty.

To bring a variation in the telecommunication system and to provide universal services to public in developed countries, a liberation and freedom of system was required. The requirements for modification of system included domestic law and regulation change, rapid developments in digital technology and privatisation[13].

In United Kingdom, the liberalisation of telecom services and privatisation of telecom operators was done about twenty years ago and since than many countries are learning to adopt the similar alteration and trying to achieve successful methods and models. These countries have gained enough experience to understand the fundamental issues and to discover optional methods to address those issues. In most countries, which are members of World Trade Organisation (WTO), liberalisation has come to mean that the monopolistic market should be open to compatible conditions of facilities and services. This should be done regardless of the controlling operator is a state enterprise or a private enterprise. A vast number of developed and under-developed countries have assured to open trade to world market through telecommunication services at various levels. The General Agreement on Trade in Services (GATS) commitments confirms access to, and use of, public telecommunications networks and services on an honest, moderate and non-discriminatory grounds. This ensures that all trading partners are to be treated with equality[14].

The commitments of the General Agreement on Trade in Services (GATS) are seen as a source of large investment, expansion export opportunities and promote economic development.

Movement of universal service obligation into another stage as a result of the communication development in the developed countries

Liberalisation made an enormous impact on communication services by developing them and expanding them to greater extent.  The effect on telecommunication resulted in advancement of universal service obligation and moved towards innovation. The countries, which were developed in communication, many new technologies were introduced and further advancements were made in universal service obligations.

Liberalisation efforts have introduced new system of telecommunication financing and have also modified service choices, access and quality. Telecommunications services are recognised as help for economic growth and development and as factor of information to determine the efficiency of other economic sectors. The competitiveness of firms is determined by the quality, cost and availability of these services and influences a country’s capability to attain its full economic potential. The privatisation, deregulation and competition emerged as a result of the Liberalisation movement[15].

On the other hand, advancements in information and communication technology have simplified market reforms. The requirements for expansion of international business communications, especially Internet-based services, have drastically increased the importance of telecom competition. The breakdown of monopolies has significantly increased teledensity in several global markets and has also resulted in increased competition[16].

Liberalization has opened vast number of opportunities for telecom providers. Approach to new technologies and a greater range of services have also resulted in greater usage of telecommunication and services. It has also provided wider access to services, particularly in rural areas that commonly lack sufficient coverage.

 The liberalisation of telecommunications has tend to develop the service provided to the public in the Community, by offering a greater range and variety , while at the same time maintaining the quality and keeping the prices affordable.

The opening of world markets and information flow has greatly effected universal service obligations. The Commission communication of 1996 on universal service specify that this service provides affordable access for everyone to a network of voice, data and fax transmission and a voice telephony service. A framework is laid down for the financing of the costs relating to this service by market controllers. The definition of this universal service is to be reviewed in 1998 and thereafter at regular intervals. The strong approach adopted with liberalisation is designed to adapt the service along with technological developments, consumer needs and general interest considerations. The telecommunication is taken as universal service and has a positive effect at national level. For example, the assurance of access at affordable prices for everyone despite of the social, medical and economical drawbacks has now been introduced by the universal service concept[17].

The concept of “universal service” is based on three components: its purpose, its justification, and its funding system. Before the Telecommunications Act of 1996, the aim of the universal service was to provide basic telephone service to all residential users. Other advanced and improved services telecommunication s services, like long-distance and optional communication technologies such as wireless telephony or cable TV were not included in the plan nor were they part of this idea. Non-residential users were not the target of the plan. The expansion of universal service took place after1996 act. It extended from house to community centers including schools and libraries, and widened the scope of plan beyond imagination[18].

The Universal Service Directive imposed by the European Union

The European Union Universal Service Directive brings together all telecommunications concerns throughout the Community. A summary of the main aims is as follows:

1. To ensure provision of good quality services
2. To make available good quality services to the whole community at an affordable price
3. To provide choices and competition in the market to enable constant improvements and advancement of services.
4. To deal effectively with consumers’ needs and satisfy them.
5. To implement regular reviews of the scope and aims of the Directive
6. To define obligations of universal service providers
7. To specify applicable consumers’ rights

The Universal Service Directive achieves its aims by outlining methods of handling all areas of electronic communications networks. All technical terms are clearly defined in order to implement the required level of regulation in each specified area of telecommunications[19].

            The member states are required to approach their telecommunications operations setup on the basis of the European Union Directive effectively while protecting public interest. They are obligated to designate operators, implement effective calculation of net costs and allow for recovery of these costs by the operators.

There should be publicly available access to data communications such as phones, facsimile and Internet at fixed locations and at affordable rates. In situations where universal service prices are not compensating the net expenses incurred by the organization, the Directive allows compensation through various mechanisms. Some of these are the allowance of different tariffs for the different income groups, cost sharing via a common fund and recovery from government budget if possible. In any of the mechanisms opted for, it is encouraged to take measures to ensure an appropriate level of transparency within the market. Where necessary, an assessment of the net costs should be undertaken so as to avoid any distortions.

The Directive also ensures that the Member States provide telephone directory inquiry services and public pay phones to all, including people with special physical and social needs. The Member States are given the due power over their designated operators, with the purpose of complying with the Directives, and will also intervene directly in order to entitle certain consumers to specific benefits. However, these obligations should only be implemented when necessary to meet defined objectives, and should be proportionate, clear and restricted by certain factors such as time.  There is an obligation upon the Member States to ensure that customers are provided facilities such as itemized billing, call barring, payment options etc and measures to be undertaken in case of non payment. The operators are required to publish information on the quality of services provided and set certain policies to assure that targets are met[20].

There is very heavy emphasis on striking the critical balance between sustaining an acceptable standard of consumers’ rights and relying on markets own mechanisms to achieve high levels of productivity and quality of service.

The need for revision of the universal services considered from time to time based on the market demand and people needs

Article 15 states that the European Commission is required to review the scope of the Universal Service Directive sporadically. This should be done in light of the fast developing technology, the economy and social changes throughout the European Union over time. However the basis of these revisions needs to be formed upon the services being used by the consumers as compared to the services that are available to the consumers, at the time of the review. Also the Commission needs to consider the developments in the services that have taken place over the period, as compared to the developments in the usage of consumers. This would highlight changes in the way services are being provided, and how they are being received by the end-users[21].

The first review was due in 2005, two years after the Universal Service Directive was published. The European Commission in great depth carried this out. The main conclusions were:

Broadband Internet Services: an extension of the existing Universal Service Obligations is not required, as it is not used by majority of consumers.

Mobile Communication Services: there were no affordability issues that need to be considered and defined through a Universal Service Obligation[22].

Several long-term issues were raised. It is widely agreed that the Universal Service Directive should evolve over time to accommodate the competitive environment. Although these can only be acknowledged once the more technological advances in telecommunications have been subject to greater experience, and consumers are better informed. Therefore, the discussions in the review were somewhat limited by these factors[23].

The consequences on some people who are not able to afford these services and the rural areas, if universal service obligation is left to the competitive market

If Universal Service Obligation is left solely to the free market, competition, and consumer demands, this would definitely ignore the minority of consumers that have special financial and physical needs. The debate of competition versus a monopoly of operators argues that it is overall beneficial for the development of telecommunications networks in a competitive market, where the market players are constantly aiming to improve in terms of providing the demanded services as efficiently as possible. However competitive markets are reluctant to penetrate into non-profitable markets, such as rural areas and the lower income groups.

These areas may have been better treated under the public sector. It can also be argued that the existing availability of telecommunication services in the rural areas is actually due the competitive markets, where prices of basic services have been driven down to some extent, making it affordable for consumers in the rural areas. This is an achievement of one of the Universal Service goals, which may not have been accomplished by a sole regulator in the public sector, as it would not have been as sensitive to consumer needs as a competitive market player. Regardless of these conflicting viewpoints, it is understood that the majorities drive competitive markets, and consumers in rural areas need to be addressed by the state[24].

They are in fact social issues, and the welfare of these consumers should be part of the Member States social policy. Financing projects in rural areas can be funded through tax revenues, and various other mechanisms. Under the Universal Service Directive, Member States are obligated to provide services to all consumers; hence it is essential to subsidize a de-averaging of rates in the market in order to meet a level that is affordable by the lower income groups. These can only be achieved in rich and developed economies. The issue is given less importance in developing and transitional economies where the emphasis is on expansion of access services, rather than on providing access of existing services to each and every household. This is not feasible in the immediate future and tends to be a longer-term aim. At the same time, priority is given to public access services rather than private access in households. This strategy seems more sensible in areas where consumers cannot easily afford services at high prices.

There are several mechanisms to fund the universality policy, some of which are detailed as follows:

¨      Cross subsidies between or within the existing service operators would guarantee a decent funding of projects in rural areas.

¨      Compulsory service obligations need to be imposed on the operators, and regulated to ensure that specific services are easily accessible by consumers in rural areas.

¨      Universality funds need to be setup independently, which would generate income from various sources and would be administered by neutral parties or regulatory authorities.

¨      Some mechanisms are more economically efficient than others, and this depends on various factors, such as the type of telecommunications services being subsidized, the amount of the subsidies and their sources. Some new mechanisms may be adopted but in hindsight, they might prove to be wasteful of the existing resources[25].

Political issues exist and cannot be ignored. These can play a vital role in the hindrance of market reforms, cost based pricing and development through competition. Funding mechanisms based on these can not be implemented if the appointed regulators wish to uphold their power and not allow market players to perform more efficiently and provide better services at considerably lower costs.

Future of Telecommunication

The future holds a lot of scope in development and expansion of telecommunication technologies not only in private sectors that include business, industry and professional organisations but also carry importance in public sectors that includes household and individuals.

The rapid developments in e-commerce are leading it towards Internet based environment. In future, the services obtained through telephone will become Internet based and universal service may focus on availability of easily affordable broadband and access link to all the services. This would result in separating the approach to fundamental element from service providing elements. In this way, the universal service will only be dealing with access to infrastructure[26].

The modern communication has brought the far off countries closer and diminished the boundaries. With the help of modern telecommunication service call centers are established in the developing countries. These centers provide information, support and back-up sales service to millions of their customer without knowing their base. The growth and improvement of telecommunication infrastructure is the requirement of every developing and expanding economy, to keep at pace with the rapid growing market. The advanced telecommunication technologies are expected to fuel the innovation driven-economic growth. In future, the basic aim is to improve the broad-based access to services, which will result in expansion of network. This expansion will lead to further long-term benefits in terms of innovative[27].

The future of universal service focus on a vast number of long term issues and it is obvious that in future, the competition will continue developing throughout European Union. The member states will be more converged in future, but this may give rise to range of national differences[28].

The most important draw back faced in future by the universal service and telecommunication service will be the issue of funding. As there will be major developments in telecommunication technologies, a large funding will be a demand of future by universal services. The expansion of universal service to broadband can help in future funding of telecommunication. According to recent reports, UK has installed 2m broadband connections. In future narrow-band has no scope. In UK, BT and Kingston Communication were the universal service providers and they met the funding through cross subsidization with other services. With obvious development in technologies, these funding systems will require a change in future. The options available are direct levy on communication service consumers or indirect levy on communication service providers. The government may also intervene through taxation[29].

Currently, in UK, the usage of mobile phones, payphones, Internet access, wireless phones and e-commerce has widely increased. In future, the number of consumers will increase with the expansion of range in services provided. The current deficits and problems of these services, like limited Internet access capability of mobile phones, can be improved in near future, by ‘functional Internet access’, which will provide users the highest level services available over the Internet[30].

The directives show that in future the free toll facilities and all the other services provided will be easily used by every citizen and will have an easy access to highly advanced technologies.

The telecommunication system can be used for early warning system in future. It can give for prior intimation of an approaching disaster. It can provide minute to minute data recording through satellite surveillance in some areas, as well as transmission of data through high-speed telecommunication. The general public can get informed of an occurring natural disaster through telecommunication to prevent the human life losses.

The modern public telephone exchanges are enhancing advanced technologies to provide trouble free services to their consumers. For example fixed wireless technology is introduced to provide crystal clear voice transmission along with data and communication. The maintenance expenditures in this respect are negligible and can be easily afforded.

Conclusion

In the light of above information, the importance and usage of universal service is quite obvious. From the topics discussed, it is very clear that universal service is the requirement of developed and advanced countries and the developing countries are also taking benefits of the services provided. There have been tremendous improvements and progress in telecommunication services in past years and it is still moving towards innovation.

The major services included in universal service obligation are telephone, mobiles, payphones, wireless, broadband, Internet, e-commerce and similar facilities for consumers with special needs. The telephone and mobile service facilitate the user with free toll service. There are number of services provided through mobile phones such as GPRS, SMS and value-added services There are a vast number of consumers enjoying these service. Payphones are more applicable in rural areas due to unavailability of individual telephone connections. Similar is the case with Internet usage as the computers are not easily affordable neither is the access to Internet connection.  The wireless phones are the added facility for consumers. The Vodafone in UK has made tremendous development in household as well as in business community. The access while on move has enhanced the approach to certain services for citizens[31].

The broadband facility has been expanded via fiber optics, submarine-cable and satellite. It provides high-speed transmission of telecommunication data at relatively competitive price. The data provided through broadband is of super quality. A group of countries has formed a consortium, which has linked satellite and submarine-cable provide the interconnectivity members.

The access to Internet has been made easy and affordable for the people. The Internet service is provided at cheapest rate in competitive markets. Both business community and general public achieve benefits through Internet. E-commerce provides facilitation to financial institutes as well as their customers. It also links stock exchange to stockholders. It is widely used in banks and finance sectors.

The universal service has benefited the consumers with special needs and has aimed to provide service to all consumers on equality basis at affordable rates. There are continuous changes, improvements and innovations in universal service obligations and specific developments are made according to the needs and requirements of public and country.

Being a competitive market, the communication service is a source of revenue for government. The government is benefited by privatization of the telecommunication services. It takes an advantage of imposing taxes and levy on service providers as well as service consumers.

This concludes universal service concept is a need of modern and developed communication environment possessed by a country, in its private sector as well as in public sector.

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[1] Prof. Dr. Nico van Eijk: Universal Service, a new look at an old concept: Amsterdam 2004.

[2] Communication to the European Parliament. 1996

[3] Review of the Scope of Universal Service in Electronic Communications: Frequently Asked Questions: op cit. 3

[4] World Bank: Telecommunication Regulation Handbook 2000: Module 6. pg. 12

[5] François Bar: Tapping User-Driven Innovation: A New Rationale for Universal Service 2000 pg. 2.

[6] Review of the Scope of Universal Service in Electronic Communications: Frequently Asked Questions: op cit. 3

[7] World Bank: op cit. 4 Pg 10

[8] World Bank: op cit. 4 Pg 16

[9] World Bank: op cit. 4 Pg 10

[10] World Bank.: op cit. 4 Pg 16

[11] World Bank: op cit. 4 Pg 17

[12] World Bank: : op cit. 4 Pg  49

[13] World Bank: op cit. 4

[14] Review of market liberalisation and the impact on Caribbean pg. 2

[15] Review of market liberalisation and the impact on Caribbean : op cit. 14

[16] Review of market liberalisation and the impact on Caribbean: op cit. 14 pg. 3

[17] Noam E. M: Beyond Liberalization III: Reforming Universal Service

[18] François Bar: op cit. 5 Pg 2

[19] Directive of the European parliament and of the council: Directive 2002/22/ec of the European parliament and of the council of 7 march 2002on universal service and users’ rights relating to electronic communications networks and services.

[20] Directive of the European parliament and of the council: Directive 2002/22/ec of the European parliament and of the council of 7 march 2002on universal service and users’ rights relating to electronic communications networks and services. Op cit. 19

[21] Directive of the European parliament and of the council: Directive 2002/22/ec of the European parliament and of the council of 7 march 2002on universal service and users’ rights relating to electronic communications networks and services. op cit. 19

[22] Ofcom: Review of the Universal Service Obligation: Statement and Further Consultation. Issued: 30 June 2005 Pg 115

[23] Communication from the commission to the council, the European parliament, the European economic and social committee and the committee of the regions: Brussels, 07.04.2006 com (2006) 163 final.

[24] Mark Young: Future of Universal Service. Does it have one?

[25] World Bank: op cit. 4

[26] Review of the Scope of Universal Service in Electronic Communications: Frequently Asked Questions: op cit. 3

[27] Mark Young: Future of Universal Service. Does it have one? Co cit. 24 Pg. 11

²⁸  Directive of the European Parliament and of the Council: Brussels, 12 July 2000 com (2000) 392

²⁹ Ofcom: Commission communication: on the review of the scope of universal service in accordance with article 15 of directive 2002/22/ec

[30] Ofcom: Commission communication: on the review of the scope of universal service in accordance with article 15 of directive 2002/22/ec: op cit. 29

[31] Vodafone: Vodafone’s response to the European commission’s review of universal service. Pg   2