Investing in access with USAFs

Following deregulation of Pakistan’s telecommunication sector beginning in 2003, telecommunications became one of the fastest growing sectors in the country, with newly established private operators channeling significant investment into infrastructure expansion and service development. The sector also attracted significant foreign investment into fixed-line and mobile networks, driving better service and lowering prices for consumers.

While liberalisation of the telecommunications market and ensuing competition brought services to a large portion of Pakistan’s population, major increases in telecom services were mainly concentrated in cities and larger towns. Service growth in rural areas was slow, as infrastructure development was difficult and service uptake was low. Prior to 2006, Pakistan’s rural teledensity was estimated to have been around a mere 1%, with telecom services providers covering only 70% of the rural population. Most rural areas only had access to one provider and even where there was demand, service providers lacked the capacity to build networks and deliver services. National teledensity at the time was estimated at around 12%, with the pace and quality of service penetration markedly better in urban areas.

Market liberalisation alone failed to ensure equitable coverage and commercial availability of telecommunications services across all parts of Pakistan, due to geographic and weather conditions, limited electricity, and the fact that providing service to remote parts of the country was not a profitable proposition for operators. To bridge the digital divide between urban and rural areas, government intervention was necessary to ensure the provision of adequate internet and telecommunications services to unserved populations and geographic areas.

Recognizing ICT services as essential drivers of socio-economic development, Pakistan established its Universal Service and Access Fund (USAF) policy and in 2006, set up the Universal Service Fund Company to operationalise its distributional objective of ensuring broad coverage of telecom services across the country. To ensure coverage, the Ministry of Information Technology and Telecommunications sets specific and progressive targets for rural teledensity and access. The USAF identifies areas that are unserved and underserved by internet and telecommunications services, and co-finances/subsidises infrastructure development projects in those areas, in order to achieve defined teledensity and broadband penetration targets.

At its founding, the Universal Service Fund Company had three distinct objectives and programmatic focus areas: (1) ensure basic telephony and data services in rural areas through the Rural Telephony & e-Services Programme; (2) improve broadband access in smaller cities through the Broadband for Unserved Areas Project; and (3) enhance access to e-governance services through programmes focusing on last-mile internet access.

Through an open bidding process, the Universal Service Fund Company awards service contracts to the most competitive telecom operator and disburses its contributions as direct subsidies to the licensee that can deliver services with the greatest efficiency. The Company and its projects are mainly funded by revenue-matched contributions from telecom operators and receive no government funding. With its subsidies, the Universal Service Fund Company makes service provision commercially viable and corrects asymmetries in availability of services in areas where market conditions do not favour investment by service providers.

Although the Company is wholly state-owned and subject to oversight of the Ministry of Information Technology, its functioning is independent. All projects and financing decisions are made by the Company’s board of directors, which has equal representation from the government and private sector, and all auction advertisements, bid submissions, service awards, and evaluation summaries are published on the Company’s website. By engaging in a public-private partnership model, co-financing, and displaying transparent and efficient fund management capabilities, the Universal Service Fund Company has created an enabling environment for operators to invest in previously unprofitable or high-risk areas.

USAF-supported telecommunications infrastructure has helped bring millions of people in Pakistan online. With over 58 million mobile internet users in Pakistan today, roughly one out of every four people in the country has a mobile internet subscription.

The USAF-enabled model of developing telecommunications infrastructure and services for rural and remote tribal areas of Pakistan has also materialised notable gains beyond mere network penetration. The USAF integrates strong social drivers into its programming efforts. For instance, under its ICT for Girls Programme, 120 computer labs — with the capacity to provide vocational digital skills training for 10,000 girls per year — were established at Women Empowerment Centres. In rural areas where the mobile boom has yet to translate to household device ownership, the Telecentres Project aims to provide last-mile connectivity with public access points for broadband services, and to deliver digital literacy programmes aimed at creating employment and economic benefits for people in all parts of Pakistan. To mitigate existing digital literacy barriers to access, some programmes use USAF contractors to facilitate people’s access to telemedicine, e-government, e-commerce, e-learning, and other services at these telecentres.

Other special projects fund ICT services for people with vision impairments, and the USAF requires all contracted operators to make services accessible for persons with disabilities. The USAF has made a point to account for usability and inclusion in its programme design as it expands access across the country.

Having achieved significant proliferation of basic telecommunication services, with a teledensity rate of 78%, Pakistan’s USAF plans to facilitate transition to newer technologies (e.g., 5G), invest in enhanced connectivity, and provide diverse digital experiences and opportunities to those just coming online. This is evident in the rollout and progress of projects like the Optic Fibre Cable to Union Councils project, which has deployed over 6,000 kilometres of fibre, the Next Generation Broadband for Sustainable Development project, which serves 7,000 administrative districts, and the Broadband Coverage on National Highways and Motorways Programme, which has planned coverage over 12,000 kilometres of highways.