The Impact of Universal Service Obligations and International Cross-Subsidies on the Dispersion of Telephone Services in Developing Countries

17 Pages Posted: 10 Jun 2013 Last revised: 18 Apr 2018

See all articles by Boris Ramos

Boris Ramos

ESPOL

Khalid Saeed

Worcester Polytechnic Institute (WPI)

Oleg V. Pavlov

Worcester Polytechnic Institute (WPI) - Department of Social Science & Policy Studies

Date Written: August 19, 2009

Abstract

This paper re-evaluates the telecommunication policies often applied to create regional dispersion of services in developing countries. We observe that failure to consider the complexities of the regional telecommunication systems in creating policies and investment strategies has increased the telecom gap between urban and rural regions worldwide. In particular, the teledensities of rural telecommunications in developing countries have remained very low in spite of support through universal service obligation fees and cross-subsidization from international services. As traditional methods for economic analysis and modeling have failed to identify mechanisms that improve telephone dispersion in these countries, we use a system dynamics modeling approach to deal with complexities of the situation in order to evaluate how Universal Service Obligations (USOs) and International Cross-Subsidy (ICS) policies affect telephone densities. We demonstrate that these policies may be counterproductive due to the structure of the telecom system itself. We also show that, when market-clearing pricing is combined with USOs once the urban telephone density reaches a minimum threshold, the dispersion of rural telecommunications can be considerably improved.

Keywords: Universal Service, Telecommunications, Universal Service Obligation, Cross-Subsidy

Suggested Citation

Ramos, Boris and Saeed, Khalid and Pavlov, Oleg V., The Impact of Universal Service Obligations and International Cross-Subsidies on the Dispersion of Telephone Services in Developing Countries (August 19, 2009). Available at SSRN: https://ssrn.com/abstract=1457832 or http://dx.doi.org/10.2139/ssrn.1457832

Boris Ramos (Contact Author)

ESPOL ( email )

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Khalid Saeed

Worcester Polytechnic Institute (WPI) ( email )

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Worcester, MA 01609
United States

Oleg V. Pavlov

Worcester Polytechnic Institute (WPI) - Department of Social Science & Policy Studies ( email )

100 Institute Road
Worcester, MA 01609
United States

HOME PAGE: http://www.olegpavlov.org

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