In an increasingly digitised world, access to telecommunications is not a luxury, but a necessity. The digital gap – that divide that separates those who have access to and know how to use digital technologies from those who do not – is one of the most critical challenges of our time, as it can lead to significant differences in development between countries and regions.
In this sense, Latin America faces important challenges, given that, according to the World Bank (2023), 74% of urban households in Latin America use fixed Internet, compared to 42% in rural areas.
One of the alternatives that countries have adopted to bridge the digital divide is the establishment of Universal Service Funds (USFs). USFs are financial mechanisms established by governments to encourage the deployment of telecommunications infrastructure and the development of digital ownership programmes in rural, remote or low-income areas where it is not commercially viable for private operators to operate. These funds are financed by mandatory contributions from telecommunications service providers, usually a percentage of their annual revenues.
In this sense, it is worth reviewing the impact of USFs on the digital divide and identifying possibilities to improve their effectiveness in society, in line with the economic resources that support them.
How do USFs behave?
According to a GSMA study (2023), these funds have failed to effectively bridge the digital divide in the countries studied, including Argentina, Brazil, Colombia, Costa Rica and Ecuador. The study highlights structural problems such as poor disbursement rates, under-execution and limited effectiveness, as well as a lack of ex-post evaluations to prioritise and continue only those projects that have had a positive impact.
Similarly, a United Nations (2017) study in Asia and the Pacific found that Universal Service Funds have not achieved better results in broadband expansion in countries with these funds, due to weaknesses in their design and implementation, with no or even negative results on connectivity.
This scenario suggests that USFs, in their current configuration, not only fail to achieve their goals, but may also be causing distortions in investment and increasing costs to deploy networks, which contravenes the connectivity objectives they are intended to support.
According to a study by the Alliance for Affordable Internet in conjunction with the Internet Society , in 18 of the 24 countries surveyed, USFs were used to fund projects, however, in some cases these resources were used for administrative costs or transferred to other government agencies.
However, a parallel reflection on the impact of the funds on bridging the digital divide should focus on the financing model and the problems that could arise from it, relating this aspect to the performance and fulfilment of the objectives that the USFs seek to achieve.
According to the GSMA (2023), in Argentina, Brazil, Colombia, Costa Rica and Ecuador, USFs are constituted solely from the contributions made by telecommunications operators to finance the expansion of telecommunications services. However, this exclusive reliance on operators raises questions about the sustainability and extent of financing coverage in the long term. Against this backdrop, the inclusion of a broader range of contributors, such as technology companies and other digital sector players, could be a key strategy to strengthen the funds and broaden their impact.
Given the need to connect rural areas and underserved communities, where economic challenges are most pronounced, diversification of funding sources becomes an essential component to ensure that USFs are not only effective, but also equitable and adaptable to changing technological needs. Moreover, by integrating more contributors promotes shared responsibility, aligning the interests of a wider range of economic actors with long-term social and technological development goals.
In this context, a relevant example is the United States, where a bipartisan bill was introduced that proposes that large technology companies contribute to the financing of broadband infrastructure. This approach seeks to broaden the contributor base of the Universal Service Fund, recognising the importance of a more equitable distribution of financial responsibility among the direct beneficiaries of a robust Internet network.
This reform could provide a valuable model for other countries in their efforts to bridge the digital divide and ensure more universal access to telecommunications.
Proposal
1. The policy should be rethought, and these funds should be eliminated if they do not have an impact; in countries such as Mexico or Chile this fund does not exist and they are countries with the same level of access or higher than other USF countries. However, understanding that they require profound changes in the laws, these funds should tend to be financed only with state resources without affecting the investment capacity of companies, which implies political will and medium-term regulatory changes.
If they exist, in order to maximise the potential of Universal Service Funds (USFs) to bridge the digital gap, it is imperative to adopt a more inclusive and multi-faceted approach to their structure and operation. Below are several recommended strategies to improve the effectiveness of these funds:
2. Diversification of Funding Sources: USFs have traditionally been supported mainly by contributions from telecom operators. However, in order to expand their reach and capacity, it is crucial to involve other actors in the digital ecosystem, such as content and online service providers. Moreover, increasing contributions from public budgets could provide additional support to ensure broader coverage and a more agile response to emerging needs.
3. Increased Transparency and Accountability: The implementation of rigorous ex-post monitoring and evaluation mechanisms is essential to ensure that every dollar invested is used as efficiently as possible. These mechanisms should not only track the flow of money, but also assess the real impact of projects in terms of access to and use of telecommunications by the target communities.
4. Promoting Public-Private Collaboration: public-private partnerships are critical to maximise the use of available resources and expertise. Establishing strategic collaborations can help implement projects that are more sustainable and have a more significant transformative impact on the communities served.
Concluding these efforts with a call to action is crucial. It is time to rethink the role and model of USFs so that they can truly fulfill their mission of universalising access to telecommunications. This change is not only necessary to adjust to today’s technological evolution and economic dynamics, but also to ensure that advances in connectivity translate into real and equitable opportunities for all, especially those in underserved or economically disadvantaged regions. Only through a renewed and committed approach to investment can we hope to bridge the digital divide effectively and sustainably.
