19 December 2005, Colombo: The telecom subsidy mechanism operationalized through India’s Universal Service Fund (USF) has unduly served the interests of the government owned incumbent telecom company Bharat Sanchar Nigam Limited (BSNL).
For the disbursement of the USF collections operators were asked to bid for the least amount of subsidy they required to roll out in the rural areas. However, the least-cost subsidy auction favored the incumbent and resulted in the attenuation of competition. Prima Facie the mechanism was transparent, but the auction design restricted participation only to operators already present in the defined service areas……
English Press Release: Indian Universal Service Fund experience shows that open access to backbone is precondition for effective use of subsidies that minimize market distortion
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