2.universal service-scott wallsten

7/30/2019 2.Universal Service-Scott Wallsten

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Universal ServiceElectricity vs. Telecommunications

Scott Wallsten

Twitter: @scottwallsten30 May 2013

Lima, Per


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Why Universal Service/Access?

1. Equity.

2. Political-distributional goals.

3. Positive externalities.

Telecom Electricity


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Why Universal Service/Access?

1. Equity.

2. Political-distributional goals.

3. Positive externalities.

Telecom Electricity

Possible externalities in electricity: Positive if affects sewerage. Negative from additional generation.


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Historically

In principle:Monopoly provider.Used cross-subsidies to fund un-economic areas.

In reality:Used to justify suppression of competition.

Poor job of providing service to poor/rural.


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Telecommunications


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Mobile phones

Telephone lines

Internet users

0

10

20

30

40

50

60

70

80

90

100

110

Progress in Universal Telecommunications Access(Latin and South America)


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WHY?


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50

55

60

65

70

75

80

85

90

95

100

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Costs Have Fallen Dramatically in Telecommunications

U.S. Wireless Telecommunications Carriers Producer Price Index


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Fast Technological Change


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Monopoly May Not Have Been Stable

Prices tended to be high relative to costs.

Telecom may never have been a natural monopoly.


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Key: Good Timing!

Pressure for reforms, desire to join WTO.

Incumbents and experts in 1980s: there willnever be a mass market for mobile phones.

Incumbents happy to stick with land line cash cow....

and allowed private entry into worthless industry.(Ooops!!)


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In Telecom, Universal Service Programs LargelyNOT Responsible for Improvements


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Electricity


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Progress in Universal Electricity Access

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2000 2002 2005 2008 2010

Rural Urban

Share of Population With Access to Electricity in Latin America

Source: World Energy Outlook, various years.


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WHY?


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Reforms (privatization, regulation)

the negative effects of layoffs and higher priceswere more than offset by increased access forpoor consumers, enhanced service quality, andchanges in public finances that benefited poorpeople more.

Kessides, Ioannis N. The Impacts of Electricity Sector Reforms in DevelopingCountries. The Electricity Journal 25, no. 6 (July 2012): 7988.


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Electricity Disadvantages

Technological change slower (even in generation).

Prices historically (often) too low relative to costs.

Certain parts remain natural monopolies. (But leaves somescope for cross-subsidies).


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Hypothesis:

Different Institutions and HistoryAffect Universal Service Programs in

Electricity Relative to Telecom


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Telecom Has Conventional Best PracticesFor Universal Service Despite Lack of Effectiveness


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Where Did Universal Service Originate?


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Electricity Does Not HaveMa Bell Historical Baggage

(with respect to universal service)


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Is my hypothesis correct?

Maybe, maybe not.

(maybe my next paper?)


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Discussion of distributional effects part of reforms, notnecessarily separate efforts.

Possible Institutional Differences andAdvantages For Electricity

Less institutionalized universal service programsallow more flexibility.

Variety of funding mechanisms.

Ability to focus on specific projects rather thanongoing support.


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If so, perhaps easier to set rules to makeensure effectiveness

The [universal service] program lacks

measures and goals to assessperformance. The program does notmeasure the impact of funds ontelephone subscribership in rural areasor other potential measures of programsuccess, nor does it base funding

decisions on measurable benefits.

http://www.whitehouse.gov/omb/expectmore/summary/10004451.2005.html

Extremely difficult to do so in Telecommunications (in US)Entrenched interest groups prevent it.


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If so, perhaps easier to set good rules tomake universal service programs effective

Set measurable objectives.

Design programs in ways that make evaluation

Possible.

Set a budget and stick to it.

Even if Im wrong about institutional differences betweentelecom and electricity, thats just good advice!


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Thank You!Gracias!

2.universal service-scott wallsten

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