Re: [gaia] [hrpc] Fibre Feudalism

Arzak Khan <> Wed, 24 October 2018 09:17 UTC

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From: Arzak Khan <>
To: Kurtis Heimerl <>, Carlos Rey-Moreno <>
CC: gaia <>, "" <>, Steve Song <>, "" <>, Leandro Navarro <>
Thread-Topic: [hrpc] [gaia] Fibre Feudalism
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The utilization of USF funds has been an issue in Pakistan where Ministry of IT and Telecoms has used the fund for building cricket stadiums, distributing smartphones to government employees and many other projects which has not impacted greatly on provisioning of broadband services in most of rural Pakistan. Building out fiber networks still remain a challenge and limited to few players only without promoting any competition.


From: hrpc <> on behalf of Kurtis Heimerl <>
Sent: Monday, October 22, 2018 6:44 AM
To: Carlos Rey-Moreno
Cc: gaia;; Steve Song;; Leandro Navarro
Subject: Re: [hrpc] [gaia] Fibre Feudalism

I thought it worth noting that some of my experiences have been different than Carlos's; for example in an unnamed central asian country the regulator mentioned that the USF distribution is set in policy and they must, by law, return the money to the telecoms. Even in those with the ability to put the money elsewhere, there were occasionally structures that push the regulator to fund "related" but non-competitive services like computer or internet literacy. Tricky space with a lot of moving pieces.

On Sun, Oct 21, 2018 at 10:58 PM Carlos Rey-Moreno <<>> wrote:
Hi all, interesting debate indeed, and happy to join a further call on this, or even work in a document where we can consolidate these discussions.

After having engaged with several regulators, and managers/officials from universal access agencies in Africa this year, my main take away is that they keep on using USO to incentivize incumbents to go to rural areas because that's the only way they know. Once they are presented with alternative models like the ones mentioned by Leandro, they are very open, in principle, to explore them. They are the ones who know how ineffective the current models are, but in most cases they are, as Steve points out, constrained by frameworks that only allow to use the fund to those who contribute to it.

I think, at least in Africa, there is a very interesting opportunity to work together with USAF managers/officials to discuss an potentially implement innovative ways of using them. Consolidating the knowledge in this discussion and others in a working document, with the different advocates in the region speaking proposing the same thing, could contribute a lot in this direction.



On Sun, 21 Oct 2018 at 19:29, Leandro Navarro <<>> wrote:
Agreed, but the sad thing is that practice (country policy) goes in the opposite way in the few cases I know where USO is a form of subsidy or tax deduction to benefit the incumbent only, before a legal monopoly. The typical government argument is that USO is paid by industry, that reflects this privilege or new form of monopoly/subsidy in favour of the incumbent only (everyone pays the king operator in the feudal metaphor). In consequence, the incumbent does the minimum required to justify receiving the funds to preserve the pool of unconnected as a source of future USO income (the serfs of the feudal system).

For example, one fibre community network but can be any alternative operator to the incumbent, fears the effect of that:<>

That’s why USO as implemented can be counter effective. Alternative models of distribution, radically different, are needed, where all the funds are not given to a single operator (and deter investment by others), but to every citizen that qualifies (to free the serfs). Bottom-up (people centred) instead of top-down (incumbent centred). Something along those lines may contribute to increase alternatives and not just be used to mainly reinforce the de-facto monopoly of largest operators (for example: ) Otherwise USO policies are mainly a form of public subsidy, a form of monopoly, to reinforce the incumbent, with the excuse of the underserved and unconnected.


On 21 Oct 2018, at 18:15, Vint Cerf <<>> wrote:

Steve is spot on.

On Sun, Oct 21, 2018, 09:53 Steve Song <<>> wrote:
Hi Amelia, Sonia,

I agree this is a very interesting and timely debate and I would be happy to participate in a discussion on this.

Universal service funds that involve (or in many cases are legally restricted to) giving money back to the incumbents to build out infrastructure has proven (over and over and over again) to be a terrible idea.  I hope we can agree that we should stop doing that.  For me the issue is about power and control and the way it is used to impede competition.  The cost of technology has plummeted in both fibre and wireless technologies.  In theory that should have been a boon for competition but high spectrum auction fees and licenses along with exclusive control of fibre backbones has created an almost impenetrable barrier to market entry.  Any government intervention in universal service should obliged to address the issue of market permeability as well as ownership of and access to core networks.

Cheers... Steve

On Sat, 20 Oct 2018 at 07:07, Sonia Jorge <<>> wrote:
Hi All,

Interesting discussion here. One that might warrant a webinar/conference call among interested people? Steve, what do you think? I would be happy to join a stimulating discussion on the topic, starting with your blog and the Access Model.

Amelia, can you point me to some evidence or a paper (anything you may have) that shows that relationship between USO and quality of infrastructure? I find that very difficult to believe but open to be proven wrong.

Something important to keep in mind is that countries where USO have been more instrumental are also countries that have traditionally been poorer and behind in terms of infrastructure development; this is certainly the case in some Southern European countries and maybe Eastern European ones as well. So the level of economic development overall is a key variable.

As for Africa and/or infrastructure investments, I could share a lot here, but for now let me call your attention to some reports we produced and that can add to the discussion.
- A4AI’s annual Affordability Report: Note that the 2018 report will be launched and published on Tuesday and addresses key questions relevant to this discussion, specially on costs associated with infrastructure investment
- a recent blog on infrastructure costs and challenges:<>
- For those interested in USFs in Africa, see

Sonia Jorge
Executive Director, A4AI
Head of Digital Inclusion, Web Foundation

On Oct 20, 2018, at 05:33, Amelia Andersdotter <<>> wrote:

Hi all,

It might be helpful to know that EU countries where Universal Service
Obligations have been extensively used and applied, also typically have
worse infrastructure than EU countries where USO wasn't well applied.
Applying USO means you put the government in a position where it faces
off with the service provider under USO in a negotiation. The service
provider has information advantage and typically a better relationship
to its consumers than the government has to its citizens (so a
communications advantage too). I lack experience of the African markets
and their regulators, but in broad strokes those are the issues faced in
various European jurisdictions with USO and I'm assuming similar
difficulties would arise in the African setting. This is a bit
theoretical, and I'm just curious how to avoid these information

As it is described by Steven, the current feudalism (operators A, B and
C all collaborate as soon as they own physical fibre networks) also
incentivises many actors to get into the infrastructure market. That's
fundamentally a good thing: it means not all the last-mile is owned by a
few big actors who need to be regulated by a regulator who is
fundamentally at a disadvantage compared to the big actors. It's the
main criticism targetting the Local Loop Unbundling reform of 1999 in
the EU as well - challengers don't invest enough in last-mile
infrastructure (except in those EU markets where many different actors
have had regulatory incentives to build their own networks, or where
there has been purposeful public investment in last-mile). Or am I
misunderstanding something?

best regards,


On 2018-10-04 20:52, Steve Song wrote:
Hi Mallory,

Thanks for that!  I think you are on exactly the right track in terms
of thinking about economic models.  Thanks to Erick Huerta of
Rhizomatica, I am very taken with the thinking of French economic
historian, Fernand Braudel..  Braudel argues that the world has three
economies not one.  A global economy which is the well-known
capitalist economic model where monopoly is the perfect end-game in
theory for every player.  Google, Colgate, Coca-Cola, all the usual
suspects form part of this economy.  The second economy is the Local
Economy where services are specific to the city/community where you
live.  This might be your local butcher, baker, plumbers or even
larger service provider which offers services that grow out of local
demand and which serve local needs in more unique ways than the Global
Economy.  The third economy is the Subsistence economy where market
forces may not operate because there is not sufficient traditional
capital to make it work.  This is the world of the informal economy
with barters, cooperatives, community initiatives that directly
contribute to the overall economy but are largely unmeasured by
traditional statistics.  And woven among these are both commercial and
commons models, which can operate with varying success at the
different levels.

When viewed through this lens, it is easy to see how regulation has
only enabled the global economy in telecommunication and that there is
a need for enabling regulations to nurture telecom initiatives in the
Local and Subsistence economies.

For me this also highlights a key flaw in models like the World Bank's
Access Gap model
<>. It
is not so much that the model is wrong, it is just one-dimensional;
assuming that successful global capitalism is the best of all possible

Writing more about this shortly.

Cheers... Steve

On Thu, 4 Oct 2018 at 10:57, Mallory Knodel <<>
<>> wrote:

   Hi Steve,

   Thanks for sharing. I read it last night and I really enjoyed it.. I
   think the metaphor is solid economically. And politically, well, that
   could be another post in and of itself..

   The agrarian commons would of course be ideal, but what we have is a
   sort of old-world economic structure that politically controls and
   profits from (what should be) the commons. This sets you up nicely to
   call for modern economic models ranging from squarely capitalist to
   socialist, and even (back to) the commons!

   I'm CCing HRPC because it might be of interest to those who have
   issues of centralisation on the list in the past.


   On 04/10/2018 15:30, Steve Song wrote:
Hi all,

This is a reflection on the current state of terrestrial fibre
infrastructure in Sub-Saharan Africa (but I think applies just about

Curious to know how apt you feel the metaphor is or any other
you may have.

Thanks..... Steve Song

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