Competition issues

Using a country’s regulatory framework to require a telecommunication operator to provide school connectivity can have repercussions for competition. Of course, this is not an issue where the incumbent operator has legal exclusivity, because there are no competitors to worry about. But such monopoly situations are becoming rare as countries liberalize their telecommunication sectors and introduce facilities-based competition.

There are advantages and disadvantages of requiring one operator to connect schools. One advantage is a minimization of administrative complexity and costs. Working with just one operator—typically the incumbent, which generally has the largest nationwide network—eliminates the need to coordinate school connectivity among different suppliers. It also might reduce overall costs, since a single operator can achieve economies of scale by aggregating schools and standardizing connectivity requirements.

It can also lower administrative costs and speed up deployment, since other methods to allocate school connectivity among multiple operators are not needed. That is an important consideration for countries where there are limited personnel and technical resources for telecommunication regulatory agencies. A single operator can internalize the costs of connectivity, eliminating the need to administer a special fund and reducing inherent delays in implementing and disbursing subsidies.

One problem with obligating a single operator to connect schools, however, is that it may be contrary to a country’s legal or regulatory framework. Although the exclusivity only applies to serving a specific market segment, rather than the overall provision of connectivity on a commercial basis, it still might be interpreted as anti-competitive within the legal framework of some countries.

A second disadvantage is that other operators may complain about not being able to serve the educational market. This may have negative public relations aspects, since such operators may be perceived as not contributing to the country’s social development.

Another disadvantage is that operators with school connectivity obligations do not always provide the service for free. There may have been an initial requirement to provide schools with a telephone line or wireless coverage at no charge. However, there is sometimes a monthly service payment required, even if that payment is discounted. If the monthly charge is waived, this may only be for a set period, after which the charge is applied. If schools have to pay something to recoup part of the operator's costs, this may well subsidize operational inefficiencies.

At the same time, requiring the incumbent to implement school connectivity imposes an additional burden that will raise the operator's costs, making it less competitive than other operators. This may be perceived as a positive development, since it tends to level the playing field -- given the incumbent’s historical advantages.

There are different options to alleviate competition concerns about requirements for operators to provide school connectivity. These include:

  • Ensuring that all operators have the same obligations, such as by including school connectivity in licence conditions. This could be an across-the-board requirement, such as obligating each operator to connect a certain number of schools or weighting the number of schools to be connected according to size or market share of operators.
  • A reverse auction scheme to subsidize school connectivity through universal service funds. This involves having all interested operators bid for the right to provide school connectivity. The lowest bid wins that right and is reimbursed the amount of its bid from the universal service fund. The auction could be designed to provide nationwide, regional or local connectivity.

A “pay or play” mechanism, whereby operators can either contribute to a universal service fund or provide universal service (such as school connectivity) themselves.

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