GSMA: Cellular coverage to reach 90 percent

But industry body says this can be further boosted if governments reform the way they allocate subsidies in network expansion.

SINGAPORE--Cellular networks are expected to cover more than 90 percent of the world's population by 2010, but this can be more extensive if developing nations made better use of funds collected--US$4.4 billion of which remain unspent.

A new study commissioned by the GSM Association (GSMA), determined that the rise in mobile coverage is the result of investment by mobile operators and the liberalization of telecoms markets. Mobile networks reach 80 percent of the world's population today, according to the study, which was announced during the 3GSM World Congress Asia conference today.

Despite greater proliferation of mobile networks, the study noted that if governments allocated unspent resources from universal service funds, mobile coverage can be further boosted to reach an additional 450 million people in rural areas.

Universal service funds are initiatives set up in developing countries to collect levy from mobile and fixed-line operators, and are then used to subsidize the rollout of communications networks in rural regions. The levy is typically set at 1 to 2 percent of gross or net revenues earned by service providers, though that fraction can climb to 6 percent in some countries such as Malaysia.

Of the 92 developing countries covered in the study, 32 have set up universal service funds. So far, governments have collected more than US$6 billion from the telecoms industry, of which US$2 billion came from mobile operators. However, according to the GSMA, an estimated US$4.4 billion of the total amount remain unspent.

Only US$1.62 billion, or 27 percent of the amount collected went into telecoms network expansion. And even then, only 5 percent, or US$75 million, was used to expand mobile coverage, while the remaining amount was spent on subsidizing fixed-line networks.

Governments from these countries chose to invest in this fashion despite World Bank estimates that the capital cost of providing mobile coverage is only one-tenth that of fixed lines, according to the GSMA. India, for example, has earmarked US$2 billion solely for extending fixed-line networks, the industry body said.

Addressing reporters at the conference today, Tom Phillips, the GSMA's chief government and regulatory affairs officer, called for reforms in the way universal access funds are allocated in developing countries.

He also urged for the unspent funds to be channeled into the industry as soon as possible, to stay in line with the funds' initial objectives.

More importantly, Phillips said governments should not put the funds back into the market, only to later impose substantial taxes on the industry. A separate GSMA study last year, found that 16 out of 50 developing countries had slapped consumers with taxes which accounted for more than 20 percent of the cost of a cellphone. In some countries, such taxes can amount to more than US$40 per user each year.