Universal Service Obligation Fund (USOF)

Universal Service Obligation Fund (USOF) is the pool of funds generated by 5% Universal Service Levy that is charged upon all the telecom fund operators on their Adjusted Gross Revenue (AGR). This fund is deposited in the Consolidated Fund of India and is dispatched on the approval of the Indian Parliament.

The USOF comes under the Indian Telegraph Act 1885. The act was amended in 2003 to give statutory status to the fund. The Department of Telecommunications, Ministry of Communications governs the fund and related provisions.

The aim of USOF is to provide a balance between the provision of Universal Service to all uncovered areas, including the rural areas.

The USOF is in the news as the Cellular Operators Association of India (COAI) has asked to reduce the license fee by 8% which comprises USOF (5%) and License Fee (3%). The proposal has come on the account of debts faced by Telecom Companies, and the rising demand for telecom services with the advent of Work From Home (WFH) amid the COVID-19 pandemic.

Telecom service providers have urged the Ministry of Finance to suspend the universal service obligation fund (USOF) levy until the existing corpus is exhausted.

About Universal Service Obligation Fund (USOF)

• USOF was set up by an Act of Parliament in December 2003 by amending the Indian Telegraph Act, 1885.
• The objective of the USOF is to provide access to telecom services in a nondiscriminatory manner to people in rural and remote areas at affordable and reasonable prices, thereby bridging the rural-urban digital divide.
• For commercially non-viable rural and remote areas, USOF provides subsidy support in the form of Net Cost or Viability Gap Funding (VGF) to incentivize telecom service providers for the expansion of telecommunications and broadband services in those areas.
• Funding Mechanism:
  • The USOF is funded through a levy on the revenue earned by telecom operators.
  • The government imposes a Universal Service Levy (USL) on the gross revenue of the telecom companies, which is a percentage of their Adjusted Gross Revenue (AGR).
  • This levy is collected and deposited into the USOF.
• Administration:
  • USOF is headed by the Administrator, USO Fund who is appointed by the Central Government, for the administration of the fund.
  • It is an attached office of the Department of Telecommunications (DoT), Ministry of Communications.

What is the Telecom Technology Development Fund (TTDF)?

• USOF officially launched the TTDF Scheme on October 1st, 2022.
• The TTDF Scheme is aimed at domestic companies and institutions involved in technology design, development, and commercialization of telecommunication products and solutions to enable affordable broadband and mobile services in rural and remote areas.
• This initiative helps to connect schools with varied volunteers from the Indian Diaspora, namely, young professionals, retired teachers, retired Government officials, retired professionals, NGOs, Private Sector and Public Sector Companies, Corporate Institutions, and many others.
• Under the scheme, USOF is also targeting to develop standards to meet countrywide requirements and create an ecosystem for research, design, prototyping, use cases, pilots, and proof-of-concept testing, among others.
• The scheme entails grants to Indian entities to encourage and induct indigenous technologies tailor-made to meet domestic needs.

Adjusted gross revenue (AGR)?

Telecom operators are required to pay license fee and spectrum charges in the form of ‘revenue share’ to the Government. The revenue amount used to calculate this revenue share is known as AGR.