Universal Service in Small Economies: An Empirical Analysis of the Effects of Policy, Institutional Endowments, and Alternative Technologies

Abstract

This paper looks into the concept of universal service in fixed voice and the factors that the literature on telecommunications policy considers to have an effect on its attainment. These factors consist of the existence of competition in the market; the privatisation of state-owned operators; the institution of an independent regulatory authority; the quality of institutional endowments in the country; and the development of mobile telephony. A review of the literature unveils that there is a lack of consensus across published empirical studies about their effect on universal service. Empirical research has also disregarded the possible effect of economy size on universal service. The literature on small economies advocates that economy size might have an important impact on the outcomes of policy. The paper holistically examines the relationships between the foregoing factors and universal service conducting an econometric analysis of data on 126 economies for the period 1980-2004. The research findings indicate that the effect of policy measures on universal service have been overvalued by existing studies whereas they advance the role of mobile telephony as a determinant factor. Economy size appears to leverage their effect on universal service. The research findings are used to formulate policy suggestions.