To encourage the operator to serve LIGs under PPP, it is vital to consider low-cost mechanisms of providing service, pricing structures that encourage customer payment, low-cost financing for system extension, and other contract mechanisms relevant to the specific characteristics of the low-income population.
PPP arrangements might be made more responsive to the requirements of low-income consumers in many ways. These include both contract provisions or content and changes in the overall approach to the reform agenda. Specifically:
Box 17: Incentives for Rural Telephony Expansion in Peru |
As an incentive for private telecommunications operators to expand service to rural areas of the country, the Government of Peru has structured public-private partnership (PPP) arrangements that award a subsidy for pay phones installed in predefined target areas. The program uses a "least subsidy" approach to achieve the desired results for minimal cost. Operators bid for the right to provide services to rural areas, and the winning bidder is that who offers to install the phones for the least subsidy. Payment of the subsidies is linked to performance, with part paid upon award of the contract, part once the pay phone has been installed, and the remainder in semiannual installments over the life of the contract, with these payments tied to the operator's achievement of key performance indicators. This structure not only provides incentives to operators to extend service to low-income areas, but places equal priority on the maintenance of infrastructure and the quality of service to low-income customers. |
Source: Cannock, Geoffrey. 2001. Telecom Subsidies: Output-Based Contracts for Rural Services in Peru. Viewpoint Note No. 234.Washington, DC: World Bank, Finance, Private Sector, and Infrastructure Network. |