Introduction
As of 2013, Malaysia was one of 69 countries with a Universal Service Provision (USP) Fund. The USP Fund was created to ensure that telecommunications services including accessible and affordable internet connectivity are accessible to as wide a population as possible.
In 2023, Malaysia continues to use its USP Fund to support a range of digital inclusion initiatives, from building communications towers in rural and remote areas to running business development workshops and promoting socioeconomic development.
In this article, we review the objectives and initiatives of Malaysia’s USP Fund, assess the balance of funds available, and offer policy suggestions to improve the use of this fund to close Malaysia’s digital divide.
The digital divide in Malaysia
At a macro level, household access to the internet in Malaysia was reportedly 95.5% in 2021. However, this statistic reflects only internet access and does not account for the affordability or quality of internet connections.
Malaysia’s digital divide came into the spotlight during the Covid-19 pandemic. From the education and healthcare sectors to mass communication and retail, a wide range of public and private services pivoted to the digital realm. Internet access increasingly became a necessity for all. For certain demographic groups such as lower income households, access to safe and secure digital devices and subscriptions to fast and reliable internet connections were particularly challenging.
Almost 100,000 workers were laid off by the end of 2020. Of this group, an estimated 75% were earning RM4,000 and below per month. Many workers pivoted to digital services and the platform economy, such as operating home-based online businesses or by becoming delivery riders, all of which required reliable internet access.
In 2020, prolonged school closures affected the learning activity of around 4.9 million preschool, primary and secondary school students and around 1.3 million higher education students. A survey on online learning conducted by the Ministry of Education in the same year found that almost 37% of students across Malaysia did not own any electronic devices. As a result of the digital divide, Malaysia had one of the highest learning losses among Asian developing nations, second only to Myanmar.
Overview of the USP Fund
Malaysia’s USP Fund was set up in 2002 (with regulations last amended in 2010) to provide collective and individual access to basic telephony and internet services throughout the country. This fund and its initiatives are administered by the Malaysian Communication and Multimedia Commission (MCMC).
According to the 2021 USP Annual Report, the USP Fund’s income totaled RM1.7b and expenditure totaled RM870m in 2021. By the end of 2021, the balance in the USP Fund had accumulated to RM10.6b as a result of annual expenditure consistently being lower than annual income.
USP Fund programmes and initiatives
Per MCMC’s website, the USP Fund’s initiatives centre around four core goals: (1) expanding mobile broadband coverage, (2) expanding fixed broadband, (3) expanding backhaul networks by laying cable, and (4) supporting community access.
In line with KRI’s earlier work on meaningful connectivity, these four cores may be further grouped into three target areas: (1) infrastructure development, addressing access issues, (2) device distribution and data affordability, addressing affordability issues, and (3) meaningful community outreach, addressing application issues.
Policy considerations for the USP Fund
- Increase transparency and ease of use of USP initiatives and allocations data: MCMC publishes USP Annual Reports that contain information on USP initiatives, programmes, and the USP Fund. However, they are less conducive for analytical purposes. MCMC could consider making all annual reports easily downloadable on its website.
- Expand USP Fund access to local communities and partnering NGOs: It may be worthwhile to consider expanding access to the USP Fund, subject to appropriate approval and oversight processes, to interested and capable local communities and partnering NGOs. This could allow them to pilot projects that for-profit service providers may be less incentivised to do.
Conclusion
The USP Fund is a useful tool in efforts to close Malaysia’s digital divide. It has enabled infrastructure development, device and data subsidies, and community outreach programmes. We suggest that the fund has untapped potential in light of Malaysia’s digital transformation.
