Uganda began reforming its telecoms sector in 1996 and has established one of the most competitive markets in sub-Saharan Africa. However, with an average annual income of about
US$300 per capita and over 80 percent of the population living in rural areas, the country faces many challenges in ensuring that everyone has access to affordable telecoms services.
A US$12 million Output-Based Aid project was designed, in part, to address this situation. The World Bank contributed US$10.5 million and the balance has come from the Uganda Communications Commission.
The project is designed to support the build-out of telecommunications facilities in areas where the social returns of the investments are high but the operation of services was not commercially viable. Subsidies are required in these areas to support capital investment in the network.
The project is accelerating access to voice telephony by providing at least one public telephone per 2,500 inhabitants throughout Uganda. This equates to everyone living no more than an average distance of about three kilometers from a public phone. It is providing broadband Internet points of presence in 32 of the 56 district capitals, dedicated Internet access for institutions, Internet kiosks and rural multipurpose telecentres.
The use of OBA to promote private investment in the provision of telecommunications services in rural Uganda has proven an effective tool. It served far more communities than anyone had originally anticipated, and at a fraction of the cost of more traditional funding methods.