"In 1994 the government established a Telecommunications Development Fund, financed by the national budget, to catalyze additional private investment in payphone service in rural and urban areas with low income and low telephone density. The Fund has been very successful. Between 1995 and 2000 it su ... pported the provision of payphone service to more than 6,000 rural localities with about 2.2 million inhabitants, thereby reducing the proportion of Chile's population living in places without access to basic voice communication from 15 percent in 1994 to 1 percent in 2002. In addition, some 25,000 individual rural telephone lines are being provided. The subsidies awarded cost the government less than 0.3 percent of total telecommunications sector revenue during the funding period, and Fund administration cost about 3 percent of the monies granted. The Fund's success was due largely to extensive reliance on market forces to determine and allocate subsidies, minimal regulatory intervention, simple and relatively expeditious processing, and effective government leadership. Competition among existing and new operators for the rural market and subsidies led to substantial reductions in cost to the government compared to earlier public sector investments in similar facilities. Commercial success has hinged on operators using the subsidized payphone infrastructures to also provide individual business and residential telephone lines and, subsequently, add value through new services (including voice mail and internet access in some areas) over this network. Interconnection was the single most important regulatory factor of commercial viability, with access charges in some cases surpassing 40 percent of rural operating revenues. The design of the Fund proved robust, and remains the leading example of a costeffective slution to reduce access gaps in basic communication in emerging economies. Some questions remain, however, about whether the services can be sustained in the long term, what to do with the small residual rural population still excluded, and whether anything needs to be done in urban areas. These questions-in addition to limited design improvements suggested by the Fund's experience, as well as work still in progress on quality standards and monitoring-are relevant to the Fund's proposed extension into more advanced modes of communication and access to information, as well as to other countries learning from the Chilean experience." (Executive summary) more