IN PURSUIT OF UNIVERSAL CONNECTIVITY:


AN ANALYSIS OF THE TELECOMMUNICATIONS INDUSTRY OF EASTERN AND SOUTHERN AFRICAN STATES
Table of Contents


 


 


I.      Introduction.. 3


II.     History of Communications.. 4


A.    Pre-Telegraph Era. 4


B.    Post-Telegraph Era. 5


III.        International Trends in Telecommunications.. 6


A.    Monopolies. 7


B.    Privatisation and Liberalisation Initiatives. 8


C.    Issues Regarding Liberalisation, Privatisation and Universal Connectivity  8


IV.       The International Telecommunication Union.. 9


V.    Background on the Policy Reforms in Africa.. 11


VI.       Access and Interconnection.. 13


A.    East African Experience. 14


B.    South African Experience. 15


VII.      Liberalization.. 16


A.    The Demands of the New World. 17


B.    Focus on Liberalisation. 18


C.    East African Experience. 18


D.    South African Experience. 19


VIII.     Shift from Monopoly to Liberalisation.. 19


IX.       Opening Of Previously Monopolistic Markets to Competition   20


X.    Regulatory Framework.. 21


XI.       The Expected Outcomes.. 23


XII.      Conclusion.. 24


XIII.     References.. 25



 


I.                    Introduction

It is inherent for the common human being to interact. As early works on the social sciences, man is characterised as a social being. This means that interaction is one of the main elements that man could not do without. It is this need for interaction is the foundation of the age old utopian dream of universal connectivity. In the current settings of telecommunications, the pursuit for this universal connectivity is affected by numerous elements involving politics, economics, and even the legal framework of states. These elements concurrently facilitate and hinder the development of communications in its pursuit for universal connectivity. This shows that there is some level of stagnation that currently exists in the telecommunications sector. The studies and lectures provided in class show that even in highly developed economies, issues pertaining to telecommunications and the implementation of its legal framework still exist. Countless calls for reform are in existence and could well anticipate more. Could this mean that the goal of universal connectivity is far from its actual realisation? This general question will be addressed using the case of developing countries in Africa, specifically those in East African Region and Southern Africa Regions. The discussions will be covering the conditions encountered by certain African states on their way to achieve universal connectivity. Legal documents as well as scholarly articles will be used to support the arguments and observations done in the course of the discussion.     


 


II.                  History of Communications

Nowadays, communications show attributes that manifest vast possibilities. Formation of creative designs and attributes particularly in the form of technology and specific gadgets are almost immediately realised. Decades ago, the notion of wireless communication is limited to the use of postal service. These days, one can reach another individual just by pushing a button. Nonetheless, the modern method of communication started long after drums and smoke were used to signify certain messages.[1] Specifically, it started during the period where the telegraph was in full swing. This part of the study will provide a brief description of the history of communications. For clarity and coherence of the discussions, the benchmark will be the era of the telegraph.


A.    Pre-Telegraph Era

Accounts of the pre-telegraph era are seen primarily on the annals of English history. For instance, the study of Walden and Angel mentioned one of the earliest accounts of telecommunication history during the reign of King  in 1660.[2] In the said study, correspondence by means of post has first encountered regulation under the rule of King . Basically, this regulation is for the purposes of national security. The end result is the General Post Office having the monopoly of all of the postal services in the country. Basically, in this pre-telegraph era, the letter was considered as the main form of correspondence.      In the context of dissemination, factors like time and distance have marred the development of communications in this era.[3] Prior to the development of railway systems in the west, the mode of dispersal of letters are made through horseback and riders. This shows how correspondence was far from interactive as what we possess today.  


B.     Post-Telegraph Era

The nineteenth century made a great leap in the area of communications in the invention of the telegraph. Lloyd and Mellor pointed out that the telegraph system started in 1837 on the railway from London to Camden.[4] The system provided the needed expediency that the conventional post could not provide. As expected, this innovation spread rather rapidly expanding the range from state to state. In the initial stages of the implementation, numerous systems of codes were employed but each essentially used to decipher the dot and line system. (p5) However, early accounts of the telegraph was said to have employed lights from heliographs and even flag movements.[5] The multifarious systems of codes, as expected provided problems in the area of decoding and interpretation. Eventually in 1850, the Morse code became the accepted standard code for every nation.[6]


 The telegraph system was said to be the one that directly challenged the monopoly of the General Post Office in UK.[7] However, the consequent success of the telegraph system did not actually go smooth sailing in its early implementations, specifically with the wire application of the system. Initially, maintaining telegraph towers were very costly for private entities. Thus, majority of the telegraph system were still operated by the state, particularly the military.[8] This intimates that even at the early periods of such an innovative technology in telecommunications, the monopoly of the GPO did not fazed. It wasn’t until the railway system was introduced that the telegraph swept the globe in a blaze of glory. ( 2003)


III.                International Trends in Telecommunications

The potential provided by the early telegraph system is considerably overshadowed compared to the current trends in telecommunications today. Like the telegraph system, today’s telecommunications is driven by technology.[9] Specifically, the devices available today, the technology of the carrier as well as the current drive towards the wireless manifests the inherent developments in the current international systems of telecommunications.[10]


In terms of the device, the telephone has now gone a long way since the inception of the basic rotary phone. Nowadays, the digital phones carry other features that increase the value of such devices.[11] Such features include message recording and number storage. In the most recent years, connectivity has increased with the introduction of cellular technology. Moreover, this relatively new device is not merely limited to incoming and outgoing calls. New technologies in communication like SMS, IM, and even internet connectivity are now commonplace for cellular devices.[12]  


In the same regard, the drive towards the wireless era is also underway. The market for cellular networks has grown immensely in the past years.[13] This development may well be a considerable step closer to the realisation of universal connectivity. Other derivatives of these developments include major improvements in satellite technology, microwave technologies, and WIFI applications.[14] There is no doubt that the telecommunications industry has come a long way. However, there are some issues appended to these improvements that could hamper its further developments.  


A.    Monopolies

As pointed out in the history of telecommunications, the industry is inherently monopolistic.[15] This means that there is always a propensity for the industry to be controlled by a single corporation. However, in major economies, competition has surged as numerous technological innovations like the ones pointed out above have given other companies the chance to directly compete with the major corporations that once dominated the telecommunications industry.


B.     Privatisation and Liberalisation Initiatives

Normally, the telecommunications industry is handled by national companies, specifically state-owned enterprises.[16] However, recent trends that prompted governments to pursue privatisation efforts on these companies have given the industry a chance to flourish. Concurrent to the privatisation initiatives of governments is the liberalisation of the of the telecommunications market.[17] Privatisation is defined as the transfer of ownership to private owners. Thus, the functions which were originally carried out by the state are now bestowed to private entities.[18] Liberalisation on the other hand is seen as the shift from a monopoly to a free market.[19] Basically, the trend towards globalisation and free trade has been the factors that made liberalisation efforts a staple for any attempts of economic development. Specifically, the World Trade Organisation established unambiguous rules pertaining to the liberalisation of the telecommunications industry of its member states.[20] With the emergence of these two phenomena in the market, competition in the said sector has immensely improved.


C.    Issues Regarding Liberalisation, Privatisation and Universal Connectivity

Privatisation is always a sensitive issue, especially in instances where economic and political aspects of the initiative are highlighted. For instance, there are some studies that emphasised the possibility of harmful implications on privatisation in pursuit of universal connectivity. Basically, these large corporations tend to operate predominantly on a profit-based perspective.[21] This means that in the long run, those who can access their technology may well be those that could afford to disburse money for their services. This is seen in the case of Mexico when their telecommunications sector was privatised. In the process, prices of the services which they offered increased exponentially leaving the local users affected immensely as it came to a point where they could no longer afford to pay their bills.[22]  


   In the context of liberalisation, the reduction of barriers for entry has given foreign companies the chance to operate in particular markets.[23] Primarily these companies tend to be multimillion dollar corporations who could afford to take on the responsibilities of operating a telecommunications provider. This shows that the local providers and local companies may have their opportunity taken away in the market. Directly opposing these major corporations may well be something short of battling a brick wall.  


IV.               The International Telecommunication Union

In the area of ICT and telecommunications policy, the International Telecommunication Union (ITU) is considered as the most influential intergovernmental body in the world.[24] Since its inception in 1865, the ITU is geared towards realising several purposes. Based on its constitution, it seeks to encourage and develop the participation of the entities and organisations involved in the ITU in order to establish a cooperative environment between the member states and the realisation of the overall goals of the ITU. Other specific purposes of the organisation are to carry out initiatives to enhance the use of all forms of telecommunications. With these general purposes in mind, the ITU is the key organisation that seeks to resolve and address certain issues of the telecommunications sector all over the world.


Seeing the description of the organisation above, it shows that the ITU is indeed one of the key organisations that seek to realise a vision of universal connectivity. [25] With the standards and principles championed by the ITU, states regardless of the size of its economy are able to communicate using telecommunication technologies. For the purposes of this paper, a closer look on ITU’s regard on developing countries will be done. The logic behind the initiatives of the organisation is the provision of information to every state regardless of the wealth of its economy. Specifically, the ITU seeks to eliminate what they perceive as “telecommunication gap” by developing the telecommunication capabilities of developing countries.[26]


Based on the website of the ITU, its goals towards development are founded in three areas: technical, development, and policies. In the technical area, the ITU seeks to standardise the efficiency and capacity of the states to operate their telecommunication services by establishing the required facilities and infrastructures.[27] In terms of development, the ITU seeks to offer assistance in the mobilisation of certain elements that would help a particular state in its telecommunication and ICT development. These certain elements constitute both funding and human resource development that will support the future of the telecommunications industry.[28] All these are carried out in form of policies that should be implemented by the member countries as well as the departments involved with the ITU.


Concrete examples of the amalgamation of these initiatives are seen in the organisation’s help in establishing medium-term development plans with specific developing countries to address the strategies needed. Other initiatives include telecentre projects.[29] The more prominent manifestation of this development initiative of the ITU is seen in the Valletta Action plan which involves over a hundred and forty states.    


V.                 Background on the Policy Reforms in Africa

The advent of globalisation has prompted hordes of developing countries to join trading blocs and organisations to address the need for free trade and other opportunities in the international market. As the current literature points out, the World Trade Organisation (WTO) has been the bastion of this endeavour. Most of the African states have succumbed to the appeal of the WTO thus making them member states in the process.[30] With the promise of probable economic development, these states have to establish reforms in their legal frameworks to conform to the demands of international trading. Such reforms are indicated in the WTO General Agreement on Trade in Services (GATS) which gives particular focus on the reforms in the telecommunications sector.


According to the study of  and Keck telecommunications is generally divided into basic telecommunications and value-added telecommunications.[31] The former constitute all telecommunication services involving “end-to-end” transmission. On the other hand, value-added telecommunications, as the name implies, are added features provided by the suppliers to the customers through the enhancement of the information, form or content of the service.


 In the case of African states being WTO members, the GATS demands transparency in both basic and value added telecommunication sectors. These terms are specified by a strict set of guidelines and regulatory disciplines subject to the supervision of the WTO itself.[32] Essentially, the ends of these initiatives are to conform to the terms of the WTO and consequently achieve economic development. For instance, the reforms of the telecommunication policies in African states like Uganda seeks to “deliver a modern telecommunication infrastructure to take the country into the next century” along with the pledge of the government to honour its commitment to achieve competitiveness and satisfy international standards in the telecommunications services.[33] This is the same with other states like Kenya and Tanzania.


VI.               Access and Interconnection

Access and interconnection are two of the most vital elements in telecommunications. Basically, these two terms work interdependently to ensure that the telecommunications sector operates smoothly for the consumers.[34] These constitute the capability of the states in terms of facilities and infrastructures in relation to the physical links and accessibility of such technologies from the suppliers to the end-users. In the case of Africa, the telecommunications sector appears to be flourishing. This is especially true in terms of mobile communications. However, in the area of fixed line telecommunications, the development is in a rather slow pace. Recent investments, nonetheless, in this area slowly, but surely, triggers the momentum for change. Based on the 2000 report of the ITU, the telecommunications indicators of Africa accounts for 2.4 fixed telephone lines for every one hundred person which shows that in the earlier years of the new millennium, businesses that deal with fixed lines have low levels of penetration in the African market.[35]


This stagnation in the fixed line services in the region may well be attributed to the absence of viable investments.[36] This means that the market for fixed lines is not appealing for both domestic and international providers. In the same manner, the regional development may well be one of the key elements that add up to the overall incapacity of the fixed line market. To deal with this predicament, reforms on the telecommunications sector were made. Specifically, liberalisation and privatisation efforts were initiated along with the institution of independent regulatory bodies that governs over the sector. The following discussions will be delineating the specific developments in two regions in the African continent.  


A.    East African Experience

In the East African region, as with the rest of Africa, the mobile telecommunications sector is considerably lucrative. Thus, the telecommunication operators realise that in order for the market to work for their favour is to establish a viable interconnection among them. In the study of  interconnection among operators means that maximising their benefits means that they have to access all subscribers.[37] For instance, CELTEL in Kenyan, Uganda and Tanzania made efforts to interconnect making calls from each state mark as local calls instead of international roaming services. This is similarly true in the case of Vodacom Tanzania, SAFARICOM Kenya, MTN Uganda and Rwanda, and UCOM Burundi. A big issue between these companies in East Africa is that there is no regulatory framework that governs over their operations. This means that the only concrete element that binds the interconnection agreements between these telecom companies is the Regulation Reference Paper provided by the WTO. Areas like the regulation policies, infrastructure development, and collocation of these infrastructures are in an arguably uncontrolled environment.


Seeing this reality, it shows that the East African states are encountering problems that hinder further development of the telecommunications sectors. More particularly, developments in ICT driven telecommunications may as well be stagnated by this occurrence. Problems in infrastructure, capital creation, and possible investments from both local and foreign capitalists could be rather distant as the market is not satisfactory and does not provide promise of possible high returns.


B.     South African Experience

South Africa is considered by numerous studies as the centre of telecommunications in all of Africa. A major fixed line telecommunications company, Telkom, is responsible for connecting Africa with the rest of the globe. Basically, its interconnection agreements with Vodacom made this possible. [38]Other projects of the said company focused on infrastructure like submarine fibre optics that reaches countries in Europe and Asia. Reports have noted the importance of the foreign operators in making these developments in South Africa possible. Other major companies in South Africa are MTN which provides telecommunications services in Uganda, Rwanda, Swaziland, and Cameroon.[39]


Being the hub of the telecommunications industry in the whole of Africa, it implies that the state is able to support the technologies demanded by the companies and service providers in the industry. This also indicates that South African states have the necessary facilities and infrastructures to ensure access and interconnectivity of the telecommunication companies that operates in their market. The presence of this capability provides the appeal that investors look for in translating investments to possible returns. In the case of South Africa, this capability to support the services is backed by a lush source of consumers that crave for universal connectivity and interactive communication.   


VII.             Liberalization

The international telecommunications industry is said to be worth over hundreds billion dollars in the mid part of the 1990s.[40] A decade later, the landscape has significantly improved; the technologies have improved tenfold which could only mean that the industry is worth more than ever. This is brought about by the liberalisation efforts of states. The following discussion will look into the general and specific attributes of the liberalisation efforts in the telecommunications industry. Like the previous portion of this study, an examination of the conditions surrounding East African countries and Southern Africa will be provided.


A.    The Demands of the New World

As pointed out in the earlier parts of this paper, accession to the WTO has been regarded by states as a panacea for economic development. This promise of prosperity does come with a price, specifically the liberalisation of trade and services. In the case of the telecommunications industry, member states are given general obligations to fulfil. For instance, Article II of the GATS prohibits any protectionist initiatives towards the treatment of other WTO members. Access to the individual markets should be given freely. In the same regard, member states are bound by Article III of the GATS calling for the full disclosure of all agreements that could have an implication on the conduct of trade in telecommunications. Moreover, other terms in the said Agreement significantly takes away the non-tariff barriers to trade. For instance, Article VI and VII point to the fairness of licensing schemes and review of administrative decisions. In the same regard, Article IX contributes to the elimination of monopolistic tendencies of industries like telecommunications in taking place.


B.     Focus on Liberalisation

For states like those in Africa, the GATS and the WTO has bestowed certain liberties on developing countries in order to equalise the telecommunications environment.[41] Specifically, the need for technologies and information networks are recognised in these types of states. This means that the WTO and the GATS encourages other member states to assist these developing countries with regards to the developmental needs of their telecommunications sector. However, these developing must ensure that specific commitments like market access and the principle of national treatment are strictly enforced.


C.    East African Experience

For countries in East Africa, competition was used as a tool for development and for liberalisation purposes. In countries like Kenya, Tanzania and Uganda, the telecommunications industry sought to build up the value of the market in the eyes of the consumer on several premises.[42] The first one is to encourage innovation from the players in the industry. Such improvement in services is considered by these states as major contributors to the added value of the telecommunications sector. In the same regard, the encouragement of the state to provide development in the telecommunications sector is by providing incentives and rewards for their responsiveness. In the same manner, pricing strategies were encouraged such that significant fees were reduced to make these services affordable for the common folk. Along these lines, as incentives for good competition are offered so as punishment for bad business.[43] Specifically, stagnant development of certain telecommunication companies is given warnings if they neglect quality of service and even the welfare of the consumers.


D.    South African Experience

In South African states, the mobile telecommunications network saw considerable amounts of liberalisation.[44] This effort prompted a considerable number of mobile players in the fray. In 2004 alone, the overall mobile subscriber in Africa has reached a massive 51.8 million individuals. It indicated that this is over a thousand percent increase since the latter part of the 1990s.[45] In countries like Kenya, the users of fixed lines have intently diminished in comparison with mobile phone users showing one fixed line owner to six mobile phone users.


VIII.           Shift from Monopoly to Liberalisation

In Africa, prior to the liberalisation and privatisation efforts in the telecommunications sector, the industry is mainly controlled by the state. For instance, the Tanzania Telecommunications Company was recently privatised in 2000, allowing foreign companies like MSI from the Netherlands and Detecon from Germany to help with the development of the telecommunications sector in Tanzania.[46] This initiative is an example of liberalisation as the state significantly lowered its trade barriers to allow the consortium of MSI and Detecon to acquire the competitive shares of a company in Eastern Africa.


 Another example is seen in the case Telkom in South Africa. In 1997, the company was privatised and sold shares to foreign companies like SBC Communications, Malaysia Telecom, and JSE.[47] As described in the earlier parts of the study, Telkom is one of the major telecommunications companies in Africa. It controls a huge number of infrastructures that facilitates the fixed line sectors of the southern region of the continent. With the liberalisation initiatives of the state, the company has acquired added capital to improve its physical assets and further develop its services for the public.   


IX.               Opening Of Previously Monopolistic Markets to Competition

The shift towards a more competitive framework is particularly seen in the opening of markets and liberalisation of trade in Africa. In this section, the case of South Africa will be taken into consideration. The main regime in terms of competition in the said state is the Competition Act of 1998.[48] This law is ratified in order to ensure equality, fairness, and promote trade in South Africa. Specifically, the creation of such a regime seems to carry out the universal objective in trade to eliminate any abuse in the market. In the context of the said legislation, discouragement of any anti-competitive conduct for operators and telecommunication companies is provided.


Superficially, the creation of such a regulatory framework tends to control the possible market abuse in the telecommunications industry. This is needed to encourage competition. For instance, the law prohibits any form of predatory pricing which involves excessive lowering of prices in order to eliminate the competition.[49] The problem in this regard is that predatory pricing is very tricky in terms of detection. In addition to the immense benefit for consumers as a deceptive consequence, it would be hard for regulatory bodies to determine which company pushes for such an anti-competitive conduct.


Another tricky anti-competitive conduct is seen in the bundling of services in South Africa. More particularly, the bundling of services is seen in the mobile telecommunications sector.[50] Normally, this is done by selling telephone units that are locked to a particular service provider. This means that the mobile unit would not be able to use a SIM card that comes from any brand that directly competes with the mobile company that sells the said unit.[51] There are instances that companies shroud this anti-competitive conduct by labelling these bundling initiatives as package deals or special offers where the consumer may accrue some benefits if they actually succumb to this marketing ploy.


X.                 Regulatory Framework

Regulatory intervention of the state is deemed a necessity to encourage competition.[52] There are two accepted types of state regulators; one covers economy-wide competition while another is industry specific. In the economy-wide regulator, competition laws are their main tools in their operations. On the other hand, the industry-specific regulator covers a single sector of the industry. In the context of the telecommunications industry in Africa, most states use both types of regulatory intervention models. For instance, the Independent Communications Authority of South Africa (ICASA) is the governing regulatory body in the whole of South Africa.[53] This is the body that deals with the issues in the telecommunications industry. Another regulatory body that operates in South Africa is the Competition Commission which takes on disputes that arise in the states, including the communication sector.[54] The question now rises whether the two bodies’ function overlaps. The two bodies complement each other by agreeing to a mutual consultation when the need arise. The important thing however, is that these two regulatory agencies should be independent from the interference of the government.[55] This is to ensure justice, fairness, and reduce uncertainty for the telecommunications market. In this manner, the players in the industry are assured that in instances when they go against certain government authorities, they are assured of a fair trial and given due process. This encourages further investments for the state from foreign and local companies thus invigorating the possibilities of competition in the market.  


XI.               The Expected Outcomes

The developments in the telecommunications sector prove to bestow significant implications on the economic development of Africa. To illustrate, studies show that the improvement in the telecommunications tends to diminish the infrastructure gap as well as the development gap in the African region.[56] Basically, the connectivity and interactivity provided by the improvements in the telecommunications sector of the region added value to the overall capacity of the industry.[57] Other implications are expected on the area of development between the urban and rural areas in Africa. Improvements in terms of the information flow provides for added productivity and economic opportunities for both urban and rural areas.


In the same lines, the improvement in the telecommunications sector provides for added input in the process of economic development.[58] Specifically, the business sector is expected to flourish as the costs of information handling labour are significantly reduced. In addition, such developments in telecommunication also open up the possibility for complementary developments in the area of information technology. This means that aside from mobile and fixed line technologies in communications, further developments in ICT and wireless telecommunications may well be the next step in the telecommunication spectrum.


One must realise that the telecommunications industry is backed up by a severely capitalist, profit-seeking environment.[59] This means that in order for services to be on its tiptop shape, the players in the industry have to first earn mounds of money. However, the acquiring the benefits of this reality is not on a one way street. Essentially, these developments and opened possibilities considerably contribute to the overall market efficiency of the African states. With the added potentials for efficiency in business, reductions in the unused and redundant resources are made making markets immensely proficient in the long run.  


XII.             Conclusion

The pursuit towards universal connectivity is now far from being a utopian dream. With the emergence of globalisation, states that were once isolated and suffered from connectivity gap have considerably improved with the liberalisation of the telecommunication sector. This is seen in the case of African states where decades earlier were considered as the bottom feeders in terms of development. As discussed in the paper above, the ends of economic development has contributed largely to the improvements in its telecommunication sector. However, one must point out, as observed in the arguments above, that the performance and development of telecommunications in Africa is based on several reforms and specific initiatives that every state need to accomplish. For instance, the move from a monopolistic sector to one that encourages competition leads to numerous advantages to the market. These outcomes include lower prices and accessibility of the services in the telecommunications sector. As seen in both East African states and Southern African states, the provision of competition initiatives and improved regulations of interconnectivity and access allows for lower prices and developed services that make the region closer to realising its pursuit for universal connectivity. This is especially true in the case of mobile telecommunications, the sector on which the continent is apparently experiencing the greatest development. Though the discussions above indicate that the services in Africa still have some room for improvement, initiatives towards greater regulation and competition will most likely address the situation. With the help of foreign direct investments and the inclination towards privatisation, African telecommunications will reap the countless benefits in the long run.    



Credit:ivythesis.typepad.com


0 comments:

Post a Comment

 
Top