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New Communication Technologies to Bridge the Digital Divide in Africa: Satellite. Wi-Fi. VoIP. GSM. Broadband Chelsea Village, London, UK, March 15th, 16th & 17th |
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Post Event Report
Around 90 attendees converged on the conference suite at Chelsea Football Club in London for Newcom Africa 2005 from 15th-17th March. The goal: to see how the different players in telecommunications can contribute to closing the “Digital Divide.” So much has been said and written on this subject, yet still much of Africa is without useful connectivity. Were this group of communications suppliers, regulators, ISP’s, consultants and Non Government Organizations (NGO’s) able to make any real progress?
There were a number of recurring themes during the two days, but the predominant three were: Removing obstacles to deployment improving the affordability of connectivity Adding value to basic connectivity. Actually, these three themes are connected. The regulatory and tax framework affects affordability and added value can make connectivity viable even at higher costs.
Regulatory Framework
Several contributors praised the work of the Global VSAT Forum (GVF) to gain “Open Skies” access for VSAT operators. They have worked tirelessly with regulatory bodies in each country to make the processes for obtaining licenses to operate VSATs as transparent and predictable as possible. We heard from a number of contributors about the state of play in their countries. From Nigeria, the picture is one of further liberalization. Meantime, the conference was disappointed to learn of apparent ministerial interference with the telecoms regulator in Kenya. Even though the conference was not in possession of all the facts about the situation in Kenya, it looked like a retrograde step. Several speakers were concerned about the impact on general levels of inward investment into Africa as a whole, not simply on Kenya. As a result, a communiqué was issued from the conference to the news media in Kenya, calling on the government to restore an independent telecommunications regulator as soon as possible.
The issue of regulation is much more complex than just obtaining a license to operate. To close the “Digital Divide” will require a positively encouraging business environment, not simply the absence of discouragement. Here are some of the implications which were raised:
Predictability
The process for obtaining licenses should be clear and unambiguous. There are advantages to standardizing the approach across several countries, and this is beginning to happen.
Speed
Businesses cannot wait for endless months before receiving their licenses. The process needs to reasonably expeditious.
Unrestrictive
Licensing which is restrictive is not helping to overcome the “Digital Divide.” One delegate told the conference that licenses which do not permit Voice over IP (VoIP) telephone calls from Internet Cafés limit the viability of those businesses, because they cannot survive when the only business they can do is web browsing at $1 an hour. Several contributors agreed that VoIP is unstoppable, and that despite the best efforts of regulators to maintain revenues from state telecom monopolies, they will lose. Disruptive technologies like Skype (www.skype.com) are literally re-writing the rules for telephony – not just in Africa, but across the world. Indeed, the Dutch operator KPN recently announced a loss of 8000 jobs due to realignment of its business with the realities of VoIP and mobile phones.
Business friendly
Optimism over the ‘new economy’ possibilities should prevail over fears of losing the old economy revenues. This is why U.S. cities like Philadelphia are investing in establishing city wide Wi-Fi networks: because connectivity is a basic requirement for attracting inward investment, and fundamental infrastructure for economic success. Interestingly, a recent article in the London Sunday Times talked about rural communities being “exiled from the fast lane,” with rural real estate being worth 25% less where broadband connectivity is not available.
Full liberalization of telecoms markets in Africa, together with low licensing costs can be expected to stimulate economic development and thus enhance tax yields in the medium term.
Improving Affordability
There was much debate at the conference about the end-user cost of telecom in Africa. One speaker questioned how it could be that a 512Kbps ADSL service could cost about $50 a month in the USA, but up to $3500 a month is parts of Africa. Likewise, why is the cost of mobile phone call to a land line within the country 34-61 US cents a minute in Kenya but only 4-11cents per minute in Chennai, India? (Sources: Safaricom and Airtel websites) It seemed that several of the delegates suspected the suppliers of profiteering. Clearly the space segment providers and satellite hardware manufacturers in the room felt defensive when they pointed out that satellite bandwidth costs for much of Africa compared very favorably with those for other continents. The discussions moved on to other areas which could be targeted in order to reduce end-user costs:
Import duty / other taxes
Import duties can add 35-50% to equipment costs in many countries. If governments seriously want to see the “Digital Divide” closed, then an abolition of import duty on telecommunications equipment would be very helpful.
A recent BBC website article stated that in Kenya, there is a 10% revenue surcharge on mobile phone calls on top of the 16% VAT. So the government is taking nearly 28% of the cost of each call. Again, it could be argued that it would be better to stimulate telecoms usage through lower taxation, and tax the profits resulting from increased economic activity instead.
Local manufacture
There was some discussion about the cost advantage to be had by manufacturing equipment in Africa. Some delegates thought that this could make sense – especially for items like C-band satellite dishes. Others felt that the necessary economies of scale and technical skills would not be available.
Distribution channels
There was a lot of support for the idea that in many African countries the distribution channels for telecoms services are inefficient, with too much margin being made by too many participants in the distribution chain, with not enough value being added by each. This adds up to the end-use prices being unsustainably high, precluding many potential uses for VSAT, Wi-Fi and other technologies.
Local technical skills
There was recognition that another component of the higher costs is the skills gap that exists in many parts of Africa. This makes it necessary for expatriate skills to be imported, at far higher costs. GVF, through its installer and business training courses is attempting to address this to some extent.
Joining the dots…
None of these factors operate in isolation. If you have a 50% import duty, and wholesaler and a distributor who each take a 50% markup, then an item which costs $5000 before it enters the country costs the end-user nearly $17000! Then if the regulator slaps on another $3000 in license fees, we’re at $20000! There are so few businesses that can make a sensible return on this level of investment, so the distributors have to make a big mark-up on each sale. Imagine if there were no import duty and only a modest $50 license fee. Imagine that the distributors each made 10% markup. The bottom line for our imaginary system is now $6100. At this level, maybe there are many more viable uses for the technology, so volumes would be much higher and real inroads into the “Digital Divide” could be made.
Adding Value
Nobody buys a Satellite broadband system just to have connectivity – they buy it for what it can accomplish. There were several presentations at the conference by organizations that talked about content and about solutions that are made possible because of good connectivity. That’s what closing the “Digital Divide” is all about: making a real difference in people’s lives – allowing them to get education, to access information, to make better decisions, to gain economic competitiveness and to be full and equal partners in today’s world. If any significant portion of the ideas discussed at Newcom Africa 2005 actually gets implemented, we could make strides in the right direction!
Rob Longhurst |
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UK EMP Archive |
