Satellite Access In Africa

 

It now is widely recognized that access to information and knowledge through affordable communications provides a significant opportunity for social and economic development, regional cooperation and integration, and increased participation in the emerging global information society. Addressing deficiencies in access to low-cost communication services now is regarded as an imperative for improving the quality of life in African communities, especially in remote and rural areas where the bulk of the population still resides.
But Africa is fragmented into many small national markets, and limited economies of scale and low income levels in these markets reduce the ability of telecommunication operators to provide services. Compounded by lack of competition in the sector, this has resulted in low levels of investment in infrastructure. As a result, even where access to information is available, costs often remain extremely high, especially outside urban areas. Although there are a growing number of initiatives to expand terrestrial infrastructure, these efforts usually are confined to major cities and along trunk routes. As a result, the cost of bandwidth for Internet and other services is generally 10 to 100 times higher than in North America or Europe.
Fortunately, satellite technology presents an immediate solution to this bottleneck, even in the vast terrain of rural Africa. The IDRC Pan-Africa Satellite Survey that provides the basis for the report, “Open and Closed Skies: Satellite Access in Africa,” confirms that systems using new high-power satellites make it possible to obtain bandwidth anywhere in Africa about 10 times more inexpensively than in the past.

African VSAT Regulation Today

A growing number of African administrations have begun to implement policies and regulations that seek to open telecommunication markets to varying degrees of competition. These policies are being applied to telecommunication structures that, on one level, have traditionally been remarkably uniform. Without exception, the telecommunications sector of each African nation has been organized on the principle of national operating entities having responsibility for providing telephone service. In some cases, international links were — and in some countries still are — the responsibility of a separate entity. Government ownership of operating entities has been the norm.
In some African countries that have adopted a liberalized regulatory framework, private VSAT networks are allowed to function under the authority of the incumbent operator, while countries that have not adopted reforms still retain a monopoly. There also is usually a limitation on the provision of voice services.
Another common restriction involves limiting private VSAT networks to domestic use only. VSAT network operators may be required to route their private network transmissions through the national hub of the incumbent operator, regardless of the financial or technical disadvantages this may create for private operators. In some cases, obtaining a VSAT licence may require a bilateral arrangement with the incumbent operator with a “landing rights fee” or tariff to be paid to the operator, even if the incumbent does not participate in the service chain. In other monopoly jurisdictions, the incumbent is the only entity that may install and service VSATs or the only entity that may own, operate and maintain satellite earth stations.
A commercial/legal presence is typically required in Africa as a precondition for receiving a license. This can be an obstacle to the effective roll-out of VSAT services, because it increases overhead costs to the private operators and inflates prices to the end-users.
And finally, in a number of African countries, rules are often not transparent and are inaccessible to the general public. The licence application process can be extremely complicated, including processing periods that require up to two years, payment of a wide variety of fees — including additional taxes, annual operator fees and landing rights. Added to licensing fees are customs duties, which often are so high as to prevent cost-effective access to VSAT equipment.

National Experiences in Satellite Regulation and Policy

Three in-depth case studies were conducted for this report. Algeria, Nigeria and Tanzania, were selected because they serve as representative examples of African nations where satellite market liberalization has been — and continues to be — applied in order to promote universal access. In addition, the countries were drawn from the western, eastern and northern sub-regions of the Continent. This demonstrates that this liberalization trend is not confined to a single sub-region and also provides an opportunity to compare and contrast the satellite regulatory approaches being implemented across the Continent. (For full details of the three national case studies, please consult the full report which can be downloaded from www.gvf.org.)
The case studies found that these three countries are on different points of the information and communications technology (ICT) development curve and that the varying levels of progress — particularly with regard to access to satellite-based telecommunication services — are largely attributable to the effectiveness of each country’s policies and regulations.
In trying to compare the license fee burden on VSAT networks in the three countries a hypothetical 100-terminal network was priced according to each country’s license fee structure, assuming an arbitrary monthly revenue or turnover of $200 per terminal over five years. The table below shows that Tanzania’s license fees place almost 2.5 times as much burden on the network than does Nigeria. In Tanzania the fees over the five-year license period amount to over $260,000, or about 22 percent of the five-year operating cost, versus $106,000, or about 9 percent in Nigeria. Algeria’s cost is considerably lower, at about $33,000, but this is likely to increase when licensed VSAT operators are introduced.
Nigeria would be atop a ranking of telecommunications development in the three countries, followed by Tanzania and Algeria. Nigeria’s success largely is attributable to how much further it has progressed in liberalizing and deregulating its market, but the underlying explanation for Nigeria’s progress is the effectiveness of the regulator.
Algeria has begun restructuring its telecommunications sector, but growth of the Algerian ICT market in general has been stalled by an inconsistent regulatory framework. In contrast, Nigeria has seen dramatic growth in ICT investment since 2001, coinciding with liberalization and deregulation of the sector. The regulatory framework already is open, relatively consultative and enabling, and commercial users consider the Nigerian Communications Commission (NCC) to have transformed from a highly bureaucratic organization to one run efficiently along business lines.
Tanzania also has a progressive approach to liberalization and deregulation, but the extent to which the regulator has used licensing to generate revenues has limited local investment, and consequently, development of the sector. The current approach to licensing in Tanzania creates incentives for operators to focus on high-margin, corporate enterprise business to pay their licence fees. Operators do not perceive Tanzania to have an environment that will provide them with a return on their investment and this also explains their reluctance to invest in a local hub. Added to licensing fees are customs duties, which often are so high as to prevent cost-effective access to VSAT equipment.
The case studies also revealed that access to satellite-based services is generally being hindered by lack of knowledge. Broadly, the information requirements suggested by each of the country case studies can be summarized as follows:
■ Algeria: Support is needed relating to technical considerations (e.g. local VSAT hubs), economic factors (e.g. satellite bandwidth costs) and effective regulatory approaches (case studies of countries that have liberalized the VSAT sector).
■ Nigeria: Dissemination of VSAT technical literature and marketing of Ku-band VSAT services are needed to promote the technology’s ability to serve as a cost-effective alternative to C-band systems for some applications.
■ Tanzania: Dialogue among the regulator, ministries and other government offices needs to be strengthened with the aim of developing the local ICT sector.
Finally, these three government stand in stark contrast to African countries where duopolies and monopolies remain in place. As was revealed by the IDRC Pan-Africa Satellite Survey, when an administration is focused on protecting state investments in a monopoly or duopoly, the inherent potential of market forces to more rapidly increase access and decrease cost of service is greatly inhibited … or prevented outright.

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