Seeking African Hearts, Minds And Access
As part of a development program funded by Canada’s International Development Research Centre (IDRC), the Global VSAT Forum (GVF) conducted an in-depth survey of satellite communications in Africa. Examined were “stakeholders” at every link of the food chain, including service providers, corporate end users, consumers and government. The results were compiled in its report Open and Closed Skies: Satellite Access in Africa, which won’t be released until September. However, Satellite News was given an exclusive sneak peek into this report.
African administrations, more than many of their counterparts in other developing countries, have begun to implement strategic liberalization of VSAT services. As recently as 1997, almost none of the African administrations had introduced competition into their satellite-communications sectors. Since then, most now have implemented some form of liberalization, a fact supported by the IDRC Pan-Africa Satellite Survey. Among 17 responses, 10 replied that competition was permitted, and others noted that plans were being made to introduce further satellite-based competition.
The importance of strategic liberalization – the selective opening of a market, sector by sector, to help an administration achieve targeted policy objectives – has begun to be seen in satellite regulatory and policy reforms developed recently by, for example, the Algerian, Nigerian and Tanzanian governments. Indeed, every sub-Saharan nation except for Namibia and South Africa has strategically liberalized the VSAT sector. In each case, the administrations identified VSAT-based services as one of several key telecommunication tools to be liberalized and for which regulations would be optimized.
Another of the sectors that tends to be targeted for strategic liberalization by African administrations is Internet service. However, the extent to which the ISP sector has been fully liberalized is significantly greater than for VSAT-based services, suggesting considerable opportunities for further progress in African liberalization.
Significantly, as this report was being drafted, increased pressure was being applied by the Kenyan Internet sector for the administration not to implement “restricted licensing” of VSATs. In an open letter to the Kenyan government, TESPOK, an association representing local Internet interests, drew public attention to the administration’s intention to begin issuing a limited number of licenses on a competitive-tendering basis for two “protected” segments: international Internet/data gateways and VSAT hubs.
Among the arguments made by TESPOK for full liberalization of Kenya’s VSAT sector are the following:
- Cost: Competitive tendering inevitably leads to high prices, which are passed on to the consumer in the form of higher prices. This is not just a cost to the consumer, but also a cost to the economy. TESPOK has calculated that the direct cost to Kenya’s economy during the next five years, if this policy is implemented, will be in excess of $220 million.
- Precedent: In Tanzania, anyone can apply to install a VSAT and be granted a license after paying a fee of $5,000 per year. The same applies in Uganda, except that the fee there is only $4,000 per year. In its open letter, TESPOK asked, “Why does the government claim with one hand that they wish to stimulate economic recovery and with the other introduce policies that will make Kenya regionally uncompetitive?”
- Technical Issues: The group believes it is wrong to have a “middle man between the Kenyan ISP and the rest of the world.” TESPOK argues that Internet exchange points are the building blocks of the global Internet. There are many exchanges in the world, but ISPs’ analysis of Kenyan traffic patterns confirms that the most important ones for Kenya are the Internet exchanges in London and New York City. Asks TESPOK, “Why should a Kenyan ISP be forced by regulation to use a third-party intermediary – these so-called ‘Internet backbone licensees’- between their Kenyan ISP network and these exchanges around the world? It goes without saying that the route is longer, and the costs will be higher.”
TESPOK concludes by requesting the government to reconsider its plan and to permit any qualified operator or service provider who applies for a license to operate satellite services to be granted a license upon payment of the relevant fee.
Malawi’s experience reinforces the International Telecommunication Union’s conclusion that “market opening works.” Separated from the Malawi Post Office in 1997, Malawi Telecommunication Limited (MTL) is the sole operator of fixed-line telecommunication services, but it does not have a legislated monopoly. The terminal equipment market now is fully liberalized, and ISPs are allowed to use VSATs to obtain international bandwidth independently of MTL and to use wireless data links to service customers. Such multi-branch companies as Lever Brothers, Shoprite and Oilcom also have begun to use VSATs to service their internal data communications needs, including online connections directly to South Africa. In Malawi, a VSAT license costs $5,000 per site initially and $2,500 per year subsequently. About 20 licenses have been issued. According to the Malawi Communications Regulatory Authority (MACRA), the uniform licensing regime may in future be reviewed with “a downward adjustment [of fees] likely to take into account the emergence of low-cost, Ku-band, two-way, VSAT-based Internet services aimed at small businesses and residential users.”
South Africa Is Different
By contrast, South Africa is – with regard to its VSAT sector – one of the least liberalized nations in sub-Saharan Africa. At the moment, Telkom SA (through a PSTS license) and Sentech (through a multimedia service license) are the only providers allowed to provide VSAT services within South Africa. The incumbent, Telkom SA, holds a monopoly for international VSAT services. An international telecommunication service license and multimedia service license can only be issued upon an invitation from the government. Further, agreements need to be made with licensed operators to obtain VSAT network facilities and services. Two private network operators serving Closed User Groups are active in the South African market: the power utility company Eskom and the railway company Transtel, and they will be jointly issued with the Second Network Operators (SNO) license. They are expected to leverage these resources to compete with Telkom SA.
The South African government’s regulatory approach increasingly has attracted criticism, particularly from neighboring administrations in the TRASA region, most of which already have opened their VSAT markets. This international tension has arisen lately because, while South African companies are now eligible to receive VSAT licenses in most of the sub-Saharan nations, companies from those nations have no comparable opportunity to provide VSAT-based services in South Africa.
At least two consequences have become apparent as a result of South Africa’s VSAT regulatory approach. Officials of some TRASA administrations have suggested that a “moratorium” be imposed on the provision of VSAT licenses to South African companies. And companies interested in providing VSAT services in the TRASA region are, instead of launching services from South Africa, obtaining licenses and building businesses in countries with liberalized VSAT regimes, including Botswana, Malawi, Mozambique and Zambia.
The contrast between the experiences in Malawi and South Africa is striking. While enterprises in Malawi have begun to enjoy expanded access to communications via VSAT – and the regulator is considering licensing-fee reductions to further promote satellite-based Internet services to consumers – the South African administration’s more restrictive approach has retarded local industry growth. That policy threatens the loss of political goodwill in the region.
David Hartshorn is secretary general of the Global VSAT Forum, and David Jensen is an independent consultant in South Africa. For further information, Hartshorn can be reached at 011 44 1727 884 739 or by e-mail at firstname.lastname@example.org.