Presentación de Alison Gillwald (RIA!) para el taller de Jóvenes Investigadores. 16 de mayo, Santiago de Chile.

1. Policy influence process in
Research ICT Africa
DIRSI Young Scholar Programme, Santiago, May
2012.
Prof Alison Gillwald, University of Cape Town.

2. Research ICT Africa
RIA seeks to build an African evidence and knowledge base in support of ICT
policy and regulatory processes, and to monitor and review policy and
regulatory developments on the continent. Part of this effort is the generation
of relevant information for policy makers and regulators. The RIA 2011 e-
Access & Usage Survey delivers nationally representative indicators on
household, individual and small business level. The survey uses national
census sampling frames in co-operation with National Statistical Offices to
deliver crucial data in a cost effective way.

3. Ministry of Communication develops overall policy for the
telecommunications sector from which Department develops
strategies
Parliament
Stake-
holders/
Informs laws
Civil
society/
inputs Policy inputs Regulator &
Consumers, Formulation Competition
citizens, Process Commission
operators,
service
providers,
academia, initiates & formulates
unions
Ministry
It is required that the regulator and competition authorities are
consulted and that public hearings are held before a policy is
gazetted. Once it is a bill Parliament, through a multiparty
parliamentary committee, will also hold public hearings before
pasing the law

4. The Parliaments passes laws based on policies
laws
Parliament
Stake-
holders/
Informs laws
Civil
society/
inputs Policy inputs Regulator &
Consumers, Formulation Competition
citizens, Process Commission
operators,
service
providers,
academia, initiates & formulates
unions policy
Ministry
directives
The Minister can provide policy directives to the regulator between
major policy reviews.

5. The policy determines the institutional arrangement for the sector -
the degree of autonomy of the regulator, competition commission
and USA - through the appointment process, funding, and delegation
of powers.
laws
Parliament (institutional
arrange- licensing
Civil
ments)
society Informs laws
conduct
Stake- Regulator
holders/ inputs Policy inputs Market
Consumers, Formulation Competition Structure
citizens,
Process Commission
operators, regulation
service
providers, Universal
academia, initiates & formulates Service
unions. Agency market failure
policy
Ministry
directives
The policy also determines the market structure through requiring
the regulator to licence certain categories of operators/service
providers and exempting others. Market conduct is in response to
the market structure and determines the nature of the regulation.

6. The performance of the sector - competitiveness reflected in
access, range choice of services, price and quality - is the outcomes
of the policy and legal framework and creates the conditions either
conducive to investment in the sector or not.
laws
Parliament
Civil conduct
society/ Informs laws
Stake-
holders/ inputs Policy inputs Regulator &
Consumers, Formulation Competition regulation Market
citizens, Process Commission Structure
operators,
service
providers,
academia, initiates & formulates
unions. policy
Ministry
directives
Policy outcomes: competitiveness - choice, prices, quality of infrastructures, services and products

7. Integrated strategy
POLICY INFLUENCE
Dissemination
CAPACITY TECHNICAL
Training RESEARCH Networking
BUILDING ASSISTANCE
Publication
RESEARCH INFLUENCE

8. Evidence-based policy
Telecom Regulatory Enviro (TRE)
(stakeholder perception survey)
NRA website analysis
Indicators
Regulatory & Policy
Impact Assessment
Data-mining and economic modelling
- gender, mobile-banking, informal sector usage
ICT Sector HH Survey
Performance Review SME Survey
Supply Side Data Demand Side Data

9. Case Study
Namibia

10. International trends and best
practice
‘Best practice’: Termination rate = cost of termination
of efficient operator:
Promote economic efficiency
Provide incentives to invest in new technologies to reduce costs and
expand product offerings
Promote competition
Promote universal service (through low access/retail prices) if passed
on/effectively regulated
NGN / IP based: voice traffic will become
insignificant...new pricing principles RPNP...hence SKA

11. Mobile termination costs Namibia (N$/ZAR):
MTC being the most efficient operator
Current MTR 1,06
MTC total expenditure per minute 1,02
MTC opex per minute 0,97
MTC direct cost and depreciation per minute 0,48
MTC direct cost per minute 0,34
MTC 50% of dircet cost and depriciation per minute 0,24

12. CellOne Telecom Namibia MTC
Model 1: Immediate 2nd choice: if 2nd choice: Removing No comment
N$0.30 accompanied by other distortionary factors immediately
regulatory but request higher transit charge
interventions for outgoing international calls
Model 2: Symmetric 2nd choice: if 1st choice: Compensates for No comment
glide path to N$0.30 accompanied by other market distortions of past
that started 1 July regulatory years
2006 interventions
Model 3: Symmetric Rejected: sees no Rejected: only gradually No comment
glide path to N$0.30 reason to wait to removes market distortions and
starting 1 July 2009 remove market disadvantage TN and consumers
distorting factors unjustifiably for two years longer
Model 4: Asymmetric 1st choice: because Rejected: only gradually No comment
glide path to N$0.30 of current traffic removes market distortions and
starting 1 July 2009 imbalance disadvantage TN and consumers
unjustifiably for two years longer
MTC model: Rejected: same as for Rejected: same as for Model 3 Otherwise: Drop
reduction to N$0.60 Model 3 in EBITDA margin
until 2011 to 37% because
of having to
compete on a
level playing field

13. After several consultations with
all operators: Industry consensus
Immediate drop of termination rates to N$0.60 to catch
up with the region and international developments
Glide path to the estimated cost of an efficient operator
+ 25% mark-up, ie NS0.30
Immediate fixed-mobile convergence of termination
rates
It gives time to MTC and CellOne to conduct LRIC
studies and contest the results

14. The best outcome for Namibia
Fair competition among telecommunication operators
Lower consumer prices
Better services
Maximum job creation
Highest income for government through company tax
and individual income tax
Reasonable returns for shareholders / investors
(including government)

15. Termination Rates
US cents
14,40
MTR FTR
9,00
8,20 8,20
6,80 6,80
5,50 5,50
4,10 4,10
Jan 2009 July 2009 Jan 2010 July 2010 Jan 2011

16. MTC key performance
indicators
2005 2006 2007 2008 2009 2010
Subscribers in million 0,40 0,56 0,74 1,00 1,28 1,53
EBITDA Margin 61% 60,2% 52,2% 50,9% 53,8% 55,8%
After-tax profit millionUS$ 39,90 45,94 46,27 48,53 52,79 54,10
Dividend paid in million US$ 14,99 10,90 33,38 30,11 50,41 52,26
Capital Expenditure in
35,4 55,9
million US$
Tax payments in million US$ 19,96 23,35 24,11 24,62 27,10 25,5

17. Namibia now among the 10 cheapest
countries in Africa: moved from rank 22 to 9
Cheapest Low User USD
Mar-11 Jun-11
1 Egypt 1,54 D.R. Congo 1,36
2 Sudan 1,89 Egypt 1,54
3 Kenya 1,90 Sudan 1,89
4 Tanzania 2,21 Kenya 1,9
5 Algeria 2,25 Algeria 2,09
6 Uganda 2,30 Tanzania 2,21
7 Mauritius 2,39 Mauritius 2,39
8 Ghana 2,87 Ethiopia 2,61
9 Sierra Leone 3,09 Namibia 2,81
10 Ethiopia 3,16 Ghana 2,87
22 Namibia 7,67
Source: Research ICT Africa

18. Case Study
South Africa

19. Multiple cross cutting interventions
Build research capacity and rigorous research for evidence based policy.
Advocacy through capacity/building technical assistance
Leverage outcomes in other jurisdictions in which we have had success and
share experiences
Adjust and align to national/local context

20. All Operators
Cheapest!Namibia!June!2009! Cheapest!South!Africa!June!2009!
285.52!!
!201.52!!
140.33!!
!89.48!!
68.18!!
!40.93!!
OECD!low!user!basket! OECD!medium!user!basket! OECD!high!user!basket!

21. Termination Rates April 2009 MTR N$
India 0,04
Cyprus 0,24
Austria 0,54
Sweden 0,55
Finland 0,59
Kenya 0,62
Tanzania 0,63
Botswana 0,71
Slovenia 0,77
France 0,83
Uganda 0,86
UK 0,93
Namibia 1,06
South Africa Peak 1,25
South Africa Off peak 0,75

23. BusinessDay - ALLISON GILLWALD: Cellphone rates 2010/11/17 10:17 AM
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ALLISON GILLWALD: Currencies Commodities JSE Today
‘Ghana, Kenya, Tanzania and Uganda
Cellphone rates have already seen increased usage with RAND/US$ 7.0690 1.11%
Lower termination fees may spark telecoms more affordable prices’ ZAR/GBP
RAND/EURO
11.2203
9.5260
0.46%
0.39%
turnaround ZAR/AUD CALC 6.5582 0.00%
EUR/USD CALC 0.7419 0.08%
Published: 2010/11/17 07:36:18 AM GBP/USD 0.6302 0.12%
JSE data provided by INET. Markets Data delayed by 15 minutes.
MUCH has been made of Vodacom ’s R800m loss of revenue in the six months to September, owing to
the reduction in termination rates from R1,25 to 89c in March, reported in its interim results last week.
Find Share
As if to confirm the dire warnings by MTN and Vodacom following the decision by the Independent
Communications Authority of SA (Icasa) late last month to cut further the rates of dominant operators,
this loss of revenue has been used to flag the threat of a future loss of earnings that would have been
received from terminating the calls of their competitors on their networks.
From a policy and regulatory perspective, these results demonstrate a far more positive outcome than
was widely reported in the media. Despite the loss of earnings from interconnection — an expected
outcome of the introduction of regulated cost-based pricing following years of extractive pricing —
overall revenue and operating profits have continued to grow.
It is true that this was at a slower rate, with Vodacom’s earnings before interest, tax, depreciation and
amortisation (ebitda) increasing by only 7% in the first six months of this year, compared with 10,5%
for the whole of last year. But ebitda margins remain constant at a healthy 33,2% over the past three
years, and Vodacom’s share price is constantly on the rise.
Historically, prices have been exceptional as a result of unregulated pricing in a duopoly market. In the
five years before the impending entry of the third cellphone operator, Vodacom and MTN increased their
termination rates by 500%, where they have remained since 2002, despite world prices dropping to a
fraction of this.
Cost-based termination rates limit these pricing distortions in the market and reduce barriers to fair Management(Tip
competition.
!When! the! job!market!picks!up,!the!first!to!leave!are
The transfer between operators caused by above-cost termination rates is generally to the disadvantage
often! a! company’s! most! valuable! employees.
of fixed-line operators, small cellphone operators and new entrants to the markets, while it is to the Unfortunately,! you! may! be! inadvertently!encouraging
advantage of the dominant cellphone operators. these! future! leaders! to! say! their! goodbyes! by! treating
them! as! cogs! in!a!wheel!rather!than!the!individuals!that
While the focus has been on the loss of revenue, reduced termination rates of course also decrease the they!are.!
costs of termination for operators. This produces efficiencies in the network that can reduce end-user
prices and offset losses in interconnection revenue through increased demand and usage, and the more !!! !,(Harvard(Business(Review(and(HBR.org
productive use of the network.
Usage has indeed increased, with average revenue per user and minutes of use up, though this is best
explained by the disconnection of millions of subscribers unable to comply with the statutorily required
registration of SIM cards.
From a policy perspective, the Regulation of Interception of Communications and Provision of Editor's Picks
Communication-Relation Information Act (Rica) has alienated poorer South Africans from
communications services, with debatable security gains. With the effects of this stabilising, however, Claim of Aurora mine death threats
Vodacom gained more than 1-million voice subscriptions in September alone. This, together with MTN’s
continued subscriber growth over this period, suggests SA will soon follow the trends elsewhere in the
world, where subscriber growth has accompanied the reduction of termination rates. The speed and
degree to which this happens depends on the speed and degree to which the reduced cost of Most Read Most Commented
terminating calls on competitors’ networks is passed to consumers.
Despite warnings from the dominant operators that this cost saving in interconnection charges does not 1. Institute says police ‘out of touch with
automatically get passed through to customers and that retail prices could even be used to offset
reality’
termination-rate losses, Vodacom reports that effective rates per megabyte have fallen by 16%, and
effective rates per minute on voice have declined by 16,9% in the six months to September 30, 2. Sisulu criticises MP’s ‘irresponsible’
demonstrating some competitive pressure on pricing, most likely attributable to greater pricing flexibility approach to defence issues
enabled by reduced termination rates. 3. Euro ‘crisis of survival’ as EU mulls Irish
The question for the regulator is whether these reductions are sufficient in relation to the termination- lifeline
rate reductions of about 30% and, if not, will it prompt a review of cellphone retail rates? 4. Mooted change in ‘secrecy bill’ hailed
5. Ramos says SA can surpass Asia’s
In most countries where termination prices have already been reduced to bring them towards cost, this
progress
http://www.businessday.co.za/articles/Content.aspx?id=126993 Page 1 of 3

24. R E S E A R C H I C T A F R I C A P O L I C Y B R I E F N O . 1
Africa Prepaid Mobile Price Index
2012: South Africa
Among 46 African countries studied, South Africa ranks poorly for prepaid mobile telephony affordability.
Ranked 30th out of 46 African states, South Africa is now far behind countries where the regulator, has en-
abled competition by enforcing cost-based mobile termination rates. The resulting competition has in many
cases driven down prices for consumers. Not long ago, South Africa and Namibia shared the same mobile
termination rates and had similar end-user prices. Today, Namibia enjoys amongst the cheapest mobile pre-
paid prices in Africa, as a result of the slashing of its termination rates to close-to-cost, which pressured the
incumbents towards cost-based pricing, thereby increasing demand and remaining highly profitable.
RIA Policy Brief No 1 March 2012
SA ranks 30th Neighbouring countries Lack of pass-through of Cell C and 8ta SA operators do not
Mobile prices are cheaper in several times cheaper price reductions to end- Two relatively late market compete for price
prepaid users
over 30 African countries entrants, Cell C and the The dominant mobile
South African
than they are in South most recent entrant 8ta, operators, Vodacom and
mobile prices are three times In South Africa, even the
Africa with prices in Kenya, have attempted to introduce MTN, have been able to
more expensive than in modest reductions imposed
Mauritius, Egypt and on termination rates have cheaper mobile prepaid withstand the pricing
Namibia.
Namibia only a fraction of generally not been passed on products, but these products pressure from price cuts by
the price of even the lowest to end-users. have not forced down the later entrants, and all
priced services in South general price level. operator’s prices have settled
Africa. around the levels set by the
dominant operators.
peak prices between May 2011 and June 2011, while the dominant
Introduction operator, Safaricom, which dominates both the voice and data mar-
ket with market shares of 75.9% and 92.18% respectively (CCK, 2011,
Pricing is the key indicator of the competitiveness of markets. Yet in
September 2010 data), increased both on-net and off-net tariffs be-
South Africa there is very little pricing transparency to allow for any
tween September 2011 and October 2011.
meaningful assessment by consumers or even the regulator of mobile
communication prices. Operator tariffs are filed with the regulator, Also in Tanzania, Rwanda and Uganda, the state-owned operators
ICASA, without any process of assessment or objection and lowest- are the cheapest in the country. In Tanzania, TTCL is the cheapest
price tariff calculators, set up by regulators and consumer groups in operator and it managed to keep its prices at a lower level than the
countries such as the UK, do not yet exist in South Africa. With more dominant operators (Airtel and Vodacom) throughout 2011. Also,
than 100 voice products currently on offer in the market, no South since January 2011 Rwandatel has been the cheapest in Rwanda, and
African consumer can readily determine the best-priced package for it further reduced its tariffs in August 2011.
her/his purposes. In Uganda, Uganda Telecom has the lowest tariffs in the country and
has kept the same tariff plan throughout the year. In South Africa,
Prepaid Mobile Prices across Africa new entrant 8ta, which is the mobile arm of Telkom South Africa, the
partially state-owned incumbent fixed operator, kept its prices at a
Table 1 illustrates the potential weakness just described by compar- lower level compared to its competitors until August 2011, when Cell
ing the cost, based on the OECD 2006 low-user basket calculation, of C introduced its ZAR 0,99 on-net rates, a drop from ZAR 1,50, thus
the cheapest product available in a country with the cost of the becoming the cheapest operator.
cheapest product from the country’s dominant operator. The sixth Meanwhile, in Mauritius, Namibia, Egypt, Sierra Leone, Libya,
column compares these two costs and shows the difference between Congo Brazzaville, Senegal, Sao Tome & Principe, Madagascar, Mali,
the cheapest lower-user product of the dominant operator and the Mozambique, Chad, Cote d’Ivoire, Togo, Central African Republic,
cheapest low-user product across all operators in that country. Where Angola, Malawi and Cape Verde, the dominant operator is the
the price of the dominant operator’s cheapest low-user package is cheapest.
significantly higher than the cheapest low-user package in the coun-
try, then this should indicate an absence of pricing pressure on the Table 1 shows that in Namibia, Chad, Congo Brazzaville, Mali and
dominant operator in that market. Senegal, the cheapest product available from dominant operators,
using the OECD 2006 low-user basket calculation, decreased in 2011
However, several of the countries surveyed in Table 2 which are in by between USD 0,7 (in Senegal) and USD 11 (in Namibia).
actual fact experiencing high levels of competition have low-user
packages much cheaper than the dominant operator’s cheapest low-
user package – thus misleadingly suggesting a lack of competition,
and showing the potential weakness of the basket method. In Kenya,
for instance, Orange Kenya cut both on-net and Orange-fixed off-
RIA Policy Brief SA No 1 2012

25. News - Top International - Top
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1/3
• Coverage in Business
Day, Mail & Guardian
(weekly), Tech Central,
IOL , and News 24.
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26. Budget vote May 2012
• Minister of Communications ask for transparency in mobile pricing
• Head of Parliamentary Portfolio Committee on Communication (ANC)
cites Policy Brief in opening response and announces Parliament to hold
public hearing on pricing in June 2012.
• Official Opposition Party response draws verbatim on brief request on
challenges within sector.
• Opposition Party (COPE) extensively quotes RIA SA Sector Performance
Review.
• Operators call for off -the-record meeting.

27. • This research is made possible with the
support of IDRC, Google and OSI.
• See www.researchICTafrica.net