The latest issue features an e-interview with LIRNEasia’s CEO Rohan Samarajiva, but it is not the only reason why we thought of highlighting the issue. The content is interesting and very readable. We publish two e-interviews from July 2010 issue here fully, as they are not available on public domain.

Apart from Samarajiva, This issue carried e-interviews with Alison Gillwald, Indra de Lanerolle, Christoph Stork and Muriuki Mureithi.

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The need for competitive research for policy influence
e-interview with Alison Gillwald

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“High quality, rigorous research…is required to compete and complement with each other for policy influence… In mature economies researchers from multiple universities would be debating and refining the positions governments should be taking on everything from regulating next generation networks to demand stimulation for broadband.”
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Alison Gillwald is Executive Director of RIA. She is also Adjunct Professor at the UCT Graduate School of Business, Management of Infrastructure Reform and Regulation, and a member of CPRafrica’s organisation and selection committee.

CHAKULA: You have just held the CPRafrica conference in Cape Town. What are you hoping to achieve through the conference?

ALISON GILLWALD [AG]: There is almost no scholarly research being undertaken in the field of ICT policy and regulation on the continent. A Google scholar search on the subjects throws up around five scholars on the continent who are published in peer reviewed or accredited journals. It is this kind of high quality, rigorous research that is required to compete and complement with each other for policy influence. In mature economies researchers from multiple universities would be debating and refining the positions governments should be taking on everything from regulating next generation networks to demand stimulation for broadband. Although there are pockets of applied research being undertaken there is no tradition of critical intellectual engagement in this area on the continent. The purpose of CPRafrica is to provide a forum for nurturing and showcasing research in the area of ICT policy and regulation on the continent and enhancing its quality through rigorous academic review and debate. The conference is complemented by a young scholars programme to expose young scholars who may be excluded from such peer-review, paper-acceptance-only style conferences without such a category. Some of these are part of the IDRC- [International Development Research Centre] funded PhD programme to encourage doctoral research in ICT policy and regulation. The idea here is to build a cadre of policy intellectuals on the continent able to critically engage government on the basis of relevant research and contribute meaningfully to research and policy excellence. This will further enhance Africa’s standing in international research and governance fora, in which its participation has historically been suboptimal.

CHAKULA: Reviewing some of the papers presented at the conference, it strikes me that there are a couple of threads that are emerging. Two in particular stand out: the notion of “innovation” in the telecommunications space, and the challenges around convergence and policy when two distinct sectors with different ways of doing things are brought into conflict with each other. I also went back to Research ICT Africa’s 2008 M-banking policy paper, which raises similar themes, and I would like to use that as a starting point. First, on the issue of ‘innovation’. In the M-banking paper, the following assertion is made: “Policy-makers and regulators need to ensure that evolving systems serve the broader objectives of economic growth and development as well as protect consumer interests, while creating an environment that encourages and rewards innovation”. In what ways can policy inhibit or encourage innovation in the telecommunication’s sector?

AG: Indeed, providing certainty to investors and operators while retaining the levels of flexibility to enable innovation in a fast-changing environment is one of the most difficult balancing acts that policy-makers and regulators have to perform. I think the linkages and catalysts between technology, market and regulatory innovation are becoming clearer all the time. New technologies and service offerings have prized open markets and the entry into less policy and regulatory constrained markets has made taking certain technologies to market more viable. This has triggered further possibilities across historically distinct platforms, not only between broadcasting and telecommunications, but between fixed and mobile services and even entirely separate sectors such as telecommunications and banking. The challenges to the expansion of such services are really regulatory now rather than technological – and that is not to say that one does not want or need public interest regulation either in the telecommunications or banking sector, but it has to be done in new, innovative ways that enable to extension of these services to those who currently don’t enjoy them. Once these various forces are unleashed they are able to intersect and create new opportunities and innovative ways of doing things that have not been done before.

CHAKULA: Innovation here seems necessarily to be tied to market gain – the objective is to increase or capture market share. In both your M-banking paper, and the case study of the mobile operator One Network in Kenya, preconditions exists that facilitate innovation. With M-banking there are low-income earners who are ‘unbanked’ and who could benefit from some kind of low-cost transactional instrument, and with One Network, there is a significant level of cross-border traffic that makes a seamless network attractive.
AG: It is true that innovation is often driven by market forces and pursuit of profits, and, traditionally, with new technologies have focused on high-end markets. But much of the ICT innovation we are witnessing in developing markets is focused on what has been referred to as the ‘gold at the bottom of the pyramid’ – very profitable turn-over of high volumes of sometimes minuscule margins on products that, by breaking them up or making them available at cost, the masses at the bottom of the economic and social pyramid can enjoy things like pre-paid phone vouchers, or transferable airtime vouchers. And many of these products have been commercialised innovative practices by the poor in order to access and affordably use communications services – such as missed calls, multiple sim card usage that allows for same net rates, or ‘plastic roaming’.

CHAKULA: If we consider Indra de Lanerolle’s fascinating case study on the South African convergence scenario, we see two sectors (broadcast and telecommunications) in conflict with each other because policy decisions are made according to different frameworks: simply put, economic versus public interest. In fact, Indra does seem to suggest that these are in competition with each other, and resolves this in an interesting way. It feels hard to believe that ‘consumer interest’ is the same as ‘public interest’?

AG: I think with the shift from public utilities to competitive markets many of the public interest objectives of delivery and service are met through serving the consumer interest. Nevertheless there is public interest regulation that is required to improve wider and collective consumer welfare – to provide access to ‘uneconomic areas’ for example – though with new more cost-effective, rapidly deployable wireless services, this concept in markets that enable competitive entry is regularly not proving to be the case. But as long as we have the large number of poor that we do, we will need some level of social regulation – even though a lot of the current pent-up demand could be met with greater market efficiency (more competitive markets offering better prices). And then there are the more traditional content regulation issues either to restrict certain ‘harmful’ content or activities or to enable it, such as local content regulation. That too may be found to be highly profitable, but may need either protection or encouragement.

CHAKULA: Indra’s paper, like your M-banking policy paper, shows that regulating convergence is tricky because of the ‘convergence’ of two or even more sectors; whether broadcast/telecommunications or telecommunications/banking etc. What are some of the key challenges that policy-makers can expect to face in Africa?

AG: The key challenge for African regulators is that they are still trying to deal with legacy regulation around first and second-generation infrastructure and access. At the same time, if they do not want the agenda to be set for them in international fora, they need to deal with next-generation issues, not only of converged IP [internet protocol] networks and services and the next-generation regulation issues of network and service-neutral regimes, but of cross-cutting issues of electronic commerce frameworks, intellectual copyright rights, security and privacy issues, and so on. And you have to do it all or be left behind…

CHAKULA: One frustration is that when one reads a good paper that seems to offer a solution to a problem, one is also met with the feeling that those with decision-making powers are probably not going to read that paper, or seriously consider its arguments. Do you feel the same? If so, how do you think CPRafrica picks up on this challenge? Is it just a case of repeating issues until policy-makers take them on board?

AG: No. CPRafrica is one of several strategic strands towards having evidence-based ICT policy on the continent. This is about organic and indigenous knowledge creation and contribution, at the national level, at the level of regional association and continentally, and also about global engagement and influence. For too long have the solutions come from the developed world. Of course, there are lessons to be learnt and we don’t need to reinvent the wheel, but we also have different challenges and Africa has demonstrated remarkably innovative responses to these when they are informed by sound policy, effective regulation or thorough and appropriate business plans. The indicator research done by RIA and its analysis in order to assess policy and regulatory outcomes is fed into several initiatives, globally and locally. RIA provides the only comprehensive public domain demand-side data on ICT access and usage on the continent. This is used in national, regional and continental meetings on ICTs, and in the database and reports of multilateral agencies such as the OECD and the International Telecommunication Union (ITU), to better inform their understanding of developments in Africa. It is true that sometime decision-makers do not like to hear of the widespread policy and institutional failure on the continent, but many do – especially those that are rapidly improving and beginning to see the rewards of their reforms. This research is also used to develop training curricula that address the needs of policy and regulators in a developing country context. So, for example, as part of the global research and training collaborative LIRNE.net we conduct a professional development course on alternative regulatory strategies at the UCT Graduate School of Business Infrastructure Reform and Regulation Programme to build institutional capacity on the continent. So CPRafrica is just one arm of a multi-pronged strategy of research and education, institutional capacity building and technical assistance and dissemination and advocacy, through our website database, policy papers and workshop and public presentations.

CHAKULA: What is the way forward for the conference? Will there be more?

AG: Yes, in order to build and sustain this much-needed capacity we will have to find a way for CPRafrica to become an annual institution.

Related links:

M-Banking the Unbanked: RIA Policy Paper No. 4:

http://www.researchictafrica.net/new/images/uploads/RIA_Mobile-banking.pdf

CPRafrica conference details: http://www.researchictafrica.net/index.php/news/38-cprafrica-looking-back-at-a-decade-of-communications-reform-looking-forward-to-2020
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Innovation through competition: the budget telecom network model
e-interview with Rohan Samarajiva

Paper link: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1564529

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“The status quo must be unbearable.”
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Rohan Samarajiva is the Chair and CEO of Lirnasia. His paper, “How the developing world may participate in the global Internet Economy: Innovation driven by competition” was presented at a workshop organised by the OECD and InfoDev in Paris, 10-11 September 2009.

CHAKULA: In your paper, you talk about the Budget Telecom Network Model (BTNM), which is brought about by competition allowing operators to reduce the transaction costs of low-end clients. This, as you point out, is different to the standard Average Revenue Per User (ARPU) model. How does it make the ARPU model redundant?

Rohan Samarajiva [RS]: ARPU is a short-hand that outside observers use to see if the firm is doing well, whether its prospects are good, etc. It is, like any indicator, imperfect. You get it by taking total revenue (preferably without extras like roaming) and dividing by number of subscribers. Of course no one really knows what a subscriber is any more, with even poor people holding up to five SIMs, foreigners having SIMs, no agreement on what an active SIM is and so on. You can get better results by looking at revenue per minute. Take total revenue (less roaming and other stuff) and divide by Average Minutes of Usage per User per Month (MOU). This is a better indicator. But investment analysts are still not used to this and it would require disclosing MOUs to calculate.

CHAKULA: Can ARPU be used as a business model?

[RS]: Operators do not actually do much with the ARPU. It is not a business model as such, just an indicator. But getting more from each subscriber (if this is known) is not a bad idea. Just that it does not predict whether the company will make money or not. The best indicator for that is EBITDA [Earnings Before Interest, Taxes, Depreciation and Amortization] margin. Sri Lanka in 2007 had an operator with LKR311 (approximately USD3 at the time) ARPU making close to 50% EBITDA margin. In the end, the success of a business model lies in whether it generates profit.

CHAKULA: What is your understanding of ‘innovation’ in the telecommunications space? You talk of “business innovation”, rather than, say, technological innovation?

[RS]: Tech innovation is important, but it is not the only thing. Pure tech innovation is done by manufacturers of network equipment and handsets. That is good. Business process innovations (e.g. lowering the costs of base stations through software) are done by operators. These include technical aspects, but are not limited to them. Shifting from one business model to another (discovering the latter) is also innovation, but it may or may not not have a tech aspect at all.

CHAKULA: What are the preconditions for innovation, do you think?

[RS]: The status quo must be unbearable. The BTNM innovation occurred when competition got so intense that there was no way to gain market share or even survive without doing something new.

CHAKULA: Does BTNM have implications for increased access to broadband internet for the majority of people on a continent like Africa?

[RS]: Yes. The latter part of the paper is entirely on the extension of BTNM to broadband. Some headlines are that operators must have enough money from voice that can be invested in the 3G plus networks. Once the overlay network is built out the operators have to offer low prices. Prepaid sachet pricing is best, where one buys packages of connectivity in minutes or in capacity. Here, because of lower transaction costs and prices there should be an influx of new customers. This is already on offer in Asia. Africa has to lower prices. Access will be over mobile networks, using dongles or built in modems, for laptops and other devices, including phones. ADSL will be a niche product. Wireless access is the future.

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The TRE methodology is based on the assumption that investment is a necessary condition for good telecom sector performance, and investment decisions are influenced by perceptions of investment risk. Using interviews and a questionnaire administered to a statistically significant cross-section of industry stakeholders and experts, the TRE assessment traverses six dimensions of regulatory risk for both the fixed and mobile sectors.

The new report, the second assessment of Peru’s regulatory environment, reports that the overall influence of the regulatory environment in Peru has improved since the previous assessment (2006-2007) but remains neutral – neither encouraging nor discouraging investment. There is positive movement in the perception of market entry regulation, but also a perception that improvements are required in regulation governing anti-competitive practices.

Read the summary in English and download the full report (Spanish only)

Since 2006 DIRSI and LIRNE.NET have conducted TRE assessment studies in six countries in the Latin America and Caribbean region (Bolivia, Chile, Ecuador, Guyana, Peru and Uruguay).

The course is designed to enhance the strategic thinking of a select group of decision-makers in telecom and related sectors in developing countries and emerging economies. The aim of the programme is to address the many challenges posed by the current stage of telecom and ICT reform to governments, regulatory agencies, operators and other stakeholders.

For more information on the course, click here.

This time the focus was on “what next.” Implicit was the question whether we need to now focus on applications since the access problem had been solved. In my first intervention I used data from Burma/Myanmar to show that the access problem had not been solved everywhere (interestingly this resonated with Amartya Sen who had spent his youth there). Many more interesting things were said particularly by the other Nobel Laureate in the room, Michael Spence (I have a LBO column coming based on that discussion), but still the phrase that stuck in my mind was that of Laurent Elder: incentives, not intervention.

Here is what Hernan Galperin of DIRSI had commented. He has included all the links to the real-time blogging and commenting that Ethan Zuckerman did.

Barrantes R., A. Agüero, H. Galperin, and A. Molinari. 2007. Asequibilidad de los Servicios de Telefonía Móvil en América Latina. Report. Diálogo Regional sobre Sociedad de la Información
(DIRSI).

De Silva, H. and A. Zainudeen. 2007. “Poverty Reduction through Telecom Access at the ‘Bottom of the Pyramid.’“ Paper presented at the Centre for Poverty Analysis Annual Symposium on Poverty Research in Sri Lanka , December 6–7, Colombo.

Galperin, H. and J. Mariscal. 2007. Mobile Opportunities: Poverty and Telephony Access in Latin America and the Caribbean. Report, November. Diálogo Regional sobre Sociedad de la Información (DIRSI).

We will continue to cite related work, whether they cite us or not. But unless everyone makes that effort, we will not be “standing on the shoulders of giants.”

Helani Galpaya and Rohan Samarajiva will be teaching at the course, in addition to Alison, Tracy Cohen, and several others. It will be followed by research meetings at which Harsha de Silva, Chanuka Wattegama, Sujata Gamage and Prashanthi Weragoda will participate in addition.

Themed, ‘Connectivity and Convergence: Alternative Regulatory Strategies for Telecommunications’, the course is designed to enhance the strategic thinking of a select group of senior decision-makers in telecom and related sectors in Africa and elsewhere.  After having been offered in Europe, Asia, the Caribbean and Latin America, this executive programme is now being offered in Africa to meet the challenges it faces in this sector. 

Target delegate profiles include decision-makers in telecommunications and related sectors in Africa including  government; regulatory agencies; operators; unions, ICT journalists, consumer groups and NGOs active in the sector

Confirmed faculty members include Rohan Samarajiva, CEO of LIRNEasia, Alison Gillwald, Associate Director, the Edge Institute and Tracy Cohen, former Councillor on the Independent Communications Authority of South Africa.

Further details, including registration information, are available here.

LIRNEasia researchers participated at the International Telecommunications Society (ITS) 17th Biennial Conference in Montreal, Canada, from June 24-27 2008. The theme of the conference was on, ‘The Changing Structure of the Telecommunications Industry and the New Role of Regulation’.

The picture above shows Professor Sudharma Yoonaidharma, Commissioner, National Telecommunciations Commission of Thailand commenting on the presentations made at the second of the two LIRNE.NET sessions, watched by (from left) Rohan Samarajiva and Payal Malik from LIRNEasia, Roxana Barrentes from DIRSI and Anders Henten from LIRNE Europe.  The session was chaired by Hank Intven, Partner at the leading Canadian firm of McCarthy Tetrault (not in the picture).

At a double LIRNE.NET panel, entitled, ‘New regulatory approaches in the face of rapidly changing demand: Research from four continents presented by LIRNE.NET’, Rohan Samarajiva made a presentation on ‘Banded forbearance: A new approach to price regulation’; Helani Galpaya presented a paper on ‘Non-owner teleusers at the bottom of the pyramid (BOP) in emerging Asia’, based on LIRNEasia research carried out in mid-2006. Payal Malik presented a study on ‘Scrapping the access deficit charge in India: A case of tardy regulatory response’.

Researchers from sister-networks, Research ICT Africa (RIA!), and the Latin American and Caribbean Regional Dialogue on the Information Society (DIRSI), also presented their research carried out in their respective regions during these sessions.

Payal and Rohan presented a paper on ‘Re-examining universal service policies in telecommunications lessons from three South Asian countries’ during the session on ‘Universal Access: Definitions, Delivery and Alternatives’.

Payal and Helani also chaired sessions on ‘Evolving Market Structure’ and ‘Country Studies’ respectively.

Rohan Samarajiva, Helani Galpaya and Payal Malik will be among panellists at a double session  on ‘New regulatory approaches in the face of rapidly changing demand’. This session showcases key findings from recent LIRNE.NET research in four different continents.

In a separate session, LIRNEasia researchers will present a paper entitled, ‘Re-examining Universal Service Policies in Telecommunications: Lessons from three South Asian countries’, co-authored by Malik and Samarajiva.

Using interviews and a questionnaire administered to a statistically significant cross-section of industry stakeholders and experts, the TRE assessment traverses six dimensions of regulatory risk (market entry, access to scarce resources, interconnection, tariff regulation, regulation of anti-competitive practice and universal service) for both the fixed and mobile sectors.

The TRE methodology focuses on the environment as a whole, rather than only on the regulatory agency. This broadens the scope and usefulness of the study to different actors.

DIRSI and LIRNE.NET are currently undertaking TRE studies in Bolivia, Peru and Ecuador. The Latin American TRE researchers are using the beta version of a TRE Toolkit developed by LIRNEasia – and making suggestions for its improvement and development, especially from a cross-cultural perspective.

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He made a presentation during the first session entitled “Getting a clearer picture: Demand side ICT data collection”, sharing with the audience some of the findings and the methodology used in LIRNEasia’s recently completed research on teleuse@BOP. During the discussion sessions and on the sidelines of the conference he engaged substantially with the DIRSI researchers planning to replicate the Asian study in Latin America. Dr. de Silva explained to the team the challenges faced in designing and implementing the study across the five countries and suggested possible alternatives.

In the second session entitled “Perspectives of telecom sector performance” he presented slides on the Telecom Regulatory Environment (TRE) 2006. Here Harsha explained how LIRNEasia researchers went about constructing and administering the TRE study in six countries in Asia and also some of the salient findings.

After the conference Dr. de Silva participated at the discussions among the LIRNE family on the preparations of the next WDR/LIRNE research cycle. Prof. Rohan Samarajiva joined in via Skype.

Click HERE for more information about the meeting.

Our friend and colleague Abu Saeed Khan is reporting on a major development on these lines from the GSM Congress in Barcelona:

:: bdnews24.com ::

Spearheaded by a special group of 19 mobile operators with networks in over 100 countries and representing over 600 million customers, GSMA believes the programme could double the number of recipients of international remittances to more than 1.5 billion, while helping to quadruple the size of the international remittances market to more than one trillion dollars by 2012.

To combine the strengths of the mobile and financial ecosystems, mobile operators are partnering with banks at a local or regional level, while GSMA is setting up a pilot project with MasterCard Worldwide, a global payments leader whose cards and network provide international authorisation, clearing and settlement.

GSMA and MasterCard, which has a 25,000 member-bank network, plan to pilot a global hub that will link together national markets and the local payment systems run by mobile operators in partnership with those local banks.

The hub will enable migrant workers to transfer money and notify their families via mobile phone.

“The creation of a global hub will enable the mobile networks, which now cover more than 80 percent of the world’s population, to offer the world’s burgeoning migrant population a convenient way to securely and cost-effectively transfer money to their families back in their home countries,” said Rob Conway, CEO of GSMA.

“The programme will resonate with governments because it makes the international payment market more transparent, encourages financial inclusion, reduces crime and boosts the flow of hard currency into their countries,” added Conway.