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 cuts will likely please fixed operator BT and small mobile operator 3, who both teamed on a campaign to get the rate either cut or dropped entirely. Smaller mobile operators tend to pay more in mobile termination rates as their users are likely to spend more time communicating with other networks than their own. The UK’s larger operators – Vodafone, O2, Orange and T-Mobile – face losing out on up to £1 billion in revenue according to reports. Ian Scales of Telecom TV demands, “Why not take it to zero?”  But the Guardian is skeptic, “This is only a proposal from Ofcom so there will be an awful lot of lobbying from the four big networks, not least of the potential Conservative government, to reduce the severity of the price cuts.”

Mobile payments should not be seen as a turf war between the financial and telecommunication sectors but as a complement to existing financial services. Banks have a long history of managing money and enjoy the confidence of depositors and businesses. However, the mobile companies have in a very short span of time reached all parts of the countries they operate in, established strong nationwide distribution systems and excelled in handling micro-payments worth millions on a daily basis in the form of top-ups. Mobile operators act as payment agents for content providers so seamlessly that most of the time customers don’t even know that they are dealing with a third party. In mobile payments, the question is not who is keeping the money but who is dealing with the customer. If the customer is dealing with the bank, the mobile operator becomes a mere conduit. If mobile operators deal with the customer, banks still have the important role of managing money. So the choice is between taking the customer to the bank at high street or taking the bank counter to the customer, wherever he is.

Sri Lankan mobile operator Tigo, a unit of Millicom International Cellular, said it had reached two million subscribers in 2008 after heavy investments to expand its network coverage.

A statement from the company, formerly known as Celltel Lanka, attributed the growth to “network expansion, the strength of the brand and excellent customer service.”

“The year 2008 saw heavy investment by the company to expand the network adding an average of 40 towers a month,” the statement said.

“The way we define a customer is the strictest in the country, which is why we normally do not disclose the size of our customer base,” said Tigo chief executive Dumindra Ratnayaka.

Full story on LBO.

The Ministry of Industry and Information Technology (MIIT) said China’s biggest mobile operator, China Mobile, was awarded a license for TD-SCDMA, the domestically-developed 3G standard.

The other two main carriers, China Telecom and China Unicom, received licenses for the US-developed CDMA2000 and Europe’s WCDMA, respectively.

The 3G high-speed networks can handle faster data downloads, allowing handset users to make video calls and watch TV programs.

Read the full story in China Daily here.

This is an intriguing development from a company many thought was withdrawing from the South Asian region.  A few years ago there were well publicized negotiations to sell its stake in Sri Lanka’s Suntel, which is believed to have failed for the lack of a high-enough bid.

TeliaSonera and its predecessor entities have not shown the nimbleness of its Nordic competitor, Telenor which has strong positions in South and South East Asian countries.  One hopes it will.  Both Nepal and Cambodia need investment and innovation.

Telecoms in the Caribbean | The Irish are coming | Economist.com

Digicel has prospered by introducing modern technology and innovative services into stodgy, uncompetitive markets. Its entry into Jamaica led to drastic reductions in prices and showed the region just how much it stood to gain from liberalisation. Digicel used a similar recipe in Haiti. “We floored prices and gave people a better service,” says Mr O’Brien. Pre-paid billing, based on top-up cards, makes phones more affordable to those outside the business and political elites. Digicel has also introduced novel twists of its own, such as the ability to send free “call me” text messages to other people.

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Pity.

TM doubles international budget

Telekom Malaysia (TM) has earmarked to spend MYR8 billion (US$2.3 billion) this year expanding its international mobile businesses in Indonesia, Sri Lanka and Bangladesh, which is considerably more than the MYR2.8 billion it spent on its overseas units last year. TM chief executive Datuk Abdul Wahid Omar said TM’s foreign operations are expected to make 30% of group revenue this year, compared with 25% in 2006. However, the group is planning to trim its 87% stake in Sri Lankan mobile operator Dialog Telekom to not less than 80%, Wahid is quoted as saying. He said the group has been approached by several local and international investors to sell shares in Dialog.

A new report has revealed that monthly ARPU is declining globally, but the gap between operators with the world’s highest and lowest monthly ARPU remains huge.

The research study from analyst firm TeleGeography showed that based on a data set of more than 130 mobile operators, ARPU fell by an average of 6.4% between September 2005 and September 2006.

“Not surprisingly, providers with higher ARPU tended to be in countries with relatively high incomes — predominately in Western Europe and the US,” the report stated.

Surprisingly, tiny BTCI, Turkmenistan’s dominant mobile operator, topped the rankings, with ARPU of $83, far ahead of any other operators. At the opposite extreme lies Bangladesh’s Banglalink, which generated monthly revenues of only $3.30 per subscriber, the report said.

In saturated markets, lower voice tariffs and declining minutes of use contributed to the decline in ARPUs, whereas in fast-growing emerging markets the addition of incrementally less wealthy users to the subscriber base is the main cause behind the fall.

“A trait shared by most high ARPU companies is a low percentage of pre-paid users and high 3G subscriber growth. Growing data revenues are helping these providers to offset declining voice revenue,” commented Mark Gibson, an analyst at TeleGeography.

The gap between high and low ARPU providers showed no sign of narrowing, the study claimed. “In fact, the five carriers with the lowest revenue per  subscriber experienced far more rapid declines in ARPU than the five carriers at the top of the ranking. However, falling ARPU were offset by dramatic subscriber growth: the five low-ARPU carriers increased their total revenues by 175%.”

Read article at telecomasia.net

With the brand name “Roshan” or light, the second mobile operator rolled out services in June 2003.

“We are very excited and proud of reaching the million subscribers milestone,” said Karim Khoja, chief executive of Roshan.

In more than three years, Roshan reached the mark, beating first mobile company in Afghanistan, the Afghan Wireless Communication Company (AWCC)— 20 percent owned by the government.

The million customers milestone comes at a time when Roshan has enjoyed the best three months of its operations in spite of increased competition.

“Roshan’s story is similar to the Afghan people’s own story; a story of faith, courage and determination to succeed against all odds,” said Altaf Ladak, chief marketing officer of Roshan.

Roshan is Afghanistan’s leading cellular service provider, with a countrywide network that covers 155 cities and towns. It has invested over $220 million and became the country’s single-largest taxpayer contributing roughly six percent of the Afghan government’s overall revenue earnings.

Roshan is owned by an international consortium of the Aga Khan Fund for Economic Development, Monaco Telecom International and US-based MCT Corp.

Xinhua reports that competition among cellular firms in Afghanistan have led to a successful development of telecoms industry and the drop of call charges in the post-Taliban nation.

Three cellular firms in AWCC, Roshan and Areeba are operating in the war-ravaged country, a development unbelievable during Taliban reign. All three operators are joint ventures by Afghans and foreign investors mostly from the Western countries.

Initially, some four years ago, SIM card would cost 15,000 Afghanis or $300 but today the price has been reduced to 500 Afghanis or $10.

Roshan and Areeba offered cheaper service and forced the rival AWCC to lower its service prices, even though the companies still charge higher for their services compared with the neighboring states.

The call rate of AWCC and Roshan is 7.5 Afghanis a minute nowadays, while Areeba charges 5.5 Afghanis.

“These companies are charging high call rates because they provide their services to the consumers via satellite and the rate would automatically drop after the installation of the optic fiber network,” said a local newspaper.

Another cellular company, the Etisalat of the United Arab Emirates, will start functioning in Afghanistan next year and thus the price of cellular service will further go down.

The Afghan government has received $87 million in taxes from the telecoms industry last year and it expects to earn $90 million this year.

The above column presents evidence to the effect that:

“Given enough time and competition, reformed infrastructure does reduce disparities among regions.

The reforms that started to have effect in the mid 1990s, with the licensing of the fourth mobile operator and the two fixed entrants in 1995-96, the partial privatization and managerial reform of Sri Lanka Telecom in 1997, and improvements in regulation starting from 1998, did result in allowing the rural people of this country greater access to telecom services.

Of course, it must be noted that the dazzling growth in the Northern Province (Jaffna and Vavuniya districts) was only made possible by the cease fire agreement of 2002, the lifting of the nonsensical ban on mobile telephony in conflict areas, and the courageous decision by Dialog Telekom to provide service in that region within three weeks of the signing of the CFA.”