Distributing the Future:
Regulation and the Future
of IT in Africa
iWeek, Johannesburg
17 September 2003
Andrew McLaughlin
“The future is here. It’s just not evenly
distributed yet.”
-- William Gibson
© 2003 McLaughlin
My Unlawful Habit
First, I want to show you something that I
do in the privacy of my own home that
would make me a criminal
in most of Africa…
© 2003 McLaughlin
The Scene of
The Crime
© 2003 McLaughlin
Cordless phone
[US$30]
IP-Voice Adapter
[US$30/month]
Cable modem
[US$40/month]
© 2003 McLaughlin
Memo to Africa’s ICT Policymakers:
If you are not panicking,
you don’t understand the issues.
I.e.,:
If you see your government going to
war against ISPs, WiFi, VoIP:
Be afraid.
Be very, very, very afraid
(for the economic future of your country).
© 2003 McLaughlin
The battles that the ISPs in this room
are fighting are battles for the economic
future of Africa…
© 2003 McLaughlin
Why It Matters
• Bad ICT regulation means artificial barriers to
technology, which means:
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higher costs,
fewer services
less reliability
lower quality of service
unequal distribution of access and services
for every individual, every company, every sector
of the economy.
• The regulation of information technology is totally
within the control of each African country.
© 2003 McLaughlin
Africa Needs the IP
• Duh! Everyone agrees, but…
• Africa has 816 million people (2001):
– 21 million fixed lines (over 100+ years)
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N. Africa:
11.4 million
South Africa:
5 million
Rest: 4.6 million
I.e., 10% of world population (626m), but 0.2% of lines
– 24 million mobile subscribers (over ~5 years)
• Low-cost, highly-reliable communications networks enable
business, government, civil society, family life, education
• IT services require communications infrastructure requires
regulation that fosters, rather than blocks, IP networks
• The poorer you are, the more you need affordable,
reliable, resilient information & communications
technology (i.e., IP)
© 2003 McLaughlin
So:
• If Internet protocol technology today has the
ability to give every African (rural & urban)
access to low-cost, high-reliability, high-quality
communications services, African governments
had better have some really good reasons for
slowing or blocking it.
• We’re going to look at how and why African
governments are typically regulating IT, and
consider how they might do it better, to serve
the interests of their people better.
– “African governments” = a composite of what most
(not all) of the larger African governments are doing
© 2003 McLaughlin
Telephones vs. Internet
Don’t be fooled by appearances: the Internet is
not just a new network that competes with the
telephone system:
Internet represents a new and different method
of communications (& way of thinking)
– Internet = packet-switched, decentralized,
distributed, ad hoc, flexible, end-to-end,
intelligence at the edge, open standards
– Telephone = circuit-switched, centralized, topdown, hierarchical, controlled, inflexible,
intelligence at the core, proprietary standards
© 2003 McLaughlin
The All-IP Future
• The future of all communications is the Internet
Protocol
– That’s the reality; it’s already happening
– Even telecom carriers are moving to IP
• MCI currently carries 10% of its voice traffic via IP; expects 25%
by end of 2003!
• African governments must either embrace this
coming reality – i.e., embrace IP – or condemn their
countries to fall further and further behind the
developed world
– In the Information Age, there will be little economic
development without affordable, reliable communications
© 2003 McLaughlin
The Old World
Vertical integration of facilities and service, with matching regulation.
Telecom Law /
Telecom Authority
Telephone
Copper
Cable Law /
Cable Authority
Cable TV
Coax
Broadcast Law /
Broadcast Authority
TV
Radio
Broadcast
© 2003 McLaughlin
The emerging order
Communications Law /
Comm’s Authority
Cable Law /
Cable Authority
Broadcast Law /
Broadcast Authority
IT Law /
IT Authority
ISP
Telephone
CLEC
Internet
Radio
TV
ADSL
HFC
Fiber
Copper
Coax
Wireless
Satellite
Broadcast
© 2003 McLaughlin
The Future
• Services (voice, data, TV, etc.) will no longer depend on
specific facilities (copper, radio, coax, satellite)
• All services will be available over all communications
facilities
– So: Regulators should allow all infrastructures to compete in an
open market to offer the cheapest, highest-quality services
• A vision of the future: Any (licensed) communications
provider should be allowed to offer any
communications service, using any available facilities,
and should be allowed to use or avoid the incumbent
telecom’s network as it thinks best.
• There is no technical reason to force a particular
service onto a particular kind of infrastructure
– Q: Is there a good economic or political reason?
© 2003 McLaughlin
Unhealthy Incentives
• Government has an interest in maximizing the
value of state-owned telco: to get the most
money from privatization
• Government owns telco and is responsible for
setting IT sector rules and for enforcement
– Can benefit telco at the expense of its competitors
– Terms of network access; Interconnection Pricing;
Spectrum; ISP & service licenses; Limits on
international gateways
• Regulator is not independent; lacks experience
& expertise in IT regulation
– May be vulnerable to pressure from (privatized) telecom
– Example: War on VOIP services
© 2003 McLaughlin
Voice Over Internet Protocol
• VOIP is not another form of telephony
– Traditional telephone service is a network-level
function
– VOIP is an Internet application, just like any
other
• To the Internet, packets are packets are packets
• VOIP follows users anywhere, over any network
© 2003 McLaughlin
VoIP – A consumer perspective
Commercial VoIP services allow a customer to:
• Use a VoIP box to connect his/her ordinary telephone into any
broadband Internet connection (keeping the same phone number)
•Make very inexpensive national & international long distance
($0.05/min to China, for example)
•Take the VoIP box anywhere in the world (except where illegal!), plug
it in to a decent Internet connection, and make and receive calls as
though at home
• Retrieve voicemail via the web
• Control features like call forwarding, call waiting, voicemail from
anywhere, via the web
• Also available: Full business VoIP systems; VoIP over WiFi;
computer-to-computer VoIP ; computer-to-phone VoIP
Why should Africans alone – of all people – be deprived of
the least expensive, most reliable communications platform in
the world?
© 2003 McLaughlin
VoIP – Options for Policymakers
Formally ban VoIP – Protects incumbent telecom, damages ISPs. Likely to drive
discount calling card vendors out of business, or into doing business with telecom.
Difficult to enforce; ISPs may continue to carry VoIP on a pirate basis. Higher
communications costs for consumers. Incumbent telecom revenues may continue
to fall as more customers turn to email, or voice email, and as the international
PSTN settlement regime continues to collapse.
Legalize VoIP, don’t license ISPs – Essentially, formalize the situation that
already exists. Will hurt incumbent telecom, will not gain new revenue from VoIP.
Easy to implement.
Legalize VoIP, license participating ISPs – Loss of revenue for incumbent
telecom, gain of new revenue from licensing fees & taxes on ISPs. Will require
strong regulatory guidance – must guarantee that BT makes it possible to
interconnect with licensed ISPs. Some pirate ISPs may still operate.
Legalize and license VoIP, encourage telecom to use it – Telecom could
lower its operational & network upgrade costs, offer competitive rates to calling card
vendors and other customers and steal market share back from ISPs.
© 2003 McLaughlin
Arguments against VOIP
• Universal Service / cross-subsidization
• Loss of Revenues from International
Settlement Regime
– [Really a question of how long the country
wants to protects its telecom monopoly from
competition]
• Quality of Service
• Need for Surveillance / Interception of voice
traffic
© 2003 McLaughlin
Fear of a VoIP Planet
• Telcos (and some policymakers) fear that VOIP will
become a substitute for traditional wireline & wireless
PSTN telephony. But:
– VOIP is an opportunity for fundamental reform of telecom
regulation, the achievement of truly universal service, and
reform of interconnection pricing using cost-basis forumulas
– Same goals, new technology  new regulatory framework
– Legacy telephone regulation does not fit VoIP.
– Customers using underlying landline or wireless facilities to
access a VoIP provider will continue to pay universal service
contributions and taxes.
– VoIP providers will generate licensing & tax revenues
– And everyone gets a general cut in the cost of communication
• The Threat of the US$ 10,000 Telecom Carrier
• Look at little Coldwater, Michigan, USA (pop. 10,000)
– Fight monopoly + competitive advantage vs other towns
© 2003 McLaughlin
Unlicensed Spectrum / WiFi
• African countries, almost alone in the world, typically require
licenses for frequencies that are set aside for unlicensed use in
other countries (example: 2.4ghz range)
• Purpose of spectrum licensing: (1) maximize efficient use of
frequency; (2) prevent interference
– African countries UNDER-utilize radio frequency
– Standards like 802.11b (WiFi) are designed to avoid interference, and
operate at low power
• Licensing these frequencies is a very bad approach
– Inhibits the single cheapest tool for bridging the digital divide, achieving
universal access, etc.
• Wireless access should be encouraged as much as possible
• Wireless LANs: legal or not?
– Often unclear; ambiguity creates opportunities for corruption.
• Recommendation: African countries should adopt a super-set of
unlicensed frequencies from US, Europe, Japan
– Assure access to the best & cheapest hardware
© 2003 McLaughlin
Access to Submarine Fiber
• New & cool: SAT-3/WASC cable
• Consortium consists of incumbent telecoms
• Only consortium members have direct access
to the cable
– Incumbent telecoms are generally both wholesale
& retail ISPs
– Ability to undercut the prices of all competitors
• Recommendation: Don’t allow monopoly
over fiber access
– Require the incumbent telecom to choose
between privileged fiber access and retail ISP
© 2003 McLaughlin
International Gateways
• Typically, African governments restrict
international links to the incumbent telecom
– Exceptions: D. R. Congo, Mozambique, Nigeria,
Tanzania, Zambia (but no longer Uganda)
– Attempt to tie as much traffic as possible to the
international PSTN settlement regime
– Result is very high international tariffs, lack of
redundancy & single points of failure
– Surveillance / interception is not a serious rationale
• Recommendation: Loosen up
© 2003 McLaughlin
Source: IDRC,
Acacia Project
(2002)
How developing countries regulate ICTs
The Regulators
- Parliament
- Ministry (PTT, Communications, Infrastructure)
- Regulatory authority (often ~“independent”)
The Regulated
- State-owned telecom (typically with wireline monopoly)
- Competitive (typically wireless) telecoms
- Internet service providers (ISPs)
The Infrastructure
- Public switched telephone network (PSTN), radio spectrum (WiFi
frequencies), fiberoptic links, VSAT satellite links, international
gateways
The Services
- Telephony, data, interconnection (prices, access conditions &
requirements), international connectivity, VOIP
© 2003 McLaughlin
Focus on Ghana I
The Regulators
- Telecommunications Law
- Vague on many key issues
- Ministry of Communications
- Responsibility for Ghanaian government’s majority stake in
Ghana Telecom
- National Communications Authority
- Purportedly “independent”
- Very close to Ghana Telecom
- Chair is Minister of Communications
- Record of ignoring anticompetitive behavior by Ghana Telecom
© 2003 McLaughlin
Focus on Ghana II
The Regulated
• Wireline telecoms (50,000+ lines):
– Ghana Telecom (majority state-owned)
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dominant wireline provider + control of fiber cable access
partially privatized, then effectively renationalized
management contracted out to Norway’s Telenor
increasingly desperate financial situation
7000 employees for 50,000 lines
reportedly lost US$30m last year, mostly due to decreases in
international calling revenue
– Westel (newly licensed wireline competitor)
• not really a significant force yet)
• less than 5% of GT’s number of lines
• Wireless telecoms (220,000+ subscribers)
– Two major GSM providers, one of which is owned by GT
• Internet service providers (ISPs)
– Numerous ISPs; vigorous competition
– Totally unable to cooperate; lots of bitter rivalries
© 2003 McLaughlin
Focus on Ghana III
The Big Issues
• GT exclusive access to SAT-3/WASC cable
• VoIP
– Complex history
– Not obviously forbidden by law; arguably a legitimate data service, allowed to
anyone with a VSAT (satellite) data service
• GT and Westel monopoly over international call termination expired in February 2002
– Contrary argument: VoIP is a telecommunications service; and VoIP providers
must be licensed by the NCA – any ISP offering VoIP is essentially running an
unlicensed phone company
– CEOs of several ISPs arrested and jailed for several days in 1999; police
confiscated
– GT believes it is losing huge revenue to inbound international VoIP calls that are
received by Ghana ISPs and terminated directly into the PSTN
– GT’s responses: (a) Do the same thing; (b) detect and shut-down VoIP traffic; and
(c) turn off regular phone service to Ghana’s ISPs
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IXP
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Ghana’s ISPs just haven’t been able to organize themselves
Some direct cross-connecting, but also lots of domestic traffic sent abroad
No trust = no IXP
As a result, Internet access is slow, costly, and unreliable
Idea: Citizens Infrastructure Corporation?
© 2003 McLaughlin
Hope for the Telecom?
Q: Is there any hope for the African telecom in the
All-IP Future?
A: Yes:
– Diversify into IP networks, the sooner the better
– Telecom as “connectivity cloud”, selling various avenues
of access (copper, GSM, 3G, WiFi, cable, whatever)
• Offer integrated services (voice, text, audio, video), over a single
connection
• Retain customers and expand traffic!
– Leverage your core asset (the local PSTN loop, which
has the best quality of service), while expanding your
service offerings (SMS, calling cards, call center
services)
– Realize cost savings with IP switching equipment
instead of costly PSTN upgrades
© 2003 McLaughlin
The challenge of creating good policy
Then:
o Clear dividing lines between telephone/fax, data, computers,
radio, television and technology research.
o Different government departments with different expertise:
Ministry of Communications handles telephones, post, and
broadcast; Ministry of Science and Technology handles data,
computers and research, etc.
Now:
o Issues cut across all communications and technology issues –
unclear whether a particular issue is about telephones, computers
or broadcast.
o Increasing need for government departments to work closely
together or combine.
o Need for technological expertise within the government to
understand implications of new technology.
© 2003 McLaughlin
Regulatory Process
IT Sector Regulation should be:
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Open & Transparent
Predictable
Neutral & Objective
Expert
Designed to reduce regulatory risk and set basic rules,
not to promote any particular technology or company
Same for Enforcement
Above all: Independent!
– If the regulator has an interest in the financial success of one
the competitors, it will not be seen to be independent (even if
the staff are good & fair)
Investors care – a lot – about Regulatory Risk
© 2003 McLaughlin
The Future is Here:
The Internet protocol is spreading in all directions, for all
services.
Before long, the vast majority of communications (voice,
text, pictures, data, broadcasting, movies, multimedia,
web, email, etc.) will travel over Internet-based networks.
The question for developing countries:
Embrace this coming reality, and regulate in a way that fits
the new technology.
Or:
Cling to yesterday’s regulations, try to shove the new
technologies into them (and hope the future goes away).
© 2003 McLaughlin
Thank you!
Andrew McLaughlin
http://cyber.law.harvard.edu/mclaughlin.html
<mclaughlin@pobox.com>
© 2003 McLaughlin
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© 2003 McLaughlin