Challenges of NGN regulation for
developing countries: a perspective
from South Africa
Alison Gillwald
LINK Centre
Graduate School of Public and Development Management
Witwatersrand University
http://link.wits.ca.za
http://www.researchICTafrica.net
Rules for NGN?
ITU March 2006
Policy and regulatory legacies
– Failure of privatisation with extended monopoly of
fixed line network as universal service strategy
• Optimisation of state assets
• Structural conflict of interests in institutional design
• Commitments to incumbent created regulatory risk for others
negatively impacting on further investment
• Failure of retail and access regulation – institutional capacity
– perverse incentives of vertically integrated incumbent
• Institutional capacity, classical information asymmetry,
structural conflict of interest = unaffordable basic service
• Universal Service Agency and Fund
• Little fixed extension – high wholesale and retail penetration
– Legacy policy and regulatory framework for NGN?
Rules for NGN?
ITU March 2006
Outcomes
• Population 45 million GDP $13000 pa
• Fixed – < than 5 million 20% of household
• Mobile – 20 million 30% of households
– but voice substitution only – very low ARPU
•
•
•
•
•
Payphone usage >70% in last three months
Internet – 5% of households
PC ownership <20%
80% of ISP costs go to Telkom
ADSL – 60 000 (2005)
• Likelihood of NGN > digital divide unless
innovatively implemented?
Source: LINK Centre SA Sector Peformance Review 2004, RIA! Towards an African eIndex
Rules for NGN?
ITU March 2006
Fixed tariffs vs subscribers
South Africa: Telephone tariffs 1997 - 2004 (in Rand)
300
270
240
210
180
150
120
90
60
30
0
Residential monthly telephone rental
Residential telephone connection charge
Cost of 10 hours w orth of calls per month (peak rate)
Total fix ed-line telephone lines per 1000 inhabitants
274.35
227.44
171.0
103.31
101.93
61.80
81.9
49.6
1997
1998
1999
2000
2001
Rules for NGN?
ITU March 2006
2002
2003
2004
Average ISP costs vs. fixed line cost of 20 hours internet access vs. % growth of total
internet subs.
Average ISP costs (Rands)*
600
120
Fixed line - cost of 20 hours w orth of calls per month (peak rate)
% grow th of total internet subscribers
500
100
400
80
300
60
200
40
100
20
0
0
1997
1998
1999
2000
2001
SA Sector Performance Review, 2004http://link.wits.ac.za
Rules for NGN?
ITU March 2006
2002
2003
2004
Questions on reform outcomes
• Competition vs. universal service model?
– Market inefficiency vs market failure
• Sequencing of liberalisation?
• Infrastructure based competition – PSTN & Mobile &
Multimedia (broadcasting signal distributor)
– Bottlenecks
» International submarine cable
» Local loop
• Under Serviced Area Licences?
– Disenabling regulatory environment – reject asymmetrical
termination regulation.
– Limited state support – little technology or business innovation
eg. WBA
– Licensing delays – last to market – no business case – high cost
GSM franchisees
Rules for NGN?
ITU March 2006
Electronic Communications Bill
• No policy framework/vision - assumed consensus
• Continued tension between industrial policy, social development,
innovation, entrepreneurial
• 2004 Ministerial Policy Directives – claw back on self-provisioning
by VANS
• Although talk of horizontal licensing to better reflect better NGN
networks
• Enable convergence but in context of ‘managed liberalisation’
(vertically integrated silos)
• Some gains
–
–
–
–
class licences and exemptions
essential facilities (international) and obligation to regularly review
Carrier pre-selection
Forbearance on SMP to promote fibre investment in greenfield
residential loops and sub-loops
– ULL
• Over 200 regulations and re-licensing - capacity to implement?
Rules for NGN?
ITU March 2006
Arising NGN issues
• Lessons for developing countries unable to privatise?
• No legacy network to speak off, competition or structural
unbundling?
• Competition to increase quality and quantity of service
as better price but likelihood of > digital divide?
• Open up competition with more effective use of USF for
network extension?
– Self provisioning – not just service providers but communities
and individuals (FIFM)
– WBA
– PLC
– IPTV
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ITU March 2006
Critical issues
• Interconnection and facilities leasing
– Costs – zero/low cost termination?
• Access to essential facilities (non-replicable
assets) – international and local
• Migration,market segmentation for SMP
• Structural separation of vertically integrated
companies (BT Open Reach)?
• Institutional capacity and political (as well
as policy) constraints/vested interests.
Rules for NGN?
ITU March 2006
Resources and contacts
• LINK public policy paper series
http://link.wits.ac.za
• Towards and African e-Index: Access and
usage in 10 African countries
www.researchICTAafrica.com
Rules for NGN?
ITU March 2006