Only Liberalisation Can Redeem Ethiopian Telecom

Telecoms

There seems to be no service that Ethiopians of all colours complain about more than telecommunications. A sector destined to live under the reign of the restructured ethio telecom monopoly, telecommunications remains the hotspot for the disappointments of the ever-growing population of the nation.

At the heart of the complaint matrix rests the quality of the services provided by the monopoly. All of the services that the corporation provides, ranging from landline telephones to broadband internet, witness the same magnitude of grumbles from consumers. The cyclic quality issue facing the services is unable to find any viable solution, even after a series of quick fixes tested by the ruling elite.

Of course, the overall policy of the EPRDFites towards the telecommunications sector originates from their developmental state model, which advocates for a state that always strives to optimise the rents collected from every possible economic opportunity. If one has to go by the books of Revolutionary Democracy, then telecommunications would constitute the business core of the rent-seeking state.

But, this argument has its own version when it diffuses to the purely technical aspects of telecommunications. Its technical breed is termed universalisation.

By way of universalisation, the EPRDFites wish to expand the service provision to the most unreachable areas of the nation. And the capital base for the investment in rural areas would come from the relatively higher profit margins to be made in urban centres. Hence, inherently, the agenda of universalisation stands as a redistributive measure for both the services and the investment.

Sectoral monopolisation, therefore, is designed to result in such redistribution. As the lone beast behind the whole equation, ethio telecom is vested with the leverage to operate the infrastructure for the whole gamut of Information & Communications Technology (ICT) services. No other force is allowed to operate in the market.

By and large, the company has grown too big to be capable of constantly feeding the ever increasing demand of the state for capital. Overwhelmed with the huge demand for public investment, largely driven by its expansionary fiscal policy, the developmental state has continued to develop an unabated need for capital. And companies, such as ethio telecom, serve the agenda by acting as shadow banks.

The latest controversy about state enterprises, such as the telecom monopoly, involves their unchecked revenue and exorbitant foreign credits that remain hidden from the established monitoring and evaluation systems of the state. While all official economic accounts fail to embrace them, critics claim that the expansionary state are using the enterprises as shadow banks to fulfil an endless credit demand.

Nothing could better evidence the claims of the critics than the latest deal the monopoly inked with the two Chinese giants - Huwawei and ZTE. In a deal that will stay away from the budgetary oversight of elected members of the legislature, the monopoly has agreed to buy a 1.6 billion dollars infrastructure expansion service from the Chinese giants. No doubt that the deal would have been significant enough to inflate the debt stock of the nation, had it been accounted in the macroeconomic frameworks of the nation.

Beyond the accounting debate, however, policymakers accept that the quality return on their investment in the telecommunications sector is low. This continues to cost consumers time, money and productivity.

It is paradoxical that the size of the consumer base continues to rise, while the quality of services declines with each day. Latest figures from the company show that number of mobile subscribers has reached 23 million. A landline subscriber base of 1.23 million and an internet user base of 960,331 are also served by the monopoly.

The numerical disappointment, however, emerges when the consumer base is compared with the total population of the nation, estimated to be a little over 84 million. A mobile penetration rate of 19pc and an internet penetration rate of 1.1pc put Ethiopia at the bottom of the global telecommunications service provision rung. Technically speaking, Ethiopia is one of the places where telecommunications services are at their most unreliable, inconceivably sluggish and unconventionally costly.

Unlike the situation during the paper age, economies during this era of ICT have become increasingly integrated. As a result, the role of the sector in the economy has become definitive.

The globalising world has rightly understood the role reliable telecommunications services could play in the development process. Hence, expanding the reach of fast, reliable and affordable telecom services have become the ultimate goals of governments the world over.

At the base of their efforts lays their realisation of the powers of ICT. Within the globalising world, economic competitiveness has become strongly correlated with productivity. And technological innovations have become the enablers of the time, helping to boost productivity beyond traditionally conceivable margins.

Hence, nations are seen attracting as much investment as possible to build reliable telecom infrastructures. Whereas those that manage to create a competitive telecommunications sector continue to reap the economic benefits it brings, the laggards keep on missing the rather important ICT revolution that would have provided them with a significant economic push.

Ethiopia belongs to the latter club of nations. Its telecommunications sector is so underdeveloped that it is yet to play a significant role in facilitating economic growth. This is more so if quality of service is to be considered a major determinant of the linkage of telecommunication services with the real economy.

With Ethiopia getting closer to joining the World Trade Organisation (WTO), the issue of enhanced productivity will eventually seize the ruling EPRDFites. Unleashing sizable productivity margins to make the economy more competitive in the face of the global market place could not happen under a monopolised telecommunications services.

Beyond sealing deals under a monopoly, then, the EPRDFites ought to rethink their policy towards the sector. They need to introduce competition within the sector by opening it up to private investment.

Quality telecommunications services cannot happen under a monopoly. It rather demands competition to be the rule of the game, since capital flows in the direction of higher return on investment and reduced risk.

For the ruling EPRDFites, the whole question is, therefore, about sustaining the economic growth of the last decade by feeding it with an incessant increment of productivity. No ideological conservatism could help unleash this potential. What might help change things is, thus, the rightful realisation of the benefits that liberalisation of the telecommunications sector could bring to enhance the productivity of the nation's economy.

After all, missing the sailing boat of the ongoing ICT revolution due to the inefficient monopolisation of the telecommunications sector is something that the Ethiopian economy could not afford. This is especially true whilst the nation is lumbering up to swim in the increasingly competitive waters of global trade.