ACT 2004 -TROUBLE IN PARADISE AS LIBERALISATION HURRICANE PASSES OVER

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This year’s ACT conference took place in Mauritius in Le Meridien Hotel alongside a beautiful tropical beach, lending the proceedings something of a holiday atmosphere. Away from beaches, Mauritius has a clear “cyber-island” strategy designed to foster innovation and attract outsourcing work. It has also been in the vanguard of liberalising its telecoms sector but the transition is still being heavily contested. This week also saw the opening of AfriNIC’s office in the new Cyber-Tower. Russell Southwood reports on the swirl of issues in and around the conference.

The Mauritian regulator ICTA brought its liberalisation plans forward a year, starting the process in 2002, but it is in danger of looking completely unprepared for its consequences. Two different Court cases have laid bare the uncertainty at the heart of the process: Mauritel and Outremar Telecom.

Dr Yiptong and his son Kenny set up Mauritel as the sales channel for (initially) their pre-paid, international calling service. Kenny Yiptong sent the regulator details of the service and its (VoiP-based) rates which it almost goes without saying were cheaper than the incumbent’s prices. The relevant Minister had accepted an invitation to the launch of the service. Then things started to go wrong. The Minister cancelled at the last moment. Mauritel was declared “non-compliant” by the regulator and Kenny Yiptong was arrested. Yiptong was bailed and went to court to argues that internet services included VoIP as everything being sent was data. The regulator argued using an ITU definition of the internet which disagreed. The ITU have subsequently rewritten their definition and it would now be more favourable to Mauritel.

The injunction against the actions taken against the company and its director due to be heard 1st October. Kenny Yiptong’s father was rightly snorting contemptuously during one session that Mauritius had “virtual liberalisation.” Kenny Yiptong’s believes that ICTA has got itself into a mess over liberalisaation:”It is trying to do too many things. It should have liberalised the ISP market but instead it’s talking about 3G licences. There’s limited resources, too many projects and not enough focus”. Mauritel’s ambition? To capture 6-7% of the newly competitive market.

The other battle in the liberalisation war is Outremar Telecom. Colin Taylor of Outremar Telecom has just won his appeal against the regulator’s directive that the new entrants must peg their prices to those of the incumbent Mauritius Telecom (40% owned by France Telecom who want to buy more as it makes a very high rate of return). The regulator ICTA was still trying to decide whether to appeal the decision (at time of going to press). Outremar took press ads welcoming the decision and promising cheaper rates. ICTA is a sore loser and fired off a letter to Outremar Telecom saying they should not announce their rates before they had been approved, although no rates had been mentioned. Like most of the new operators, Taylor is not taking any of this lying down and is determined to fight it through to the end. As he told us during the gala dinner on the beach:”If it comes to Court again, they’re bound to lose. Their position doesn’t make sense. They want competition but want all the prices to be the same. You can’t regulate prices.” He suspects that Mauritius Telecom has leaned on the regulator.

But changes in the regulatory environment in Africa as a whole are beginning to speed up. Last week’s announcement of a competition framework by South Africa was followed by Kenya’s version this week (see Telecom News below). Most of the South Africans we spoke to were very pleased by the changes but are still waiting to see how it works out in practice: "It’s a level playing field but they may yet find a few potholes to hold up the competition to Telkom,” one person told us. Another thought that the announced timetable might yet get pushed back.

Mawuli Tse, iBasis attempted a “score-card” on VoIP from his own experience. He identified three countries where VoIP is open to private operators: Mauritius, DRC and Nigeria. He put a question mark over Nigeria but as one player in that market told us, there are now over 60 international, pre-paid calling operations and the majority are using VoIP. His next category was countries where operators must connect to the incumbent to use VoIP: these include Mali, Senegal (where operators must pay Sonatel 2 cents a minute more than if you bought directly from iBasis), Guinea and Côte d’Ivoire. Finally there were those countries where the incumbents are using VoIP: Zimbabwe, Gambia, Chad, South Africa and Angola (signed but not yet in operation). Kenya, Zambia, Uganda, Congo-Brazzaville and Gabon are all doing trials. There is a total ban in Ethiopia and Sudan. The rest are “undecided”.

Brian Longwe of AfrISPA talked about the new “rules of engagement” document it is developing to ensure fair play in the market. The principles are:
- Transparent regulatory framework with locally relevant market segmentation.
- Firm legal frameworks to ensure swift action on regulatory breaches. - An emphasis on local private sector investment.
- An emphasis on unbundling the local loop. Whose copper is it? It should be retained as a public resource with equal access for all comers.
- Avoid the danger of anti-competitive practices and evaluate regulatory options to protect against this.

In order for the rules of engagement to work, there needs to be: strong local ISP associations to lobby for action; local IXPs (it has plans to start 10-12 additional exchange points); local long distance carriers as well as international carriers; and interconnected IXPs via RXPs. He said AfrISPA wanted to name best and worst cases but the gathering pace of change rather undercut two of his worst nominations: Kenya and South Africa. But you can always rely on his third worst case – Ethiopia – to continue to feature on this sort of list for some time to come.

Having for years walked backwards into the future, Africa’s regulators and governments are beginning to look as if they might favour a more open-minded approach. And if it carries on at this pace, it might reach a “tipping-point” where those unable to face the challenge of the future will become a distinct minority.

Another focus of attention at the conference was the rise of Open Source. Dr Subusiso Sibisi of South Africa’s CSIR gave several examples of where open source was now being more widely used. These included:
- Medical aid services provider, Medscheme migrated a proprietary database to linux servers and said had saved hundreds of thousands of rands.
- UCS put in linux-based transaction processing to provide near real-time financial reconciliation for a range of retail clients.and both cut costs by 50% and found it more reliable.
- A well-known high street bank in South Africa has installed hundreds of linux partitions on a mainframe to provide internet banking administration. It has saved millions of rands.
- A provincial government has migrated its desktops to Open Office and saved hundreds of thousands in licence costs and software upgrades.
- Provincial Government health scheme used linux for systems integration and saved 30% on costs.

“There’s a growth in support entities for open source like small companies and large companies that have actually done it. There are now open standards in communications and ERP.” He predicted that the next wave of growth will come from the SMME sector:”Comparatively open source provides biggest ‘returns’ where there is a market that’s been neglected.” The Mauritian Minister who opened the conference said that Open Office was already being used in the Civil Service.

Alastair Otter who runs Africa’s most widely used linux web site Tectonic told us that it attracts 8,200 individual visits and its e-letter has 700 subscribers. Both are beginning to attract interest from the big players like IBM and Novell. The growth of interest is fastest in South Africa, helped in no small part by the work of the Shuttleworth Foundation:”There’s an incredible level of interest but much less actually going on but I believe it will feed through.” However no-one has yet worked out the largely voluntary efforts that power linux developments in the developed world (with many programmers on academic salaries) will be replicated in Africa. Another Bridges.org report on comparisons between OS and proprietary software is in the works.

There were three other topics that attracted much discussion – mobile data services, outsourcing and connecting rural areas – all of which we will be returning to in future issues.

See People at ACT 2004 for further news.