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The technologies that allow "grey market" operators to bypass those who are licensed to terminate calls are changing the whole African market dynamic and it will be impossible to hold them back. Although it has been faced with the problem of the Government-owned Ghana Telecom haemmorrhaging money, the Ghanaian regulator, the NCA looks set to issue a new policy framework that will address the new realities of the market. Eric Osiakwan and Russell Southwood look at the dilemmas the players face.

Since we last reported on the Ghanaian situation in issue 145 three weeks ago very little has happened. Despite this major crisis in the market, events appear to moving rather slowly. Some lines have been reconnected but not all. Both GISPA and Ghana Telecom have met separately with the Minister and a meeting was supposed to have happened last week that brought the two parties together but the Minister was not available. A new meeting is being rescheduled which will also include the NCA, of which (rather confusingly) the Minister (as the "owner" of GT) is still the Chair.

Two factors have come together to destabilise the market. The period of exclusivity for international terminations expired in February last year and since then the number of VSAT authorisations has gone from 30 to over 100. Access to a VSAT satellite allows users the capacity to bypass GT terminating international calls: in other words, they can take the international call income and feed it into GT’s infrastructure as a local call.

Faced with this kind of competition, GT’s commercial strategy can either do one of two things. It can rely on Government and the regulator to try and hold back the tide of "grey market" competition or it can adjust its international rates downwards to meet the competition. Until recently, the most common business model for African telcos was that profits made on international traffic subsidised both investment in and calls at a domestic level.

With international competition and porous access to the international market through digital calling, the cornerstone of the old order - the international "accounting rate" system administered by the ITU - has completely collapsed. Minutes from calling cards in the developed world (used by the diaspora) are getting into countries through a large number of different routes (often disguised) that do not involve the incumbent telco.

Ghana Telecom has the means to "fight fire with fire". It has co-located ITXC equipment that allows it to handle and offer VOIP calls. ITXC can bring it "calling card" minutes provided the price is right, bringing revenue back into GT’s coffers. It may be less than it was expecting but a percentage of something is better than all of nothing. Until recently, GT’s problem has been its inability to price competitively and react quickly to price changes. As one insider close to the situation told us:"You cannot monitor all the lines all the time. You have to decide to join in and aggressively compete with the illegal operators. But you need to change your rates more than once a year. That’s how Government operates and it won’t work. I feel sorry for GT."

(According to last week’s Ghanaian Chronicle, the new Telenor management at Ghana Telecom has installed new systems and "revenue has multiplied six fold and the leakage that was costing government billions of cedis every week has drastically reduced".

Part of the difficulty in regulatory terms is that GT still dominates the telecoms infrastructure. The SNO Westel which was meant to have installed 50,000 lines still only has 3,000. It is now in "hot water" with the regulator for failing to reach targets and it it wants to fine the company. Westel argues that GT was slow to meet its commitments, making it difficult for it to operate.

The regulator has prepared a new framework for international calling and we understand that this is due to go out for industry consultation shortly. The regulator has indicated on a number of occasions that it is not averse to opening up the market to VOIP calling. So what should happen?

The regulator should announce its intention to open international call termination up to a much wider range of operators. These should include a mixture of different types of organisations including: mobile and fixed telcos, ISPs and larger cyber-cafes. A short period should be given to GT to "put its house in order" (3-6 months maybe) and then a steady roll-out of new international operators should be licensed. On an experimental basis, one or two licences should be given to rural operators to encourage growth outside the cities. Small-scale rural operators like Capital Telecoms (with just 500 lines) need a shot in the arm. Underlying this new competition policy should be a clear principle that all parts of the connectivity infrastructure must interconnect and that interconnection disputes will be settled as quickly as possible. If the NCA can achieve this, then Ghana will go from having one of the worst African telecoms infrastructure to having a lively market that responds to consumer need.

(With assistance from Paul Hamilton)