Trade
in Infrastructural Services: Selected African Experiences
By
Dominique
Njinkeu (AERC)
I. INTRODUCTION
Understanding of commitments
and link to ongoing reform (privatization /liberalization)
Special focus on
- Policies
and market structure (competition; ownership, regulation)
and
- Performances
(prices, quality, access)
Introduction (Ctd)
- How
further own development goals?
- Respective
roles of domestic policies/ WTO?
- Competitive
effects have positive static and dynamic dimensions: static effect with
reduced mark-up of prices over costs, then reduced costs. Dynamic effects
in In LT with innovation and adoption of modern technology through enhanced
foreign investment
This presentation’s
concerns
- What issues
are likely to arise in the design and implementation of pro-competitive
regulation.
- What implications
for ongoing negotiations?
- Presentation
draws on on-going efforts of AERC and collaborative institutions (e.g.SATRN):
preliminary results; Cameroon, Cote d’Ivoire, Ethiopia, Guinea.
- Comparison
with process in other countries e.g. Botswana…
Sector Specific Experiences:
Telecommunications
Market
access.
- The
limitations on number of suppliers for natural monopolies reasons.
- Restrictions
on legal entity to allow foreign/private investors to set up.
- Restrictions
on foreign ownership through minority limits on foreign ownership.
African government reasons
for access restrictions
a. To give incumbents
time to prepare for competition: Ethiopia (mobile+Fixed), Cameroon (fixed)
b. To increase government
revenue from privatization or license fees: Ethiopia(mobile+fixed)
c. Exclusive rights necessary
to attract (strategic) investment: Ethiopia (mobile), Cameroon (fixed)
d. Exclusive rights to
allow the provision of universal service: Cote d’Ivoire, Cameroon
(fixed)
National treatment.
Through "limitations
on nationality requirements" and through a variety of other "domestic
regulations". The main measures include (a) tax measures, (b) nationality
requirements, (c) residency requirements, (d) licensing, standards,
qualifications, (e) registration requirements, (f) authorization requirements,
(g) ownership of land and other property.
Private / Foreign
ownership (opening) in sample
Fixed lines
- Local, long
distance and international services: Cameroon, Cote d’Ivoire, Ethiopia
- Leased line:
Cameroon, Cote d’Ivoire
Maximum equity: 100%
Cote d’Ivoire
Mobile lines
- Analogue:
Cameroon, Cote d’Ivoire, Guinea
- Digital:
Cameroon, Cote d’Ivoire, Guinea
- Maximum equity:100%
Cote d’Ivoire; 70% Cameroon, Guinea
Regulation
and Competition
- New
entrants to compete with incumbent operator : competition enhances efficiency
- Process
and timing. How to avoid collusion and abuse of market power: 4
methods.
Regulation
- Through facilities-
or non-facilities-based modality
- By geographical
areas covered by the license;
- Through number
of operators licensed
- Through specification
of implementation time frame
State of regulation
in sample
- Separate regulatory
agency created recently: Cote d’Ivoire (1995), Ethiopia (1996) Cameroon(1998)
- Regulatory
responsibility shared with Ministry in charge of telecommunications:
all
- Countries
with regulatory agencies but interconnection responsibility with a telecommunication
operator: Cameroon, Cote d’Ivoire; in both case the fixed telephony
monopoly.
- Countries
with regulatory agencies without dispute settlement responsibility
:Guinea
- With public
service monopoly + possibility of private entry: all
Regulatory responsibilities
in African countries
Mobile telephony
Licensing: Regulator
(Cameroon, Cote d’Ivoire, Ethiopia) Ministry (Guinea)
Interconnection: Operator
(Cameroon, Cote d’Ivoire)
Retail tariffs : Operator
in Cameroon and Cote d’Ivoire, regulator in Ethiopia
Dispute settlement &
arbitration: Regulator (Cameroon, Cote d’Ivoire), Ministry (Guinea)
Regulatory responsibilities
in African countries (ctd)
Fixed telephony
Licensing: Regulator
(Cote d’Ivoire), Ethiopia) Ministry (Guinea)
Interconnection: Operator
(Cameroon, Cote d’Ivoire)
Retail tariffs : Regulator
(Cameroon, Cote d’Ivoire), Operator(Ethiopia)
Dispute settlement &
arbitration: Regulator (Cote d’Ivoire)
Meeting a
twin objective: profitability and social goals (USP).
- Infrastructure
rollout to under-serviced areas: e.g. Cameroon over five years all
cities with at least 50,000 inhabitants.
- A universal service
fund: Botswana. Also use a subsidy. Village with 250- 500
required to have 3-7 lines placed at strategic points.
- Granting of a regulated
monopoly for specified time period and licensing conditions: e.g.
SA number of new lines, both overall and in under-serviced areas over
the license period
Meeting a
twin objective: profitability and social goals (USP) (Ctd)
- Objective
of USP hard to attain with current instruments b/o nature of industry:
Convergence markets-technology make it difficult to sustain regulated
monopoly for stipulated period + ensuring world-class quality services.
- Difficulties
associated with management of a special telecommunication development
fund and reluctant private operators to invest in unprofitable areas.
Lack of profitability due to high price and low consumption.
Effectiveness
of Regulatory Bodies :Tariff and Interconnection
Tariff
policy: align prices to costs to reflect their likely levels
in a competitive environment.
- Distortion
with cross-subsidization b/o inefficient decision-making by consumers
and service providers. Cost based prices subsidy mechanism reflects
true economic costs and transparent ground for competition; sustainable
base for investment decisions and technology acquisition.
- Accounting
and settlement systems
Effectiveness
of Regulatory Bodies :Tariff and Interconnection (Ctd)
Interconnection
- Interconnection
necessary in multi-operator environment. Users to freely communicate.
- Incumbent
operator that deters entry keeps efficiency from being maximized.
- Property
rights or rights of way are necessary to protect against
abuse of market power.
- Access
to unbundled elements of network, charged only for required facilities;
- Cost-based
pricing directly pertaining to costs of construction of link is desirable.
Effectiveness
of Regulatory Bodies :Tariff and Interconnection (Ctd)
The
interconnection requires TRB.
- To centralise
sector key indicators (access to relevant information)
- To regulate
market on transparent, objective and non-discriminatory manner.
Regulatory
bodies face stringent constraints
i.Technical
e.g. direct+indirect connection compatibility of switch and equipments.
ii. Legal,
especially on dispute settlement;
iii. Economic:determination of price
reflecting true cost.
Effectiveness
of Regulatory Bodies : The
challenges
- Accounting
for legacy of past policies, commitments and capacity for reform.
- How to reverse
past commitments that could limit effectiveness and how to compensate
to ensure credibility?
- Division
of responsibilities between administrative and regulatory functions
to avoid conflict of interest, taking capacity into account and concern
for effectiveness.
Effectiveness
of Regulatory Bodies : The
challenges (Ctd)
- Countries
launched reforms without sectoral restructuring policy; reform happened
before or simultaneously with design of rules and creation of regulatory
agencies. Hence complex implementation problems.
- Countries
too small to allow entry of adequate number of firms for effective competition
(instead of collusion): objective of economic efficiency, reduced
cost, improved quality hard to achieve.
Special case:
Experience of Botswana
- Number
of fixed lines doubled in 5 yrs reaching 10% of population. Mobile
used by 16%; estimated mobile could reach 35% of the population in a
few years.
- Weak
accounting services pose problems e.g. lost of customers. 90% of mobile
subscribers use pre-paid services. When billing problems rectified
most customers preferred to stick to mobile despite higher prices. Strong
preference for quality.
- Competition
led to falling prices
Special case:
Experience of Botswana (Ctd)
- Fast-track
dispute settlement.
- Staffing,
leadership, compensation.
- Overall
policy environment in the rest of the country.
- Telecommunication
Regulators Association of Southern Africa (TRASA): role of SADC, large
market, institutional framework for regional model telecommunication
policy
- Detailed
studies required to assess relevance for other countries/regions.
Conclusions and Lessons
- GATS complex
and not sufficiently understood;
- Market size
a constraint: regional dimension, develop inter-linkages with regional
and continental blocks; significantly liberalize at regional levels,
as building block to multilateral liberalization.
- Competition
crucial for market contestability. Effective regulatory mechanisms and
institutions are either lacking are grossly understaffed and under-funded.
Conclusions and Lessons
(Ctd)
- Provision
of services requires access to networks; adequate interconnection.
- Prices
too high (mobile or fixed)
- Best
way of reaching-out to many; provisions for universal service, detailed
study of cyber cafes and community centers, role of Internet and other
new technologies.
Conclusions and Lessons
(Ctd)
- How
to negotiate away existing some restrictions / commitments, promote
national/regional objectives, be WTO compatible such as to enhance credibility.
- Given
current reform was under SAPs study coherence between objectives / instruments
/ commitments in WTO: links to be understood.
- Replicate
TRASA in other African regions? Africa Telecommunication Regulators’
Network (ATRN)
- Do the same
on administrative side of telecommunication