Responding to a New Challenge: The Case of Telecom Policy in Ethiopia
Samuel Kinde Kassegne+, PhD, Teodros Kidane++ ,and Samson Yemaneab Kifle +++,
+University of California at San Diego - UExt, San Diego, California[firstname.lastname@example.org],
++Onix Microsystems, Inc., Fremont, California, USA [email@example.com]
+++ SITA International, Atlanta, GA, USA [firstname.lastname@example.org]
The Information Age had arrived in Ethiopia, unheralded and quiet late in 1997 with the introduction of dial-up connections by the country’s sole telecom player - Ethiopian Telecommunication Corporation (ETC). While the number of subscribers stands at a dismal 2500, (one of the lowest in simple and per-capita magnitude anywhere in the world) it nevertheless, has raised huge expectations. Providing basic Internet service to a large scale potential user-base and hence building a sizable profitable market will require a revised and consistent approach than what is practiced now by the country’s telecom monopoly - ETC. This paper suggests that this proposed strategy presents ETC and Ethiopian Internet users a win-win situation.
Some estimates put the potential Internet user base (basic e-mail and some web-browsing) conservatively to as high as 250,000 in the city of Addis Ababa alone . This is a potentially big market capable of sustaining a continued growth and also capable of generating a significant amount of revenue that could guarantee a strong foothold for Internet in Ethiopia. However, the state of Internet penetration in the country hasn’t shown any improvement for the past 5 years. Even the long awaited upgrading of the national Internet infrastructure, when completed, will increase the subscriber base to only 12,500, a fraction of the potential market size. In this paper, the authors discuss what needs to be done to create this potential market and realize revenues in addition to bringing the huge benefits of ICT to this segment of the society and the country as a whole.
2. Core Competency and Need for Competition
As starters, if Internet usage in this country is to reach a respectable level, the regulatory body, ETA - Ethiopian Telecommunications Authority along with ETC should allow competing businesses to operate as ISP (Internet Service Providers). As demonstrated in almost all other places where the Internet has made some successful inroads, it is the private and competing ISPs that are nimble enough to meet the Internet connectivity demands, particularly at the initial build-out phase. The stories of India’s Satyam and Rediff, Kenya’s Africa Online, and AOL (American Online) are perfect examples of the huge success that private ISPs have enjoyed elsewhere.
This expectation, while not practiced so far both by ETA and ETC, is, however, inline with publicized ETA policies that were even published in the public media. We submit that ETC’s demonstrated core-competency and high-margin profitability since the turn of the century (i.e., 1894) has been in voice communications . Data communications infrastructure and administration is a whole new area ETC has been struggling with for most of the 90s. Upgrading of the current infrastructure to a modem pool of 2500 from the current 500 has tested ETC beyond its limit for the past 5 years. These were valuable years that were wasted, and opportunities never utilized. Further, we submit that if current trends and practice continue, in the long run, the data communication business will do more harm than good to ETC.
The story of the struggling US telecom giant, MCI is a case in point. For most of the 90s MCI had built an extensive data communication infrastructure from revenues generated from its long-distance voice communication business. The massive data communication built-out has drained MCI of valuable capital with expected revenue inflow from such infrastructure yet to show up. For ETC, allowing other players to build the ISP infrastructure and provide basic Internet service will help it avoid the mistake of MCI.
3. Learning from the African Experience
Almost all African countries seem to have learnt the lesson and do allow competition in the ISP space. Table 1 summarizes the number of licensed ISPs in major African countries. A general trend that is obvious is that the only guarantee for a growing and sustainable Internet penetration is the presence of competition in the ISP space. Further, the table demonstrates that in countries where there is no competition in the ISP space, Internet penetration is dismal.
Ghana for example has licensed as many as 40 ISPs (eight operational, so far), Malawi 24, with Egypt boasting 40 and Kenya, long a believer in telecom monopoly finally agreeing to license a staggering additional 50 players in the ISP industry! The story of the success of Africa Online Holdings, a Kenyan Internet company (mainly ISP) and a shining example of the new African entrepreneurship with businesses in eight other African countries would simply not have happened if Kenyan Telecom had refused to relax its monopolistic hold. As a side note, the $3.5 million purchase of MenaNet, Egypt’s second largest ISP, by Kenya’s Africa Online has put the new face of African competitive ISP industry on the map. Will such an Ethiopian success story in Internet entrepreneurship happen under monopoly? The answer is obvious and not encouraging - the facts speaking for themselves as depicted in Table 1.
Further, the example of Somalia, the last African country to get connected to the Internet should serve as a good reminder that opportunities are being wasted here in Ethiopia. Somalia, a country barely re-establishing the rule of law and a functioning government apparatus has managed to attract as many as three ISPs serving a client-base of almost a 1500 users . If ISP industry could thrive in an environment as difficult and challenging as in Somalia - almost in the absence of a government - then why is it that Ethiopia, a country with one of the largest and most experienced telecom technical and management labor force is wasting such an opportunity?
The lack of opportunity of any kind, we submit, can not be used as an excuse for the dismal state of Internet connectivity in the country, as there is ample evidence that, given a helpful regulatory environment, the country is endowed with a lot of opportunity in terms of a local telecom labor force, an increasingly optimistic entrepreneurial business community and a sizable Diaspora trained manpower that are willing to put the money and hard work that is needed to create a thriving Internet enabled ICT economy.
Table 1. Summary of Number of ISPs and Internet connectivity in selected African Countries.
4. Making Internet Access Affordable
In addition to ISP permits, ETA and ETC should seriously consider reviewing their policy in disallowing private Internet Cafés which are one of the most popular and affordable ways of connecting to the Internet available to millions around the globe. ETC has argued that reselling of its basic Internet service does not make business sense to it and hence is illegal. However, ETC itself is a reseller of Internet services from global Internet network to start with!
Again, other African countries could be sited as excellent examples where Internet Cafés have actually brought the promises of Internet to millions. Table 2 summarizes the number of Internet Cafés in selected African countries. Accra, Ghana’s major urban center, for example hosts as many as 190 such business outlets. This has enabled the emergence of an estimated 0.5 million Internet user-base in Ghana .
It is interesting to note that if an average of five people find employment in such Internet Cafés, one can easily see that as many as 1000 people can find gainful employment in this segment of the economy alone. ETA and ETC can do the country a lot of economic good if such Internet businesses are encouraged.
Meanwhile, ETC may be better positioned to enter (or as things stand, strengthen its presence in) the cyber café service industry itself as one of the players that offer reasonable rates. This business is not only easy to implement and administer but also profitable and hence will not drain ETC’s resources. More importantly, however, providing such affordable services to the masses will also play in favor of ETC as it will establish ETC as a government body sensitive to the needs of the average citizens who might otherwise be left out of this technology. The backlashes on perceived “digital divides” are real and it is in the strategic interests of ETC to play as an “equalizer”.
Table 2. Summary of estimated number of cyber cafés in selected African countries
5. Win-Win Strategy for Internet Users and ETC
As argued above, the licensing of private and competing ISPs (both domestic and foreign) is the only proven way of meeting the demands for increased number of subscriber accounts. Ethiopian Internet users will come out as winners only in this environment; thereby helping create a decent-sized digital economy.
On the other hand, the strategic interests of ETC are very well served if it concentrates in its time-tested core competency of building and upgrading the telecom infrastructure with new and appropriate technology such as wireless, VSAT (low-orbit satellite) and perhaps DSL. Competing ISPs will increase demand for telephone lines and no one in the country is better positioned to meet this demand and at the same time be profitable than ETC. In addition, the intangible benefits of a winning respect and support from the country’s average citizens and the business community as well should not be underestimated.
It has been argued that the next wave of killer Internet applications and businesses will come from developing countries where the Internet is seen as promising one of the most efficient “equalizers” and “leap-froging development” enablers. The relevance and power of the national telecom policy to enable this promise is impossible to ignore and perhaps holds the key to Ethiopia’s ability to be a significant beneficiary of this technology.
The country’s telecom executives find themselves in a historical position with their favorable response to this challenge of vision and leadership holding a key to the future of Internet-enabled economic growth in Ethiopia. It is a rare and enviable opportunity few men and women are bestowed with and one can hope that this fact is realized and acted upon courageously. As the stakes for the future of the use of ICT for current and future generations of Ethiopians is at stake, it is also the responsibility of the business and technology community to work with policy makers, as it has remarkably done so far, to ensure that opportunities of this historical magnitude are not lost.