Trade in Infrastructural Services: Selected African Experiences

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Trade in Infrastructural Services Selected
African Experiences

• By
• Dominique Njinkeu (AERC)

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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)

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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

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This presentations 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 dIvoire,
  Ethiopia, Guinea.
• Comparison with process in other countries e.g.
  Botswana

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Sector Specific Experiences Telecommunications
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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.
  

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African government reasons for access restrictions

• a. To give incumbents time to prepare for
  competition Ethiopia (mobileFixed), Cameroon
  (fixed)
  
• b. To increase government revenue from
  privatization or license fees Ethiopia(mobilefix
  ed)
  
• c. Exclusive rights necessary to attract
  (strategic) investment Ethiopia (mobile),
  Cameroon (fixed)
  
• d. Exclusive rights to allow the provision of
  universal service Cote dIvoire, Cameroon
  (fixed) 

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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.

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Private / Foreign ownership (opening) in sample

• Fixed lines
• Local, long distance and international services
  Cameroon, Cote dIvoire, Ethiopia
  
• Leased line Cameroon, Cote dIvoire
• Maximum equity 100 Cote dIvoire
• Mobile lines
• Analogue Cameroon, Cote dIvoire, Guinea
• Digital Cameroon, Cote dIvoire, Guinea
• Maximum equity100 Cote dIvoire 70 Cameroon,
  Guinea

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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

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State of regulation in sample

• Separate regulatory agency created recently Cote
  dIvoire (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
  dIvoire 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

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Regulatory responsibilities in African countries

• Mobile telephony
• Licensing Regulator (Cameroon, Cote dIvoire,
  Ethiopia) Ministry (Guinea)
  
• Interconnection Operator (Cameroon, Cote
  dIvoire)
  
• Retail tariffs Operator in Cameroon and Cote
  dIvoire, regulator in Ethiopia
  
• Dispute settlement arbitration Regulator
  (Cameroon, Cote dIvoire), Ministry (Guinea)

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Regulatory responsibilities in African countries
(ctd)

• Fixed telephony
• Licensing Regulator (Cote dIvoire), Ethiopia)
  Ministry (Guinea)
  
• Interconnection Operator (Cameroon, Cote
  dIvoire)
  
• Retail tariffs Regulator (Cameroon, Cote
  dIvoire), Operator(Ethiopia)
  
• Dispute settlement arbitration Regulator (Cote
  dIvoire)

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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

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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.

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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

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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.

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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. directindirect connection
  compatibility of switch and equipments.
  
• ii. Legal, especially on dispute settlement
• iii. Economicdetermination of price reflecting
  true cost.

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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.

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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.

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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

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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.

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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.

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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.

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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