From deregulation to reregulation Alison Gillwald LINK Centre

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From deregulation to reregulationAlison
GillwaldLINK Centre

• Session 4
• Is liberalisation the answer?
• NETWORKING AFRICA
• KwaMaritane

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Contents

• Where are we?
• Monopoly provisioning
• What do we want?
• Multilateral agencies solutions?
• Privatisation
• Liberalisation
• Effective regulation

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Where we find ourselves?

• Late 20th century in Africa in era of global
  information capitalism
• Like other countries around the world recognition
  that to develop nationally and compete globally
  requires information infrastructure on which to
  run the economy.
• This requires connected companies, connected
  consumers and even connected citizens
• Failures of public provisioning teledensity
  across Africa and the turn of the millennium
  around 1.

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How did we get here?

• Formally to provide services which public had
  rights to
• health, education, information but very often
  additional usually more expensive private
  provisioning permissible.
• Public utilities infrastructure for water,
  power, telecommunications that could not be
  duplicated largely due to high costs or limited
  resources.
• In practice fund other activities of government
• Political, social and economic safety net
• Abuses of which resulted in nepotistic
  employment, favourable pricing for government or
  elites at expense of new subscribers on the
  network

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Where do we want to be?

• Universal access
• Affordable services
• Range of services
• Choice of services
• Quality of services
• Needed for modern economy and development
• Focus only on the aggregation of needs and
  services through community access will perpetuate
  digital divide.
• Need to mainsteam bulk of citizens onto services
  to use as they choose.
• Target available funds at those most
  marginalised.

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What is needed?

• Network rollout
• Financial capital
• Skills/transfer
• Technology transfer

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Multilateral organisations solution?

• Deregulation of the sector through
• Privatisation
• Liberalisation
• Independent regulation.

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Competition panacea or regulatory tool?

• Bretton Woods institutions mantra of deregulation
  compelling countries, large and small, throughout
  the world to reform their markets and open them
  to foreign access in the hope of putting an end
  to high cost, inefficient monopoly provision.
• Efficiency only one concept if a key one, in
  mediating social claims, especially in developing
  countries.
• Public interest considerations require
  intervention to ensure affordable access.
• Some public service obligations counterproductive
  and protect elite provisioning

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Privatisation benefits for whom?

• rationale injection of capital and skills and
  technology transfer in order to roll out service,
  modernise outmoded networks, prepare for
  competition.
• tangible monetary benefits for the exchequer
• direct foreign investment serves to integrate
  developing economies better into the global
  economy
• But has this happened?

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South Africa privatisation case

• High dollar investment in network, fully
  digitalised to provide state of art
  communications
• Number of subscribers on network declining 1.5m
  churned off network in last 18 months, largely
  due to affordability
• Effective private monopoly chilled sector growth
  in relations to competitive VANS and ISP segments
• All of this resulted in dramatically reduced
  value of Telkom stock by time of IPO!
• Structural policy constraints on effective
  regulation with significant conflict of interest
  prevented effective monopoly regulation

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Lessons learned

• Could more effective regulation not have enforced
  better access, more affordable prices, better
  interconnection regime and unconstrained access
  to facilities by users?
• Structural constraints result in conflicts of
  interest that make effective regulation
  impossible
• State relinquishing control of incumbent
• Introduction of competition to achieve intended
  benefits of market allocation of resources

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Why liberalise?

• Means to and ends
• To provide a range of ICT services at lower cost
  to more people.
• How?
• By reaping the benefits of efficient market
  allocation of resources
• Assumes perfect markets

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Competition and market failure

• Likelihood of imperfect competition in
  telecommunications one of the major reasons why
  special sector regulators have been given
  oversight of the telecommunications sector.
• Not only to guard against anti-competitive
  practices by the incumbent or other dominant
  operators and ensure access to essential
  facilities but also to establishing
  pro-competitive measure that are particular to
  telecommunications and without which new entrant
  may never enter the market.

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Bottlenecks requiring regulation

• Control of essential facilities
• Economies of established national network
• Vertical integration
• Control of standards
• Cross Subsidies

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Conclusions

• Effective, certain regulation key to investment
  needed for network rollout
• But even more important than financial capital,
  development of human capital to provide this
  environment
• Competition regulation complex, next generation
  regulation requires strategic regulators and in
  African context requires non-tool kit, strategic
  regulation that is responsive to the public
  interest, both inducing innovation in the market
  and affordable access for consumers (and
  potential consumers.)

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• Alison Gillwald gillwald.a_at_pdm.wits.ac.za
• LINK Centre
• Phone [phone]
• http//link.wits.ac.za