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    Ethiopia Success and Failure Under Monopoly

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    Samuel Getachew
    1) Ethiopia has gone through three phases of internet development - a pre-internet phase with low connectivity, a "cash cow" period from 1996-2008 where mobile services were introduced but growth was slower than other African nations, and a third "catch-up" period from 2008-2018 with major infrastructure investments but still lagging in coverage, affordability, and quality. 2) Under the monopoly regime, demand outpaced supply and quality of service issues emerged. Reforms began in 2008 with a $3.1 billion infrastructure loan and management changes, but Ethiopia still ranks low on connectivity indices. 3) While prices have dropped, internet remains less affordable than the UN's 2% income target

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    Ethiopia Success and Failure Under Monopoly

    Uploaded by

    Samuel Getachew
    39 views29 pages
    1) Ethiopia has gone through three phases of internet development - a pre-internet phase with low connectivity, a "cash cow" period from 1996-2008 where mobile services were introduced but growth was slower than other African nations, and a third "catch-up" period from 2008-2018 with major infrastructure investments but still lagging in coverage, affordability, and quality. 2) Under the monopoly regime, demand outpaced supply and quality of service issues emerged. Reforms began in 2008 with a $3.1 billion infrastructure loan and management changes, but Ethiopia still ranks low on connectivity indices. 3) While prices have dropped, internet remains less affordable than the UN's 2% income target

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    Ethiopia-Success-and-Failure-Under-Monopoly (1)

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    1) Ethiopia has gone through three phases of internet development - a pre-internet phase with low connectivity, a "cash cow" period from 1996-2008 where mobile services were introduced but growth was slower than other African nations, and a third "catch-up" period from 2008-2018 with major infrastructure investments but still lagging in coverage, affordability, and quality. 2) Under the monopoly regime, demand outpaced supply and quality of service issues emerged. Reforms began in 2008 with a $3.1 billion infrastructure loan and management changes, but Ethiopia still ranks low on connectivity indices. 3) While prices have dropped, internet remains less affordable than the UN's 2% income target

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    39 views29 pages

    Ethiopia Success and Failure Under Monopoly

    Uploaded by

    Samuel Getachew
    1) Ethiopia has gone through three phases of internet development - a pre-internet phase with low connectivity, a "cash cow" period from 1996-2008 where mobile services were introduced but growth was slower than other African nations, and a third "catch-up" period from 2008-2018 with major infrastructure investments but still lagging in coverage, affordability, and quality. 2) Under the monopoly regime, demand outpaced supply and quality of service issues emerged. Reforms began in 2008 with a $3.1 billion infrastructure loan and management changes, but Ethiopia still ranks low on connectivity indices. 3) While prices have dropped, internet remains less affordable than the UN's 2% income target

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 29

    Ethiopia Internet Development Conference 2020

    Ethiopia Successes and Failures Under


    Monopoly Regime- Implication to the
    Internet Development
    Ingredients to achieve good Internet ecosystem– did we get them
    right?

    Policies and
    regulation

    Research and
    Investment in
    Policy
    Infrastructure –
    Influence – Internet- Availability, telecom and
    learning and Accessibility,
    Affordability, Ability, energy
    adjustment
    Awareness and
    QoS

    Institutions,
    Local ICT sector management,
    entrepreneurship
    development leadership
    Ethiopia Communication Sector Development Phases

    Pre – 1996 (Pre- 2008-2018 (Let us Post 2018 (break


    1996-2008 (Cash
    Internet) Catch up period) the rule and
    Cow)
    reform)
    Pre-Internet
    • Self-satisfied incumbern with its achievement for over 100 years, since Menelik time

    • Low cost communication was introduced (PADISnet)

    • Bringing Internet to Ethiopia (BITE), and registration of the domain (.et)

    • Reform in Latin America, Asia and some countries in Africa – “ because there were
    more telephone in Manhattan than Africa” Telecommunications regarded as a
    luxury

    • Early use of low cost communication for social interaction


    Cash Cow Era 1996 - 2008
    • Mobile services and Internet were introduced
    • Mobile regarded as cash cow thus no interest in reform
    • A series of policies were crafted to improve telecom sector
    • Five institutions were created
    • Ethiopian Telecommunications Corporation – operator as public
    corporation
    • Ethiopian Telecommunications Agency – regulator working for Ministry
    • Ethiopian IT Development Agency – to promote a series of projects –
    woredanet, ethernet, agrinet, schoolnet, community access, e-
    government
    • Ethiopian Broadcasting Authority – regulator for broadcast sector
    • Information Network Security Agency -
    Government policies and regulation
    2007 Proclamation No. 533/2007 – Broadcast Service Proclamation
    2006 Council of Ministers Regulation No. 130/2006 - Information Network Security
    Agency Establishment Council of Ministers Regulation
    2004 Council of Minister’s Regulation No. 99/2004
    2003 Proclamation No. 360/2003 – Ethiopian Information and Communication
    Technology Development Agency Establishment Proclamation
    2003 Proclamation No. 375/2003, Investment (amendment) Proclamation)
    2003 Council of Ministers Regulation No. 93/2003
    2002 Proclamation No. 280/2002
    2002 Proclamation No. 281/2002
    1999 Proclamation No. 178/1999 – Ethiopian Broadcasting Agency Establishment

    1999 Broadcasting proclamation N°187


    1998 Investment proclamation No 166/1998
    1996 Ethiopian Telecommunications Agency Proclamation 49/1996
    1996 Proclamation for the establishment of Ethiopian Telecommunications Corporation
    10/1996
    Institutional Arrangement
    Prime Minister

    Council of
    INSA
    Ministers

    Ministry of Ministry of
    Ministry of
    Capacity Transport and
    Information
    Building Communication

    EICTDA ETC ETA/SRD EBA


    Pickup of of mobile sector, but slower than African average
    Low Internet Innovation and growth

    Internet and Mobile Development


    Cash cow period
    4500000

    4000000

    3500000

    3000000

    2500000

    2000000

    1500000

    1000000

    500000

    0
    1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

    Mobile subscribers Ethiopia Internet Subscribers Ethiopia


    U
    n
    s
    a
    ti
    fi
    e
    d
    m
    ,w
    ig
    lt
    f
    o
    r
    …

    Unsatisfied demand – registered waiting lists for fixed line


    250000

    200000

    150000

    100000

    50000

    0
    1998 1999 2000 2002 2003 2004 2005 2006 2007 2008
    Implication of the cash cow period
    • Monopoly was unable to meet demand and track global growth
    • By 2006, the government began to look for resources to meet
    unsatisfied demand and network expansion and secured US$1.5 billion
    from the Chinese Exim Bank and engaged ZTE to rollout infrastructure
    • Plummeting ARPU resulted in lower revenue - cash cow was not
    achieved as desired
    • Government started to look for change of management of the operator
    • Limited improvement in ICT standing in global indices
    • Falling quality of service
    Time to Change Period (2008-2018)
    • Infrastructure Investment US$3.1 billion loan –
    rolling out fiber across the country, mobile
    network expansion, introduction of 3G
    network, universal access to Kebeles/rural
    areas
    • Change of management and engagement of
    France Telecom to restructure Ethio Telecom
    • Establishment of Ministry of Communication
    and Information Technology
    • Ethio IT village
    • Expansion of bandwidth
    • Increased revenue
    Fixed, Mobile and Internet Development in Ethiopia
    70

    61.6
    60

    49.8
    50

    43 42.8
    41.8
    40

    33.3

    30 27.4

    22.8
    20.4
    20 17.5 18.5
    14.7
    12.9
    10
    10 7.6 7.3
    5.2
    1 1 0.2 1 0.3 0.9 1 1 1.2 1.2 1.2 1.2
    0.03
    0
    2009/2010 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018 2018/2019

    Fixed Mobile Internet


    Comparison of Penetration in Recent Years

    Country ICT Mobile Internet Fixed


    Development penetration penetration broadband
    Index (2017) (2017) (2017) penetration
    (2016)
    Kenya 2.91 (138th) 94.3 % 89.4% 0.3
    Sudan 2.55 (145th) 70.1% 29.5% 0.1
    Egypt 4.63 (103rd) 106% 48% 5.2
    Nigeria 2.60 (143rd) 84% 51% 0.01
    Mali 2.16 (155th) 127% 65.3% 0.03
    Rwanda 2.18 (153rd) 75.5% 33% 0.2
    China 5.60 (80th) 107% 55.8% 22.9
    Ethiopia 1.50 (170th) 45% 15% 0.6
    Pricing

    Prices have dropped, but


    still high, considering
    income.

    1GB Internet cost of


    US$3.5 was above the 2%
    of the target that was set
    by the ITU Broadband
    Commission
    Quality of Service
    • Low quality Internet service
    • Frequent disruptions and shutdowns –disinformation and
    misinformation related violence, securing public safety
    and national security, preventing cheating during exams.
    • When security at stake “Internet is not water or
    Internet is air”, PM Abiy Ahmed…
    • Inadequate International bandwidth, which contributes to
    lower throughput – 70 Gbps in 2018 compared to 1150
    Gbps in Kenya
    Implications of the catchup period
    • Substantial network rollout, but unable
    to catch up in terms of coverage,
    affordability and quality
    • Government debt at the expense of
    private investment
    • Shortage of foreign currency
    • Low access to electricity and handsets,
    • Safety and security of infrastructure.
    • Low level of applications and content
    Reform Phase 2018-
    • In 2018, the PM announced the plans to liberalise the
    country's telecoms markets
    • In 2019, the Ethiopian Parliament passed a new telecom
    law, which saw the establishment of an independent
    communication regulator- the Ethiopian
    Communications Authority (ECA).
    • Efforts are also underway to partially privatise the
    incumbent public operator, Ethio Telecom and open the
    market to two new licenses during the first quarter of
    2020.
    Benefit of the reform is beyond earning foreign
    currency
    Economic Growth
    •wages, business operating
    surplus and taxes, Innovation and efficiency gains
    •Productivity impact from Local ICT sector growth
    increased access Foreign Direct Investment
    •Purchase of goods by and
    services

    Jobs
    • Direct employment in the sector Financial Inclusion
    • Indirect employment for
    Reform issues
    Licensing of three operators
    • Refining draft licensing document based on feedback
    • Ensuring the participation of local ICT sector, potential
    grassroot community networks,
    • What specific license Tower Companies will be
    granted, if they want to operate?
    • What provisions will be there for alternative providers,
    like EEP, and Railway Corporation, if they want to enter
    the market.
    Spectrum (and other scarce resources) management and fees

    • Assessing current use of spectrum by incumbent


    • Defining a flexible spectrum allocation that
    balances economic returns and also affordable
    communications
    • Decide on a method of award spectrum and
    value (fee)
    Competition and Economic Regulation
    • What obligation should new entrants and Ethio
    Telecom should meet in terms of coverage, rollout
    target, how much they should contribute to universal
    service fund? Is the fund necessary?
    • How can they compete with each other –
    interconnect, set fees, access to Ethio Telecom
    Infrastructure?
    • How will the regulator address the SMP of Ethio
    Telecom?
    Access to right of way
    • How can new entrants access to public and private
    land, at what cost?
    • What are the roles of local authorities?
    • What lessons can be learned from similar projects in
    terms claims and compensation payment of the
    land(e.g. railway)
    • Can new entrants ride on ET right of way?
    Interconnection, Collocation and Infrastructure sharing

    • Access to alternative infrastructure (e.g. EEP


    infrastructure, railway infrastructure)
    • What point of interconnection, collocation and active
    and passive infrastructure sharing are available for
    entrants, at what cost?
    • Is ET ready and has fee schedule for collocation,
    interconnection and infrastructure sharing with two
    other licensees?
    Universal access
    • What will be the goal of universal access (broadband
    supply/demand for content, applications and
    services)?
    • What is an optimum fee percentage to go to the
    universal fund
    • How can it be disbursed and to whom, (e.g. what will
    be the role of community networks)
    Privatization of Ethio Telecom

    •What is the implication of


    privatisation –
    • Positive in terms of innovation, QoS
    improvement, revenue,
    • Negative – pricing and selling of public
    asset, workforce, morale
    Regulatory capacity and legitimacy (not necessarily independent)

    • Staffed by experts from multiple fields


    • Fast track training and capacity building on economic and
    technical regulation- to build expertise
    • Assert authority (attain procedural legitimacy)
    • Transparent and seen on its web site doing the right thing (i.e.
    communicating)
    • Works with others with expertise and consults widely and show
    results
    • Deals with disputes through a robust appeal procedure
    Conclusion
    • From optimism of the impact of communication in early
    1990s, Ethiopia went through a period of stagnation,
    reflection and now back on track.
    • This has costed the country - economic growth, innovation,
    • The future is bright, but needs to be managed well through
    analysis of pros and cons, learning from failed experiences of
    other countries and the great things that happened.
    • The many unanswered questions during reform means that
    the new regulator needs capacity and legitimacy to function.
    Thank you

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