Internet growth in East Africa could be held back if governments continue to keep substantial shareholdings in their telecommunications utilities, as deregulation could impact severely on the interests of a national asset, says an analyst.
Will Hahn, an analyst with international research firm Gartner, said this in reaction to comments made recently by Kenya's minister of information and communications, Samuel Poghisio, during the landing of the East African Submarine Cable System (Eassy), in Mombasa.
Poghisio said that, despite the recent landings of two other submarine cable systems in that country, telecommunications prices had not fallen substantially.
“We witnessed the landing of both the Teams and Seacom cables and, although both are operational stakeholders, the public is yet to experience any remarkable changes in the pricing of bandwidth, as had been expected.
“As a government, we expect that, when operational, Eassy will create a competitive environment where bandwidth prices will fall, so service providers can pass this benefit to customers,” Poghisio said.
At the same event, the chairman of the International Telecommunications Union, Hamadoun Tour'e, said the landing of the Eassy cable was timely, as it will enhance telecommunications development in Africa. He said he was optimistic Internet connection costs would come down drastically, with increased competition in tandem with international trends.
“If this does not happen, then there is a big problem in regulation, which must be addressed to ensure fair competition,” Tour'e said.
According to Hahn, the part of an undersea cable that is the hardest to regulate is that which stretches from the landing station into international waters. “...this business of the landing sites, the cable huts, basically the first 100m of a network from the moment the cable emerges from the sea, this can be a tough business to regulate, sometimes what I refer to as a 'shadow monopoly' if only one company truly controls access,” Hahn said.
In terms of the Eassy model, the incumbent telecommunications operators in their respective countries will be responsible for the landing stations. In SA, Telkom mans and operates the Eassy landing station at Mtunzini, while Telkom Kenya does the same in Mombasa.
Hahn says that, if his assessment is true, Eassy would not resolve the issue of Internet growth in Kenya, as it will proceed precisely as fast as Telkom Kenya can handle it, or thinks fit.
“I know Kenya has powerful mobile providers and a small, but thriving, Internet exchange, so there could be alternate routes to international bandwidth and, if so, then the question is whether the new entrants are taking advantage of it,” he says.
Hahn adds that a telecoms monopoly is not something where the solution is obvious: some developed regions have tried to promote facilities-based competition (including breaking up the incumbent) and others have moved for resale schemes (including local loop unbundling, which SA still lacks).
“Either way, there are plenty of opportunities to make a mistake, and some very well-heeled, powerful and long-standing telecoms NRAs (national regulating authorities) have done so,” states Hahn. “But if the government of Kenya still owns a third or more of the incumbent, that's a warning sign for me. The regulator is going to be caught between imperatives, in promoting competition, they would be hurting the short-term interest of the national asset.”
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