Introduction

Private VSAT networks have been a growing feature of telecommunications services in Africa since the mid 1990s. Telecommunications, long since an important business factor, have over the past decade become an integral part of the security, speed and quality of communications essential to any modern business undertaking. That integrality is also dictated by the fact that telecoms are now a significant part of corporate expenditures, often reaching a significant percentage of operating costs. Not surprisingly then, companies have been focusing on reducing costs in this area, and improving the quality of their intra-corporate networks. Private VSAT systems have been playing an important role in this regard on the continent. Their reliability, the high-speed, high-quality of data and voice transmission they provide, and their cost-effectiveness for large users of telecommunications have made them a preferred solution for corporate users on the continent.

The high cost of telecommunications and the unreliability or outright unavailability of service in many areas today mean that a company's decision to invest in any African country takes into account the ease with which it might be able to freely decide what private telecommunications service best suits its commercial needs. Only a few years ago, this was next to impossible due to regulatory barriers. All telecommunications services were the monopoly of a national operator. In recent years, the industry has known dramatic changes, as African countries compete to open their markets, attract investment, and improve the regulatory environment to develop telecommunications services. As part of this effort, Governments and regulatory authorities are increasingly permitting companies to operate private networks for the internal needs of the corporation. Nevertheless, the small portion of the market private networks occupy in relation to public fixed and mobile services, as well as the lack of collected information on their management as a policy objective, has made them an understudied feature of telecoms deregulation.

National governments throughout the African continent first began introducing competition in telecommunications services some five years ago. Initially, with the exception of a few discrete alternatives , the only services available, if any, were those provided by the national operator's public-switched terrestrial network ("PSTN"). Consequently, the new policies naturally tended to focus on privatisation, competition and deregulation as they affected the national operator. The subsequent gradual availability of mobile phone services and, to a lesser extent, Internet-based services, starting in the second half of the 1990's, both expected but surprising in their speed of expansion, has since monopolised attention in the field of telecoms deregulation in Africa. This article focuses instead on deregulation of private network services, and continuing formal barriers to their introduction.

While approaches to deregulation and competition of VSAT networks have of course varied from country to country, some universal trends have emerged, together with a basic set of rules to assist national operators and regulators in their liberalisation efforts. VSAT networks are a benefit to consumers and to the development of an improved national telecoms infrastructure. They are easy to regulate, for the following reasons:

•  Consumers of private VSAT networks are invariably corporations with the clout to negotiate favourable service terms, and are therefore not in need of consumer protection measures such as those that regulators might apply to public networks;

   

•  In private network services, there are no real issues of unfair competition between private network operators, as no service provider is sufficiently dominant, and there is vigorous competition from the many operators in the field. The regulator's attention to unfair competition, if any, in this field, must be directed at preventing the national operator from using its position abusively, such as by restricting access to space segment. If anything, some regulatory authorities have created conditions of unfair competition by restricting the market to a small number of VSAT operators, and denying end-users the possibility of obtaining their own licences.

•  Private networks do not represent any competitive threat for public fixed or mobile services;

   

  The only serious concern that the liberalisation of private VSAT networks therefore need present to regulators is to ensure that the process for their approval be as open and lightly-regulated as possible. Unfortunately, such an open approach has only sparingly made gains against the more widespread perception held by many individual regulators entrusted with deregulation, that private VSAT networks must be treated with as much scrutiny as fully-fledged universal service public telecommunications services. Indeed, applications for authorisation to install and operate a private VSAT network, serving one company, often take as much time to be processed as it takes to grant a licence to an entire cellular network. Disturbingly, this narrow-minded and heavy-handed regulatory view is often exercised in plain defiance of clear & governing legislative goals to the contrary.

II Formal Barriers

Africa has yet to produce a single fully deregulated policy in respect of private VSAT networks. Where deregulation of private networks has occurred, it is dogged by a number of enduring restrictions.

A. Denial of Voice Transmission

The most common restriction is the denial of voice transmission. Despite the chronic and demonstrated failure of national operators over several decades to live up to their own conditions of licence and provide such service to corporations, the national operator's unwarranted monopoly over voice transmission continues to be perceived in many quarters as a birthright vital to the national interest. However, some countries have been allowing end-user licences with no voice restriction for several years. Foremost among these is Senegal. There is no evidence that this liberalisation has harmed the national operator - indeed, it has happened during a period in which the national operator has been expanding, rolling out a cellular network in the face of competition, and successfully attracting investment to privatise. Senegal's example has been followed by Guinea, which in 1997 adopted a set of regulations allowing end-users to obtain data and voice private networks with international transmission rights. In addition to countries that have adopted similar liberalised regulatory frameworks, an increasing number of national operators are now allowing private VSAT networks to function under their authority, despite retention of a formal monopoly.

B. Limiting Private Networks to Domestic Use

This restriction makes a mockery of any purported liberalisation policy of private VSAT networks, as one of the main benefits, and use, of private VSAT networks is to link facilities across extensive geographical distances, typically in different countries. Barring international use is therefore nearly equivalent to disallowing private networks entirely. Even banking institutions, whose networks of branches within a country make them a natural user of domestic networks always require an international connection to process electronic transfer transmissions. Allowing domestic networks only is thus an expedient allowing an administration to lay a claim to liberalisation without actually modifying the basic regulatory framework. Kenya is an example of a market that has purported to liberalise VSAT services without actually taking any effective deregulatory measures. In April 1999, the Government of Kenya issued its Telecommunications and Postal Sector Policy Statement. On VSAT services, it contains the following statement:

The Government of Kenya intends to liberalise the supply and installation of VSAT terminals. However, VSAT services will be restricted to national and intra-corporate data traffic within national boundaries. The carrying of public voice services on VSAT will not be authorised in the interim period. Consequently, only Telkom Kenya and operators of long distance and international services, when licensed, will be authorised to operate VSAT hub (sic).

Indeed, the only liberalisation measure contained in the Kenyan policy is allowing the sale and installation of VSAT equipment by suppliers other than Telkom Kenya (which previously had a monopoly on same). Actual operation continues to be reserved to Telkom Kenya. In practice, this signifies that there is no opening up of the market as it has always been possible to enter into an agreement with Telkom Kenya for the operation of a private VSAT network, but not to establish one independently. Quality of service and reasonable pricing thus remain elusive. On the surface, this is reminiscent of the Ghanaian experience. In 1997, Ghana initially opened up its own VSAT sector, limiting networks to domestic transmissions. However, the reality on the ground was that due to competition between the two national operators in Ghana, private network users were in a position to enter into commercial arrangements allowing for international transmission. This flexibility greatly enhanced possibilities for corporate users, and the National Communications Authority in Ghana soon thereafter further liberalised its policy by allowing licences for international data networks.

C. Forcing Transmission Through the National Hub

Throughout the 1990s, many national operators in Africa attempted to upgrade their network, and the range of services they could provide, by installing large-scale, expensive VSAT hubs, and leasing a large quantity of bandwidth from Intelsat. Due to poor training, delays in implementation, technical inadequacies of the VSAT hub for several of the services it purported to provide, and a number of other reasons, those efforts proved largely unsuccessful. For example, a report published in 1998 estimates that Telkom Kenya spent some US$2,000,000 on installing a VSAT hub from 1992 to 1997, but that over 93% of the transponder capacity was unutilised.

Despite the failings of such projects, or rather in part due to those failings, subsequent liberalisation policies often attempt to force users to route their private network transmission through the national hub, regardless of the technical or financial disadvantages this entails. It is not commercially or technically reasonable for end-users to route through a national hub for at least two reasons. First, the advanced state of current VSAT technology allows end-users to transmit direct from the antenna on their premises to the satellite. Forcing transmission through an additional point, such as an unrelated national hub, adds a "hop" to the transmission, and reduces the quality of transmission. This can result in less-than-optimal data transmissions, and degrades voice transmissions. Further, the national hubs do not necessarily have the bandwidth management equipment to allow for the end-user to select the best mode of access to the satellite. Second, using additional facilities imposes additional costs on the end-user that are simply unnecessary. Finally, it means end-users cannot rely on one service provider for quality of service, as there might be the service provider responsible for the end-user's equipment, as well as the national operator's engineers, responsible for the hub. In case of a system fault, it is much more difficult to resolve the problem.

While the number of countries requiring routing through a national hub is steadily dwindling, there are other examples. For example, South Africa requires transmissions to transit through Telkom hub. This restriction is mitigated by the fact that Telkom SA's monopoly in the field is scheduled to end in May 2002. Most other jurisdictions that allow private VSAT networks have now dropped the requirement of transiting signals through the national hub.

D. Allowing End-User Licences, But Not Operator Licences

Most countries that now allow private networks have regulations allowing for both end-user and operator licences, thus allowing for the full range of services possible with VSAT networks. Zambia opened its market in this respect as early as 1994 , followed by Côte d'Ivoire in 1995 and, more recently, Mozambique, in 1999 .

However, a small number of countries have more timidly approached the issue, some allowing operator, but not end-user licences. Others, end-user but not operator licences. This restriction is aimed at allowing users to install their own private network, but not to allow operators to set up their own hub and provide private network services. The regulatory objective here is to allow some liberalisation, while limiting the progression of services and controlling each new network installed. Yet it is not clear why some jurisdictions have essentially chosen to allow private VSAT networks, yet at the same time interfere in the market by freezing operators out. Such a policy results in needless regulatory delay and cost to end-users, each of which must go through the application process, which can last from several months to a year. It also increases the cost of service itself, since each end-user must acquire the entire range of equipment needed for a self-standing private network, rather than use private services off a hub run by an operator.

E. Allowing Operator Licences, But Not End-User Licences

This situation only exists in a minority of situations in Africa, such as Botswana, Morocco and Uganda. This approach is predicated on the notion that consumers require protection against the unavailability of service that can result if operators fail commercially. This is arguably a reasonable safeguard in the case of services intended for the general public - such as fixed or mobile services - where operators are required to invest very substantial amounts, and incur service provision obligations to span up to a decade. While the failure of such operators may theoretically result in areas being unserved or under-served, the main driver behind the restriction of operators in this area of service are the public operators themselves, who would otherwise not risk the large investment required. In the case of private VSAT operators, this only results in creating an oligopoly between the few service providers licensed to provide service, with resulting poor quality and high prices to consumers, who are thereby deprived of using the service provider of their choice.

F. Denying Connection To The Public Network

Some jurisdictions theoretically allow connection to the public network, for additional licence fees, although in practice this concession is very difficult to obtain. As private networks are primarily intended for intra-corporate communications, this has not been a major concern for end-users.

The restrictions mentioned above are official policy restrictions. It must be added that unofficial restrictions almost as a matter of routine impose additional burdens on users and operators of VSAT services. These include lack of transparency, inefficiency in processing applications, failure to adopt regulations specifying the manner in which general legislative principles are to be applied (thus leaving decision-making to the arbitrary of individual regulators), and disregard for the rule of law. Finally, the cost of VSAT licences has come down to commercially reasonable levels throughout a majority of those countries in which they are available grant them. Nevertheless, there remains a clutch of countries whose national operators claim astronomical costs for VSAT authorisations, effectively stifling use of VSATs.

Nevertheless, it should be said that a majority of African jurisdictions have by now implemented some form of liberalisation, perhaps the most common being the authorisation of private VSAT networks restricted to data transmission.

III. Conclusion

Formal regulatory barriers to private VSAT networks in Africa are gradually being replaced by a patchwork of liberalised policies. However, the diversity of approaches, the unavailability of transparent and consistent criteria for licence-granting, and outright formal restrictions of various kinds that continue to apply oblige both end-users and service providers to arm themselves with expertise in the area, as well as resources of cost and time.

This is unfortunate not only for consumers who wish to have access to improved telecommunications services. It is also a serious drag on the resources of regulatory authorities. Obliging regulators to police a patchwork of formal barriers to entry prevent them from devoting scarce resources in human and financial resources to larger issues in telecoms development, such as fixed and mobile public networks. Given the ease with which private networks might be deregulated, for example by allowing operation of such networks simply on registration and frequency coordination, it is to be hoped that policy-makers throughout the continent will act to remove remaining red tape strictures.

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