[kictanet] flashback.... OFC debate

Tue Apr 17 07:58:07 EAT 2007

 hi,
here are some issues raised during the OFC discussion, a full report will be uploaded once the site becomes fully operational....

KICTANET facilitates OFC debate 

 “The government is only facilitating, the owners of the Optic Fibre Cable (OFC) will be the private sector,” said Bitange Ndemo, Permanent Secretary, Ministry of Information and Communication. “Governments must design and implement regulation based on the needs of a particular country and its peculiar historical or other circumstances, of course tending towards best practices,” said Joseph Kihanya, a lawyer. 

“Will all this fibre talk translate to real
consumer cost savings or are they just the usual public marketing of the
wonderful world to come?” asked Alex Gakuru

 These are some of the comments that came out of the two week online discussion on the OFC facilitated by KICTANET. The online forum was calculated to encourage stakeholder input to the OFC debate, analyze the advantages and the concerns of the various sectors. There were contributions from government, private sector as well as academia. The discussions were divided into five themes; Why OFC?, existing business models for OFC provisioning, existing/appropriate regulatory models for OFC, best model (business and regulatory) for East African, projected impact on stakeholders, reconciling stakeholder  Why OFC? OFC has been described as the solution to high cost of international Bandwidth. According to Information and Communication minister, Kenya will be in a position to attract ICT business and compete with countries like India, once the cable is in place.  Once the whole country is linked via a backbone, then rural areas can conduct business online locally and
 internationally. For instance, the coffee societies licensed to market their coffee can easily sell their coffee directly without coming to Nairobi or other major towns. In the region, OFC will make easier and cheaper to communicate and share information. Uganda and Ethiopia have already laid their cable, expected to connect through Kenya to the world. With the backbone, the banks and other regional businesses can use the same network for transactions.   Existing Business Models Three models persisted throughout the discussion, namely, Open Access (EASSy), Private-led (Flag), and the Consortium models.  There was lively discussion about separation of Cable ownership from Cable Management which fits squarely with the Open Access thinking, whereby, the investors in the cable (Govt, Public, Private Companies) appoint an independent management agent (at a fee) to operate the cable on their behalf on a cost-recovery, open access basis. I.e. open to current and future operators
 wishing to connect to the landing points or invest further in the cable on equal basis.  In this case, the cable becomes an essential service or public good, from where operators can compete to offer (other) services at a Profit. Flag- a Private Investment initiative has a variant model where the cable is –privately owned but promises to open access to the landing points - but aims to maximize returns on the investments made on the cable         infrastructure by reselling capacity at market rates.  They also aim to play only at the infrastructure level, rather than at all levels, namely Infrastructure (cable) and services (network and application), opting to leave that to ISPs and ASP (Application Service Providers). The consortium model was not heavily advocated for but there were suggestions that it can operate if commercial interest are let loose to play dynamically with the market forces.  The consortium model is where a group of operators get into a private,
 closed,Commercial agreement to build, own and operate a submarine cable with aim of maximizing their returns (profit) in the shortest time possible. The question of short term investors has been a bone of contention with arguments that in the end, consumers suffer once investors get their profits and pull out.  The short-term interests of investors must be balanced against the long-term social benefits that would accrue from an affordable bandwidth provisions. Discussants asked for the regulator should flex their muscle once the OFC is laid-out.  The major financing option was by way Initial Public Offer (IPO) other financing models (Equity, Debt, etc) were not thoroughly discussed. Existing/appropriate regulatory models The overriding argument was that the government should relax its oversight role to allow business to operate with some elasticity. In this relaxed role, the government would maintain the role of regulator e.g. the way governments of other fledging
 economies such as South Africa, Singapore and Malaysia maintain a subtle oversight role. However, the role of government as the regulatory authority was underscored as the balance between investor interests and the consumers.   Why is regulation in telecommunications important?It authorizes new operators, removes barriers to entry, mandates interconnection between players, and oversees the penetration of services in areas that commercial imperatives would not allow or pursue because of minimal profits. Transparent telecommunications will regulate mainly by promoting efficient supply of services, providing an enabling environment for the maintenance of efficient pricing, Protect consumer rights/privacy rights and facilitate interconnection thereby efficient use of communication services. Deregulation was discussed as a theme that is in play in most countries that have achieved above optimal competitive markets. The case of the UK under the Communications Act 2003 was given
 as an example. Though there is no direct call for deregulation in the draft ICT bill CCK was suggested as a proper authority that could maintaining industry specific competition principles and statutes for the telecommunication sector. Regulation for the OFC may be through the competition framework under the CA (1998) or the ICT bill (2006). Complete lack of regulation may therefore not be an option given the circumstances.The WTO and the ITU also anticipate regulatory oversight given the various international documents that Kenya is signatory to.  Projected impact of OFC It was unanimous the OFC will boost connectivity and lower the cost of bandwidth. With faster internet, it will be easier to carry voice, data and images via internet protocol. The issue of local content raised great concern with arguments that Kenya imports 99 % of the content. The implication will mean that people will have to develop content that suits them instead of copying what is already available
 elsewhere. With local content, the internet industry will employ more people to keep updating the content as well as offer services and goods via the internet.

It was felt
that regardless of the OFC that will be adopted, benefits might not be
maximized due to prevailing market structures. Roland Alden (2006) argues that
our current market (regulatory) structures have not adapted to the realities of
a converged market and therefore continue to constrain the potential benefits
that OFC may bring about. 

In his
extensive writing on telecommunications, Roland contends that networks require
capital investment, customers who can support that investment, and a clear
regulatory environment that is not disruptive or counterproductive. In Kenya, all
three inputs have been in short supply.

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