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The Death of Telecoms Regulation in Ghana: Poor policy direction towards 4G Licensing and LTE Evolution

Can’t the telcos survive without 4G licenses? The answer is a big NO! The future is Big Data and they need the 4G license to stay in business!

By Franklin Cudjoe | Commentary 0124 |  IMANI 

Does it make sense to invite Telcos along with foreign capital into a market with the prospects of growth only to limit them to 3G licenses when 4G and LTE technology are available to their peers in other markets? And do you wish to throw away almost 20 years of their contributions to the economy of Ghana and then what? Does it really make sense to be championing nationalisation of industry in this day and age because South Africa, has an indigenisation policy?

Answers to the above can only be exacted from a rather lame promise by government in 2013 to reserve LTE license and opportunities thereof to a group of indigenous Internet Service Providers to create some local championship league in the rather serious business of telecoms.   But there is a common strand in all of these- A disinterested regulator.

Already, the regulator, the National Communications Authority (NCA) has severely compromised its ability to be impartial in the affairs of telecoms with its rather illiberal and opaque handling of the Interconnect Clearing House matter, which has become the subject of legislative and judicial enquiry.   It can only get worse.

The NCA’s dogged stance and policy on service evolution licensing means that they have already truncated the ability of existing Telcos to leverage their massive infrastructure base across the country in providing 4G and Long Term Evolution (LTE) service offerings. It is akin to saying that because you own a fleet of Taxis you cannot own a fleet of buses. This means that the nation has already been robbed of new revenue streams that could have accrued from taxes of data services by these companies, whose clients already number millions and have an existing client pool to tap into.

The argument proffered by the NCA in defence of the awards of the 4G licenses leave much to be desired in terms of its own outlook for the industry.  It is dismal and suggests an abdication of duty for an industry that has done so much for the country.  It gets farcical when one thinks the only way to address an average deficit of 32% of 3G penetration by established telcos is to  award 4G licenses to new entrants who have no records of success.  It is common knowledge that whereas the established telcos such as MTN have achieved a 65% 3G roll out within five years at great cost, the new untested entrants having held 4G licenses for almost 3 years have managed an abysmal 0.2%.  Perhaps they realised quickly that they cannot be absolved from the realities of Ghana’s economy- power challengers, arbitrary tax regime, currency challenges and a general unpredictable increases in the cost of doing business.  And yet, these new entrants want to be given additional licenses to hold spectrum capable of deploying 4G services whilst they seek to deny established telcos any opportunity to be part of the 4G LTE revolution and consequently deny close to 22 million registered Ghanaian Sim Card holders the benefits to learn, explore and work seamlessly with improved data penetration.

I thought the NCA should be interested in encouraging telcos in surmounting the numerous competitions from the likes of new generational social media such as whatsapp, Facebook, Skype, Viber etc that already threaten their survival rather than creating crony capitalist schemes under the pretext of supporting local content and industry. Why, don’t telcos pay large taxes, pensions and create value chains and impact millions of Ghanaians? Above all, don’t telcos return a value for your money? Isn’t that the essence of capitalism?

However, some of the telcos qualify, if not all.

MTN for example invested and successfully met all required conditions for a license, and yet with their nationally ubiquitous infrastructure and most favourable bid positioning in terms of value, were inexplicably refused a license. In almost all comparable jurisdictions, 4G licenses are allocated to those who can show value as well as a wide reach potential. For now, Ghanaians might have to wait for years and stay behind the internet distribution curve just because of the reluctance of the NCA to do the right thing and extend the 4G capabilities with the established telcos, at a time when almost all mobile devices produced since 2014 are all 4G enabled.

Poor policy framework and an inquisitor type administration model will not be the solution to Ghana’s growth. Instead of padding up interventions in the communications industry, the NCA will do well to ensure that policies already put in place address issues related to the growth and resilience of the industry, instead of finding ways to police the system and trump up offenses just to justify perceptions of exploitative tendencies by telcos.

The Future is Big Data

Some are asking, can’t the telcos survive without 4G licenses? The answer is a big NO! The future is Big Data and they need the 4G license to stay in business!

You cannot encourage something with one hand and then use your other in appropriating results unfairly. The so called local empowerment of the newly created 4G LTE license holders is laughable at best. The telecoms market is already saturated and they must be helped to sustain their operations and the many livelihoods they touch, not to kill them on the altar of dirigiste economics.

[pullquote]Clearly South Africa is not the way to go. Clearly it has a dysfunctional state affirmative action policy.  [/pullquote]

I have also heard arguments advanced by the leadership of the ICT Chamber to the effect that the home of MTN, in South Africa supports indigenization of business, something akin to nationalisation called the  Black Economic Empowerment (BEE) programme, hence  the need to undertake same in Ghana. It is instructive to know however that MTN in South Africa is the first operator to pioneer 4G/LTE in South Africa and it is currently expanding across the country. MTN has also been granted permission to run 4G in Cameroon. They also have a license to operate 4G and LTE in Benin. Tigo recently launched 4G in Tanzania and Airtel has received 4G license in Chad. Chad, Benin and Tanzania do not compare to Ghana on most development indexes, yet they have been more visionary.

However a deeper reflection on BEE is needed.  The Black Economic Empowerment South Africa adopted in 2003 to create local black South African champions failed miserably as South Africans were soon to learn, all the golden eggs were callously appropriated by a few black elites.  SA’s Black Economic Empowerment (BEE) Commission’s draft charter suggested as an analyst at the prestigious South African think tank, Free Market Foundation identified,   “to redress the imbalances of the past by seeking to substantially and equitably transfer and confer the ownership, management and control of South Africa’s financial and economic resources to the majority of its citizens.”

Despite the introduction of the BEE, many economic analysts have agreed that “unemployment continues to increase at an alarming rate, especially for black South Africans. This means that the implementation of these various government interventions in the labour market has had a negative impact on employment. Many businesses have not expanded because the owners do not want to be bound by the provisions of BEE. Others refrain from increasing their capital and financial transactions to avoid falling within the ambit of the BBBEE Act. In South Africa, 90 per cent of jobs are created by the private sector. “Unemployment has increased, especially for Black people – in 2015, unemployment for Blacks was 39% compared to 8% for Whites, which is an increase from the 2003 levels, which were around 34% for Blacks and 5% for Whites. Temba Nolutshungu, a director at the Free Market Foundation of South Africa has also said “Black action policies already discredited in countries where they have been implemented previously including the US and Malaysia.  These policies have failed to deliver despite their avowed objective of economically empowering the targeted groups.  Instead they have brought about the enrichment of a few politically, well-connected individuals and have failed dismally to empower the genuinely disadvantaged target groups”.

Sadly, the SA government is getting bolstered by the day with several anti-business legislation that will further expropriate property rights.  One such bill currently being contemplated by the SA government is what has been misleadingly characterised as “Protection of Investment Bill”. Analysts have been quick to notice the contradiction with existing trade enhancement legislation.

“South Africa cannot afford the proposed Investment Bill. It puts at risk new foreign investment from the Western nations that are the country’s main investors. It also breaches South Africa’s legal obligations under a binding Trade and Investment Protocol adopted by the Southern African Development Community (SADC). In addition, the Bill’s wording is often too vague to pass constitutional muster, while the consultation process around it has been too short”, said Dr Anthea Jeffery, Head of Policy Research at the IRR (Institute of Race Relations), at a Free Market Foundation media briefing on 27 October.

The Free Market Foundation reports that “The misleadingly named “Protection of Investment Bill” is likely to destroy foreign investors’ already fragile confidence in the country. This in turn is likely to deprive South Africa of the additional foreign direct investment (FDI) vital to both growth and jobs. “Without a complete rewrite to align the Investment Bill with the SADC Protocol, which is binding on South Africa and cannot simply be ignored, Parliament should reject the Bill”, said Jeffery.

Unlike the Investment Bill, the SADC Protocol complies with international best practice in that it:

•    protects foreign investors against nationalization and expropriation (both direct and indirect),
•    guarantees market-value compensation, and
•    gives investors the right to take disputes to international arbitration.

By contrast, the Investment Bill allows international arbitration only with the South African Government’s ‘consent’, making this a meaningless ‘right’. It also fails to provide any clear protection against expropriation – and especially against expropriation of an ‘indirect’ kind.

Indirect expropriation occurs where the Government does not take ownership, but its regulations nevertheless deprive investors of many of the powers and benefits of ownership. Indirect expropriation will occur, for example, if the Government demands that foreign companies transfer 51% of their equity to South Africans. Such a demand is already evident in the Private Security Industry Regulation Amendment (PSIRA) Bill of 2012, that has been adopted by Parliament but has yet to be signed into law by President Jacob Zuma.”

Clearly South Africa is not the way to go. Clearly it has a dysfunctional state affirmative action policy.

 We can have a conversation in Ghana by asking the Telcos to list on Ghana’s Stock Market instead of what looks like a reintroduction of nationalization.  There are many sectors dying for investments like agriculture and all those purporting to help the local economy should go invest in agriculture and leave the overly saturated and beleaguered telecoms industry alone.

Franklin Cudjoe is President and Founder of IMANI Center for Policy and Education. 


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