François Dugué Issue: AME 2013
Article no.: 5
Topic: IP Convergence and Regulation – the battle over the first mile
Author: François Dugué
Title: SVP, Strategy & Development
Organisation: Global Voice Group S.A.
PDF size: 364KB

About author

François Dugue is the senior Vice-President, Strategy & Business Development, at the Global Voice Group (GVG).

Prior to working for GVG, Mr. Dugue was Vice-President and founder of InterSat, a satellite broadband provider servicing Latin America, Caribbean and Africa. He was also the founder of ILSI, a Miami-based IT company. Mr Dugue is also Senior Telecom policy advisor for the telecom regulator of Rwanda, Tanzania, Ghana, Guinea, Congo and Suriname.
François Dugue graduated from the University of Haiti where he studied electrical engineering..

 

Article abstract

With more than 700 million subscribers, GSM operators in Africa can be proud of having developed the world’s second largest mobile market, after Asia. Beyond those figures, the African ingenuity also contributed to the evolution of mobile telephony, by developing innovative services such as M-Banking, which stimulates the local economy and promotes the economic integration of a growing number of Africans. Furthermore, as the GSMA likes to shout it from the rooftops, said GSM operators are among the biggest taxpayers in Africa, we can understand why so many African tax and regulatory authorities are stepping up and upgrading their capacity to control and audit the complex revenue streams of the telco operators.

 

Full Article

Pay-per-use Bonanza
In Sub-Saharan African countries, entire streets lined with stalls selling prepaid phone cards are a common sight. Although such pictures are now very familiar for Africans, they often surprise Westerners getting off the plane in Conakry, Lomé or Monrovia, to such an extent that they may have the feeling they are entering the kingdom of mobile telephony.

With more than 700 million subscribers, GSM operators in Africa can be proud of having developed the world’s second largest mobile market, after Asia. Beyond those figures, the African ingenuity also contributed to the evolution of mobile telephony, by developing innovative services such as M-Banking, which stimulates the local economy and promotes the economic integration of a growing number of Africans. Furthermore, as the GSMA likes to shout it from the rooftops, said GSM operators are among the biggest taxpayers in Africa, we can understand why so many African tax and regulatory authorities are stepping up and upgrading their capacity to control and audit the complex revenue streams of the telco operators.

In the light of such an assessment, what can one expect from the future?

The new business landscape
One could talk for hours about the various possible scenarios, but the most important and radical factor for change remains without a doubt the rapid advent of next-generation networks, through the development of fiber optic everywhere in Africa. While several African markets have not yet reached maturity, thus displaying penetration rates below 50 or 60 per cent, the arrival of 3G, 4G and mobile Internet is about to changes things radically.

The editors of this magazine are wondering, and quite rightly so, whether the battle for subscribers may have already been lost and whether one should not rather talk about a battle for access. In fact, a deep transformation of the telecoms market, based on new rules dictated by consumer demand, convergence technology and Internet business practices, has started in Africa.

At first sight, individual African subscribers seem to be coming out as the winners. Via their Smartphones, they can now access the Internet and become content, applications and services consumers in the huge virtual supermarket that the worldwide digital network has become. They have the possibility to replace services that were previously invoiced by the minute or by the unit, such as voice calls or text messages, with their cheaper and better – if not free – OTT services.

However, collectively, this rapid evolution has important economic, commercial, cultural and regulatory implications for the African continent.

Securing the value of the ‘first mile’
The problem of the ‘last mile’ in Africa is not as crucial as it was ten years ago, when the main technical and financial challenge for GSM operators was to enable the connection of the local subscribers’ villages or neighborhoods to a specific network. Now, the new challenge is the ‘first mile’, i.e. the mobile points of access from which these subscribers can connect to a network to access the Internet wherever they are.

Telecom companies have heavily invested in broadband coverage in Africa. It is not unusual to see all the major operators offer nationwide 3G, 3.5G or even 4G networks African countries. With the competition waging for new consumers, the very same operators who feared competition from Skype, Apple and other Internet giants yesterday, are now trying to capitalize on the consumers’ demand for over-the-top services in order to retain existing subscribers and increase their customer-base. It is now common to see these operators offer Facebook, Google or Apple Store for free to the customers who maintain a minimum ARPU.

Who will control the ‘first mile’ and benefit from it the most?
With Direct Operator Billing (DOB), African operators try to strengthen their control over the ‘first mile’. DOB is the new slogan used by many of them to tell the OTTs that this ‘first mile’ belongs to us”. After all, they still possess the subscriber relationship and, with DOB, they also process the billing for the access to OTT services.

In a telecoms market that is characterized by convergence, however, operators increasingly play the part of a communication channel between their subscribers and the content providers on the Internet. And yet, these content providers, which are mostly controlled by American interests, offer and sell their services outside of the national jurisdictions where the operators and their subscribers are established. They thus evade the local tax administrations, and their commercial activities result in the expatriation of a growing portion of the revenue generated by the telecoms sector.

The Decline of traditional voice revenue
On a global scale, the traditional voice traffic constantly loses ground to the advantage of VoIP. Ironically, OTTs enter in direct competition with traditional operators on the very lucrative call services market, by ‘borrowing’ their networks. Some European telecoms giants, in particular, suffer significant losses in terms of turnover. For these multinationals, Africa still represents an interesting growth potential, insofar as the mobile markets of several African regions have not yet reached their saturation point. However, in Africa as elsewhere, the voice traffic has been losing its value and the operators’ margins have kept on decreasing.

Internet giants such Skype, Google, Talk, Facebook, AppleStore, VisaMobile, and Amazon no longer hide their game. Having built a global community of people who are not mute and deaf, they have clear intention to provide their own proprietary and subsidized devices to the network operators. It is also clear that all these devices will offer voice services, thus replacing traditional voice services.

WCIT-12 – ‘You are on your own’
At the WCIT-12 in Dubai, the member states of the International Telecommunication Union did not manage to reach an agreement on the inclusion – even though symbolic – of the Internet in a new treaty on international communications. The countries that opposed this inclusion, led by the United States, dealt with the issue as though telecommunications infrastructures on the one hand, and the Internet on the other hand, were two separate worlds that could not in any way be subjected to the same governance rules and principles. But, in fact, these two worlds meet and merge within the technological convergence, and the second is about to impose its rules onto the first.

The WCIT-12 did not deliver any solution to the market globalization. Each regulatory body and each network have the responsibility to control their own telecom borders. The message from Dubai is clear: “You are on your own.” The global Internet supermarket is open for business everywhere.

This time around, a lot of African governments are creating their own Revenue Assurance Departments, using ICTs to implement traffic monitoring and fraud management systems. There is a rush for all regulators to build data centres and acquire new data mining tools for IP traffic, because the business landscape is changing rapidly in Africa.

Overall, African countries are seeking ways to make the best of the new IP interconnected world. In that respect, consolidation of the IP traffic through regional Internet hubs imposes itself as the only means to achieve this goal.

Fostering and harnessing IP convergence
With the liberalization of telecoms in Africa, States have had to implement regulations and to create regulatory agencies in order to ensure that the sector could develop while respecting the economic, social and fiscal interests of each nation. These efforts geared toward good governance recently culminated, in several African countries, in the adoption of modern regulatory tools allowing the States to increase their visibility over the financial, fiscal and technical performances of the sector.

Convergence in Africa undermines this visibility, hard-earned through years of regulatory efforts and technological advances. It also threatens to affect the tax base of African States and, consequently, their capacity to meet the requirements of their socio-economic development, at unprecedented levels. However, convergence has the potential to become a powerful driver for development which will need to be harnessed and planned in Africa, through the establishment of a regulatory framework and the adoption of new regulatory tools adapted to IP.

The debate launched in Dubai is far from closed. The Internet governance issue is more relevant than ever.