Expanding access to affordable and reliable ICT Infrastructure and services

Alison Gillwald, Executive Director, Research ICT Africa,

Professor, University of Cape Town Mandela School of Public Governance

ld

1

Linkages between affordable access and prices, quality of service, and network investment in Africa

§ Accuracy of Internet penetration data/ devices data

§ Barriers to take up vs use

§ Problems with assessing affordability of price of GB as percentage of GNI per capita

§ Problems of assessing price without licence obligations/coverage/quality of service

§ Awareness of cost drivers and urban rural differentials

§ Need to support operator transition from voice to data with financial service revenues

§ Embracing OTT in mobile ecosystem and achievement of national objectives

§ Certain environment for network investment, regulation of dominance in markets with out killing golden goose.

§ Dangers of instrumental competition regulation in complex adaptive Internet environment.

§ Alternative access strategies.

Supply vs demand-side indicators: What’s the story?

v Active SIMS vs Unique subscribers.

3

87 8479 78

74

63 5949 48

40

80

147

10799

136

83

72

58

75

52

0, 00

0, 50

1, 00

1, 50

2, 00

2, 50

3, 00

3, 50

0

20

40

60

80

100

120

140

160

Kenya Sout h Af ri ca Lesot ho Senegal Gha na Ni ger ia Tanzani a Ugan da Rw anda m ozamb ique

RIA ITU Mea n SIM ca rd o wnership

v Disaggregation by gender, income, education, location.

Nationally representative surveys of ICT access and use by households & individuals aged 15-65; In 16 developing countries; Data represents 30% of the global population; 28,900 face-to-face interviews; +/-3 margin of error

Mobile phone ownership, Internet use tracks GNI per capita

5

Gender gap in Internet use also track GNI

6

Internet divide greater between urban and rural areas

7

8

Table 6: Barriers to Internet use

No access devices

Don’t know what the

Internet is

Don’t know how to use the Internet

No interest/not useful

Too expensive

Ghana 22% 14% 9% 2%Kenya 21% 27% 12% 26% 4%

Lesotho 13% 53% 13% 13% 1%Mozambique 76% 14% 3% 1%

Nigeria 13% 40% 22% 10% 4%Rwanda 42% 9% 3% 4% 33%

Senegal 16% 50% 13% 9% 1%

South Africa 36% 9% 16% 15%

Tanzania 64% 1% 13% 15% 2%Uganda 51% 23% 12% 4%

Major barriers to adoption in rest of Africa is lack of power

Transition from voice to data supported by other revenue streams such as mobile money

Financial inclusion

9

ACTiviTiES ON THE iNTErNET 98

initiatives that rely on mobile phones to provide financial, healthcare, agricultural, government and other services14.

Mobile phones today enable consumers to use them to access bank accounts, transfer money and make and receive payments, and perform other financial operations. The most common form of mobile banking in Africa is mobile money services, commonly referred to as M-Pesa in Kenya. Mobile money has improved the degree of financial inclu-sion in Africa by allowing people to transfer, save and pay bills using their mobile numbers as their account without the requirement to open a bank account15.

Mobile money has become a thriving business in Africa, which has the highest levels of mobile money penetration in the world16. The 2017 RIA After Access Survey shows that 22 percent of people aged 15 years and above use mobile money services in the surveyed countries. The survey shows that, while most people in Africa do not have a formal bank account (67%), the use of mobile money services has contributed significantly to financial inclusion in the region, especially in Eastern African countries (Kenya, Rwanda and Tanzania). Accounting for the use of mobile, the survey shows that 45 percent of those aged 15 and above in the surveyed countries

Figure 26: Account ownership in seven African countries Source: RIA After Access Survey data, 2017

14. Aker, J.C. and Mbiti, I. M. (2010). “Mobile phones and economic development in Africa”, Journal of Economic Perspective, 24(3),

207-32. Available at: https://www.aeaweb.org/articles?id=10.1257/jep.24.3.207

Mothobi, O. and Grzybowski, L. (2017). “Infrastructure deficiencies and adoption of mobile money in Sub-Saharan

Africa”. Information Economics and Policy, 40©, 71-79. Available at: https://www.sciencedirect.com/science/article/pii/

S0167624516301342

15. Fanta, A.B., Mutsonziwa, K., Goosen, R., Emanuel, R. and Kettles, N (2016). “The role of mobile money is financial inclusion

in the SADC region” Finmark Trust, Policy research paper No.3/2016. Available at: https://www.finmark.org.za/wp-content/

uploads/2016/12/mobile-money-and-financial-inclusion-in-sadc.pdf

Olinto, P., Beegle, K., Sobrado, C. and Uematsu, H. (2013). “The State of the Poor: Where Are The Poor, Where is Extreme Poverty

Harder to End, and What is the current profile of the World’s Poor?” The World Bank. Available at: http://siteresources.world-

bank.org/EXTPREMNET/Resources/EP125.pdf

16. GSMA (2017). “Mobile Money Economy”. Available at: https://www.gsmaintelligence.com/

research/?file=7bf3592e6d750144e58d9dcfac6adfab&download

0

22,5

45

67,5

90

Kenya South Africa Ghana Tanzania Rwanda Nigeria Mozambique

Bank and mobile money account Bank account Mobile money

13

3

26

45

54

8

83

13

40

30

14

29

60

34

18

3338

46

5858

85

Smartphone penetration aligned with Internet penetration

10

Figure: Smart phone ownership in Africa

Financial inclusion

11

Cost drivers • High rand-dollar exchange rate- Which affects equipment importrequired for the constant upgrading of mobile network.

• Increasing costs of key inputs - power in particular has inflationaryeffects on data prices

• In the absence of high-demand spectrum being released tooperators for 4G: high bandwidth services are also not being deployedin the cost-effective manner which further exacerbate the high cost ofdata.

• Regulatory issues: failure of NRAs to undertake market review todetermine dominance in wholesale markets, which is highly imperfect bynature, does not produce the intended competitive results – wholesalefacilities and IP transit costs result in high telecom input costs for serviceproviders and corporates

• High secondary taxes excise duties: High taxes on profits preventreinvestment in networks; social networking taxes reduce use, revenues,profits and company taxes.

International bandwidth and national transmission

❖ International bandwidth prices plummeted as result of undersea cable competition

❖ considerable backbone and backhaul investment over the past decade, providing significant cross boarder coverage in the continent and especially in continguousmarkets (competitive advantage)

❖ Supplemented by recent expansion of fibre networks in larger metropolitan areas and complementary investments in secondary intercity routes (high levels of redundancy in some markets but no new investments in five years in Nigeria other than spectrum auction with only one bid.

❖ Little support for operators in transition to data only environment.

SA’s Cheapest 1GB data Compared to Africa’s cheapest countries

USD 1,13

USD 1,25

USD 1,49

USD 2,08

USD 2,23

USD 2,23

USD 2,28

USD 2,37

USD 2,40

USD 2,46

USD 2,68

USD 2,75

USD 2,79

USD 8,28

0 2, 25 4, 5 6, 75 9

Egypt

Namibia

Mozambique

Tunisia

Tanzania

Guinea

Sud an

Rwand a

Brundi

Ken ya

Ghana

Uganda

Nig eria

So uth africa

Source: RAMP Index, 2018

❖ Though this is not how data is used in pre-paid markets – very high value low cost products that make ‘effective’ price much lower

❖ But best value in >10GB products and post-paid products that are the best value but not affordable to majority of citizens – ‘poverty premium’

❖ Affordability measures of price as percentage of GNI per capita mask inequality – many countries have hit affordability barrier on devices and services in terms of use – SA 50%, Kenya, Nigeria, Ghana around 30% but Rwanda and Mozambique 10% and Uganda 15%

Measuring prices, affordability, against access

In a regulated data environment a number of other important factors that have to be considered when comparing price

Prices vs quality of service

❖ Licensee obligations – coverage, quality of service❖ And progress towards policy objectives - policy outcomes ❖ QoS – increasingly important in broadband environment -

QOS flip side of price.❖ Penetration (access)

❖ Usage (intensity of use)❖ Quality of service❖ Even price sensitive users choosing to pay premium for quality

services (or just to get signal in their area).

Download speed in ZA vs Rest of the World (Speedchecker)

vSouth Africa performswell in comparison toother African countries.

vdownload speeds inSouth Africa have beenimproving due toinnovations andtechnologicaldevelopments.

v A development whichcan be associated withinvestments bytelecommunication

Efficiency, innovations vs consumer welfare

❖ What is clear is that we need even greater regulatory agility and insight to manage tensions between the policy objectives of competitive efficiency, innovation and consumer welfare.

❖ Where no pricing pressure in competitive markets more effective regulation of wholesale access rin market in which operators are dominant could reduce the cost of broadband not only for individual users but as a critical input into other sectors of the economy.

❖ It is clear that even cost-based prices based on existing business models, licensing frameworks and spectrum valuing and use are not going to be affordable for large numbers of Africans that are currently offline.

❖ Interventions that would reduce prices, enhance quality, improved e-literacy and develop local content would all bring online those who are currently marginalised from services, women being in the majority.

Even if there was effective regulation and prices were cost based largely numbers of people

Alternative access strategies

❖ Review all national licensing, spectrum and USF models and strategies –develop alternatives based on realities of extreme inequality;

❖ create incentives for infrastructure-sharing and support complementary investments in broadband networks;

❖ enable public and private extension of free public Wi-Fi to towns and rural with the connection of all public buildings;

❖ more optimal co-existence of licensed and unlicensed spectrum that will optimise spectrum for diverse needs in the country;

❖ secondary use of spectrum should be made available which can be delivered at a fraction of the price of GSM technologies;

❖ ICASA must assign licensed spectrum required for the evolution of existing services at a competitively determined (efficient use) price to ensure the build-out of capital-intensive networks (with spectrum trading to correct value/use errors);

❖ nationally allocated spectrum not in use in should be made available through low cost or licence-exempt spectrum for communities, non-profit providers or micro-networks; and

❖ create incentives for infrastructure-sharing and support complementary investments in broadband networks.

Research made possible through the support of

20

See Gillwald, Mothobi & Rademan. 2018. State of ICT in South Africa, available at www.researchictafrica.net, or electronically here