Rules for NGN? ITU March 2006 Challenges of NGN regulation for developing countries: a perspective from South Africa Alison Gillwald LINK Centre Graduate School of Public and Development Management Witwatersrand University

Rules for NGN? ITU March 2006 Policy and regulatory legacies –Failure of privatisation with extended monopoly of fixed line network as universal service strategy Optimisation of state assets Structural conflict of interests in institutional design Commitments to incumbent created regulatory risk for others negatively impacting on further investment Failure of retail and access regulation – institutional capacity – perverse incentives of vertically integrated incumbent Institutional capacity, classical information asymmetry, structural conflict of interest = unaffordable basic service Universal Service Agency and Fund Little fixed extension – high wholesale and retail penetration –Legacy policy and regulatory framework for NGN?

Rules for NGN? ITU March 2006 Outcomes Population 45 million GDP $13000 pa Fixed – < than 5 million 20% of household Mobile – 20 million 30% of households –but voice substitution only – very low ARPU Payphone usage >70% in last three months Internet – 5% of households PC ownership <20% 80% of ISP costs go to Telkom ADSL – (2005) Likelihood of NGN > digital divide unless innovatively implemented? Source: LINK Centre SA Sector Peformance Review 2004, RIA! Towards an African e- Index

Rules for NGN? ITU March 2006 Fixed tariffs vs subscribers

Rules for NGN? ITU March 2006 SA Sector Performance Review, 2004http://link.wits.ac.zahttp://link.wits.ac.za

Rules for NGN? ITU March 2006 Questions on reform outcomes Competition vs. universal service model? –Market inefficiency vs market failure Sequencing of liberalisation? Infrastructure based competition – PSTN & Mobile & Multimedia (broadcasting signal distributor) –Bottlenecks »International submarine cable »Local loop Under Serviced Area Licences? – Disenabling regulatory environment – reject asymmetrical termination regulation. –Limited state support – little technology or business innovation eg. WBA –Licensing delays – last to market – no business case – high cost GSM franchisees

Rules for NGN? ITU March 2006 Electronic Communications Bill No policy framework/vision - assumed consensus Continued tension between industrial policy, social development, innovation, entrepreneurial 2004 Ministerial Policy Directives – claw back on self-provisioning by VANS Although talk of horizontal licensing to better reflect better NGN networks Enable convergence but in context of ‘managed liberalisation’ (vertically integrated silos) Some gains –class licences and exemptions –essential facilities (international) and obligation to regularly review –Carrier pre-selection –Forbearance on SMP to promote fibre investment in greenfield residential loops and sub-loops –ULL Over 200 regulations and re-licensing - capacity to implement?

Rules for NGN? ITU March 2006 Arising NGN issues Lessons for developing countries unable to privatise? No legacy network to speak off, competition or structural unbundling? Competition to increase quality and quantity of service as better price but likelihood of > digital divide? Open up competition with more effective use of USF for network extension? –Self provisioning – not just service providers but communities and individuals (FIFM) –WBA –PLC –IPTV

Rules for NGN? ITU March 2006 Critical issues Interconnection and facilities leasing –Costs – zero/low cost termination? Access to essential facilities (non-replicable assets) – international and local Migration,market segmentation for SMP Structural separation of vertically integrated companies (BT Open Reach)? Institutional capacity and political (as well as policy) constraints/vested interests.

Rules for NGN? ITU March 2006 Resources and contacts LINK public policy paper series Towards and African e-Index: Access and usage in 10 African countries