It now is widely recognized that access to information and knowledge through affordable communications provides a significant opportunity for social and economic development, regional cooperation and integration, and increased participation in the emerging global information society. Addressing deficiencies in access to low-cost communication services now is regarded as an imperative for improving the quality of life in African communities, especially in remote and rural areas where the bulk of the population still resides.
But Africa is fragmented into many small national markets, and limited economies of scale and low income levels in these markets reduce the ability of telecommunication operators to provide services. Compounded by lack of competition in the sector, this has resulted in low levels of investment in infrastructure. As a result, even where access to information is available, costs often remain extremely high, especially outside urban areas. Although there are a growing number of initiatives to expand terrestrial infrastructure, these efforts usually are confined to major cities and along trunk routes. As a result, the cost of bandwidth for Internet and other services is generally 10 to 100 times higher than in North America or Europe.
Fortunately, satellite technology presents an immediate solution to this bottleneck, even in the vast terrain of rural Africa. The IDRC Pan-Africa Satellite Survey that provides the basis for the report, “Open and Closed Skies: Satellite Access in Africa,” confirms that systems using new high-power satellites make it possible to obtain bandwidth anywhere in Africa about 10 times more inexpensively than in the past.

African VSAT Regulation Today

A growing number of African administrations have begun to implement policies and regulations that seek to open telecommunication markets to varying degrees of competition. These policies are being applied to telecommunication structures that, on one level, have traditionally been remarkably uniform. Without exception, the telecommunications sector of each African nation has been organized on the principle of national operating entities having responsibility for providing telephone service. In some cases, international links were — and in some countries still are — the responsibility of a separate entity. Government ownership of operating entities has been the norm.
In some African countries that have adopted a liberalized regulatory framework, private VSAT networks are allowed to function under the authority of the incumbent operator, while countries that have not adopted reforms still retain a monopoly. There also is usually a limitation on the provision of voice services.
Another common restriction involves limiting private VSAT networks to domestic use only. VSAT network operators may be required to route their private network transmissions through the national hub of the incumbent operator, regardless of the financial or technical disadvantages this may create for private operators. In some cases, obtaining a VSAT licence may require a bilateral arrangement with the incumbent operator with a “landing rights fee” or tariff to be paid to the operator, even if the incumbent does not participate in the service chain. In other monopoly jurisdictions, the incumbent is the only entity that may install and service VSATs or the only entity that may own, operate and maintain satellite earth stations.
A commercial/legal presence is typically required in Africa as a precondition for receiving a license. This can be an obstacle to the effective roll-out of VSAT services, because it increases overhead costs to the private operators and inflates prices to the end-users.
And finally, in a number of African countries, rules are often not transparent and are inaccessible to the general public. The licence application process can be extremely complicated, including processing periods that require up to two years, payment of a wide variety of fees — including additional taxes, annual operator fees and landing rights. Added to licensing fees are customs duties, which often are so high as to prevent cost-effective access to VSAT equipment.

National Experiences in Satellite Regulation and Policy

Three in-depth case studies were conducted for this report. Algeria, Nigeria and Tanzania, were selected because they serve as representative examples of African nations where satellite market liberalization has been — and continues to be — applied in order to promote universal access. In addition, the countries were drawn from the western, eastern and northern sub-regions of the Continent. This demonstrates that this liberalization trend is not confined to a single sub-region and also provides an opportunity to compare and contrast the satellite regulatory approaches being implemented across the Continent. (For full details of the three national case studies, please consult the full report which can be downloaded from www.gvf.org.)
The case studies found that these three countries are on different points of the information and communications technology (ICT) development curve and that the varying levels of progress — particularly with regard to access to satellite-based telecommunication services — are largely attributable to the effectiveness of each country’s policies and regulations.
In trying to compare the license fee burden on VSAT networks in the three countries a hypothetical 100-terminal network was priced according to each country’s license fee structure, assuming an arbitrary monthly revenue or turnover of $200 per terminal over five years. The table below shows that Tanzania’s license fees place almost 2.5 times as much burden on the network than does Nigeria. In Tanzania the fees over the five-year license period amount to over $260,000, or about 22 percent of the five-year operating cost, versus $106,000, or about 9 percent in Nigeria. Algeria’s cost is considerably lower, at about $33,000, but this is likely to increase when licensed VSAT operators are introduced.
Nigeria would be atop a ranking of telecommunications development in the three countries, followed by Tanzania and Algeria. Nigeria’s success largely is attributable to how much further it has progressed in liberalizing and deregulating its market, but the underlying explanation for Nigeria’s progress is the effectiveness of the regulator.
Algeria has begun restructuring its telecommunications sector, but growth of the Algerian ICT market in general has been stalled by an inconsistent regulatory framework. In contrast, Nigeria has seen dramatic growth in ICT investment since 2001, coinciding with liberalization and deregulation of the sector. The regulatory framework already is open, relatively consultative and enabling, and commercial users consider the Nigerian Communications Commission (NCC) to have transformed from a highly bureaucratic organization to one run efficiently along business lines.
Tanzania also has a progressive approach to liberalization and deregulation, but the extent to which the regulator has used licensing to generate revenues has limited local investment, and consequently, development of the sector. The current approach to licensing in Tanzania creates incentives for operators to focus on high-margin, corporate enterprise business to pay their licence fees. Operators do not perceive Tanzania to have an environment that will provide them with a return on their investment and this also explains their reluctance to invest in a local hub. Added to licensing fees are customs duties, which often are so high as to prevent cost-effective access to VSAT equipment.
The case studies also revealed that access to satellite-based services is generally being hindered by lack of knowledge. Broadly, the information requirements suggested by each of the country case studies can be summarized as follows:
â–  Algeria: Support is needed relating to technical considerations (e.g. local VSAT hubs), economic factors (e.g. satellite bandwidth costs) and effective regulatory approaches (case studies of countries that have liberalized the VSAT sector).
â–  Nigeria: Dissemination of VSAT technical literature and marketing of Ku-band VSAT services are needed to promote the technology’s ability to serve as a cost-effective alternative to C-band systems for some applications.
â–  Tanzania: Dialogue among the regulator, ministries and other government offices needs to be strengthened with the aim of developing the local ICT sector.
Finally, these three government stand in stark contrast to African countries where duopolies and monopolies remain in place. As was revealed by the IDRC Pan-Africa Satellite Survey, when an administration is focused on protecting state investments in a monopoly or duopoly, the inherent potential of market forces to more rapidly increase access and decrease cost of service is greatly inhibited … or prevented outright.

Challenges & Solutions: Satellite Regulatory Guidelines for Africa

The following draws upon successful satellite regulatory and policy practices being applied in Africa and aims to provide governments with practical information that constructively informs their decisions relating to the formulation of effective satellite communications regulations and policies.

Optimizing the Regulatory Framework

African administrations are, like their counterparts in other regions, discovering that it is beneficial to establish a legislative and regulatory environment in order to promote competition and attract private investment. Without an appropriate legal framework for sustained telecom infrastructure development other efforts aimed at bridging the “Digital Divide” may have little long-term impact. The introduction of competition and privatization has made most governments fully aware of the importance of effective, well-financed and professionally-staffed regulatory authorities.
As of 2004, there were 124 separate regulatory authorities worldwide, according to the International Telecommunication Union’s (ITU) Regulatory Database. African regulators represent 27 percent of the total — second only to Europe. The trend toward African governments establishing separate regulatory agencies was echoed by the IDRC Pan-Africa Satellite Survey, which asked administrations whether there was an “independent regulator” established in their country, 17 of 24 governments surveyed answered in the affirmative. However, only 12 of those 17 indicated that the “independence” of the regulator has been affirmed.
The overwhelming trend toward the establishment of telecommunications regulatory authorities (TRAs) gives credence to the assertion that the standard institutional structure for the telecommunications sector around the world today includes a separate and autonomous regulator. However, it should be noted that while TRAs may influence policy formulation, typically TRAs are only able to implement government-approved policies. Thus, the government has primary responsibility for developing policies that promote expanded access to telecommunications through increased competition and improved regulations.
Positive reasons for independence and separation of TRA activities include: the perceived neutrality and insulation of TRAs from political or operational pressures; operators and investors generally will have greater confidence that an independent TRA will regulate a market objectively and transparently: and this leads to increased investment in the sector and to related benefits that satellite services can provide to an economy.

Strategic Liberalization in the VSAT Sector

African governments, more than many of their counterparts in developing countries around the globe, have begun to implement strategic liberalization of VSAT services. The African trend toward strategic liberalization of VSAT was underscored by the latest regulatory developments in Algeria, Nigeria and Tanzania. In each case, the administrations identified VSAT-based services as one of several key telecommunication tools to be liberalized and for which regulations would be optimized.
There are at least three reasons why some African administrations still have not liberalized their satellite, says Perminus Karungu, senior officer, Licensing and Compliances, for the Communications Commission of Kenya: a desire to protect the incumbent operator(s); fear of the unknown and lack of appreciation of the additional benefits of deregulation.
The ITU’s believes that “market opening works,” and Malawi’s experience reinforces that belief. A VSAT license in the country costs $5,000 per site initially and $2,500 per year subsequently, and about 20 licenses have been issued. According to the Malawi Communications Regulatory Authority (MACRA), the uniform licensing regime may in the future be reviewed with “a downward adjustment [of fees] likely to take into account the emergence of low-cost Ku-band two-way VSAT-based Internet services aimed at small businesses and residential users.” The trend by African administrations to apply satellite regulations that echo Malawi’s approach underscores a commitment to opening markets to the provision of satellite services in a manner wholly consistent with national policy objectives and the goals of the World Summit for the Information Society and the World Trade Organization.

Liberalization and Universal Access

As the trend toward fully liberalized VSAT markets continues to develop, several African governments interviewed for the satellite survey expressed reservations about permitting an unlimited number of market participants to provide services. Much of the concern relates to reports that unlicensed service providers are eroding incumbents’ revenues, thereby undermining their ability to provide other services such as universal access.
However, it has been observed that when a country limits competition through a restriction on the number of market participants, it may inadvertently encourage a black market to develop in which non-mainstream businesses attempt to provide services and meet consumer demand in violation of the government’s licensing requirements. The prevalence of non-mainstream service providers often makes it more difficult for governments to ensure compliance and enforcement with their regulations and licensing conditions.
Many countries have traditionally restricted the number of authorized terrestrial and satellite-based telecommunications service providers that are permitted to serve a country in order to support an implicit program of universal service for consumers. Specifically, many countries require that their dominant telecommunications provider subsidize the cost of local telephone services primarily by charging higher rates for long distance and international telephone services. Such a system of cross subsidies between different services is inefficient from an economic perspective and is difficult or impossible to sustain following a conversion to a competitive market.

Creating Transparency

The IDRC Pan-Africa Satellite Survey found that the African satellite regulatory process is severely lacking in transparency. The difficulty of obtaining information about VSAT regulation in Africa is so acute — and the demand for satellite solutions so great — that a lucrative business has developed for international consultants who sell information to would-be satellite service providers.
Addressing the obscurity of accurate information about African satellite regulation is a primary objective of IDRC, the U.K. government’s Catalyzing Access to ICTs in Africa (CATIA) program, the GVF and, to a significant extent, the ITU Satellite Regulatory Survey. Transparent practices are critical to the success of satellite regulation, enabling parties to benefit in a variety of ways. Recognition of this fact has resulted in significant moves by administrations worldwide to post their regulations and/or policies online.
With two exceptions, all respondents to the ITU-D Question 17/1 Satellite Regulatory Survey indicated that their laws, decrees and legal instruments were publicly available, and in many cases, are posted on the web, while 68 percent of the respondents indicated that their license application forms were available, the majority on the web. But considerations of transparency are difficult to address. What is posted on web sites often is misleading or incomplete, which creates the same impact as not providing the information at all.
Applicants are not the only beneficiaries of transparency; administrations also have much to gain. Online publishing of regulatory requirements is inexpensive, reduces the burden on administrations by reducing the need to respond to numerous individual inquiries, enables industry to more effectively provide services, and serves as an effective platform from which to promote regulatory harmonization.
In addition, regulators rely upon transparency to safeguard their legitimacy and efficiency. Regulators also obtain information from the regulated industry and other interested parties that they need in order to base their decisions on all relevant facts and diverse views. Operators and service suppliers depend on transparency to ensure that their concerns are heard and that they play a role in shaping important decisions.
To facilitate this process, CATIA is coordinating with regional inter-governmental groups throughout Africa to establish an online VSAT license-application framework that also includes public access to the VSAT regulatory requirements applied by each African Administration. All African governments have been invited to participate.

Streamlining Licensing

The ITU has brought attention to the impact of the licensing process on the larger regulatory environment and the market as a whole, noting that, “The licensing process can be one of the most important regulatory processes related to reform of the telecommunication sector. Licensing policy and its implementation determine the structure of markets, the number and types of operators, the degree of competition among them, the revenues earned by governments in opening markets, and, ultimately, the efficiency of the supply of the services to the market.”
Despite significant gains made in recent years among African governments, VSATs still are among the most heavily-regulated technologies in the region, a fact that is most apparent in the realm of licensing. In combination with the sheer number of administrations, Africa has become one of the most difficult regions in which to roll out a VSAT network. Several types of licensing requirements have been employed effectively, in Africa and elsewhere in the world. These licensing rules tend to focus either on the space segment or the ground segment, and in both situations, care is being taken to ensure that licensing requirements do not become barriers to free trade. Governments are realizing that tremendous demand for Internet, data, voice, video and other services is best addressed by policies that permit open and direct access to all satellite resources assuming that they have been properly coordinated through the ITU.
Many countries also require that public-network operators hold licenses so that there is some quality assurance of the service being provided to their public. A few countries have adopted this rule also for private VSAT services, with licenses referred to as Service Provider Licenses, Value Added Service Licenses and sometimes certain types of Class Licenses. As the nature of private satellite services is being understood better, the application of this type of license is declining. As it is not a public service, not usually connected to the PSTN and can be privately owned, it increasingly is the view of administrations that this redundant licensing process causes delays and confusion.
Traditionally, most governments have required each VSAT or mobile satellite terminal to be licensed individually; this was in addition to requiring a network operator’s license. But more than 10 years ago, a new approach to regulating VSATs — blanket licensing — began to be implemented. With this regulation, VSATs are configured based upon technical criteria such power level and frequency, which is intended to eliminate the risk of harmful interference. Thus, a single blanket license can be issued covering a very large number of VSAT terminals.
Another finding of the ITU and IDRC surveys was that the majority of African administrations either do not apply any licensing to receive-only systems — whether they are used for video or data — or they apply blanket licensing. The rationale behind this is that, in theory, the verifiable purpose of licenses is public safety and preventing harmful frequency interference; receive-only systems, because they do not transmit, are incapable of creating interference or of posing a radiation hazard, so licensing need not be applied.

Licensing Fees

Implementation of general authorizations or blanket licensing results not only in faster implementation of service, but also lower costs of implementation. This derives from the fact that with individual licensing of terminals or services licensing fees are often imposed on the use of individual terminals — which is likely to make the service unaffordable to potential end users — or on each of the service providers and require more administrative work on behalf of the regulator or responsible national body. As shown in the examples for 100 site networks in the country comparison for Nigeria, Algeria and Tanzania above, the licence fees can be 10 percent to 25 percent of the operating cost of a small network.
These fees must be considered in the context of still other cost factors faced by VSAT network operators; there may be customs duties to be paid (up to 47 percent of equipment value), surtaxes of up to 20 percent, extended surtaxes up to 17.5 percent, value-added tax of up to 15 percent, fees to be paid to the incumbent PTO, equipment-inspection fees, spectrum fees and more. The fundamental rationale for licensing fees is that they should compensate administrative costs to the regulator, but they should not be used as a source of real profit for the government.

Addressing Commercial Or Local Presence

The Satellite Survey found that numerous African governments maintain commercial or local-presence requirements, the costs of which have been reported by VSAT network operators to be far-reaching. Foreign ownership rules are capable of complicating the entire process of incorporating a company within a jurisdiction. In addition, even after a local presence is established, local partners in such arrangements may gain inequitable benefits. It has been asserted that foreign ownership restrictions are generally contrary to the spirit if not the letter of foreign trade agreements including the General Agreement in Trade in services.
As elsewhere, in Africa, technology neutrality is the new trend as regards the provision of satellite services. Administration representatives have long called for a “leap-frogging” of technology from those building out African networks; the interest in the latest equipment and technologies is therefore a long-established policy. The Botswana, Mauritius and Ugandan administrations’ current technology-neutral approaches to satellite regulation provide an example of governments’ recognition that modern telecommunications services are being provided to consumers using a number of different technologies, such as wireline, satellite and terrestrial wireless networks.

Managing Spectrum

Regulation of satellite and other radiocommunications services is necessary to manage scarce spectrum resources. This is particularly true in those limited cases in which satellite services share a co-primary allocation with other services in the same frequency bands. In many frequency bands, however, satellite services do not share the same spectrum with other services, and administrations throughout the world increasingly see no reason for regulators to place any restrictions on satellite networks that have been licensed by other countries and completed spectrum coordination through the ITU. Instead, regulators in each country have begun to impose only licensing and spectrum coordination requirements on satellite networks that are based in that country. Such an approach ensures that spectrum resources are used efficiently.
There are a number of trends around the world of considerable relevance to African governments. One discernible trend in the spectrum regulatory reform movement in many countries is increased interest in the use of so-called market-based allocation methodologies or auctions as a preferred means for spectrum allocation decisions, as well as expanded opportunities for use of spectrum-related fees in connection with licensing activities. Irrespective of how this may or may not work in other areas, given the regional/global character of the provision of satellite services, reliance on auction-based allocation mechanisms can be fraught with considerable difficulties. At a minimum, it can subject a global or regional satellite operator to considerable uncertainty and vulnerability in its ability to provide service.

Optimizing Equipment Certification

About $135 billion in telecommunication and information equipment throughout the world is affected by type approval processes each year, and a significant percentage are satellite-based systems. These type-approvals costs are passed on to consumers in the form of higher equipment prices, and an additional layer of expense often if added when administrations require type approval testing and certification for satellite terminal equipment already tested and certified by other administrations.
In Africa, the current state of type approvals and equipment registration requirements for earth stations suggests a strong interest in streamlining these traditional processes in order to lower consumer prices and enable more cost-effective access to satellite services. The IDRC Pan-Africa Satellite Survey shows that most African administrations are content to recognize the type-approval marks that apply elsewhere in Africa, as well as in Europe, the United States, Japan, Korea and China. The ITU-D Question 17/1 Survey had a similar finding, as the majority of nations around the globe recognize Mutual Recognition Agreements (MRAs), with a total of 38 out of 50 countries indicating acceptance. Africa’s proportion is higher, where 11 countries recognize MRAs, versus only one that does not.
In order to help facilitate use of the MRA process for satellite-based systems, the private sector has also offered a solution — a technical framework that enables administrations to mutually recognize test results generated during the satellite operator type approvals process. This framework is encapsulated in a document entitled “GVF 101: Mutual Recognition of Performance Measurement Guidelines and Procedures for Satellite System Operator Type Approvals.” It defines a set of standardised measurements that can be used to check compliance of an earth station antenna model with applicable performance requirements. The procedure also provides for independent auditing of the accuracy and completeness of the data.
Other administrations are bypassing mutual recognition to go a step further. A good example is Ghana, which reported that it has begun to apply self-declaration of conformity by manufacturers. This approach, which shifts responsibility for type approval testing and certification from the government to the manufacturer, also is in line with global trends. Overall, 42 of 56 nations that responded to the ITU Satellite Regulatory Survey allowed self-declaration.
Content is not addressed in the applications to provide VSAT service in sub-Saharan Africa. This is not to say that the administrations are indifferent to content, however, the nature of the content is not addressed during the application process except as it is used to define the service such as corporate intranets and data transmissions.

Enforcing Compliance

All operators face the risk of fines, suspension or annulment of licences, and confiscation of their equipment if they are discovered to be operating without a licence. Operators particularly are at risk using C-band, which continues to be heavily used for terrestrial services. Countries increasingly are developing laws and regulations for the telecommunications sector that are objective, easily understood and highly predictable. Such laws and regulations also prohibit government actions that are arbitrary or discriminatory.
Mainstream businesses tend to avoid investing in countries that lack objective, transparent and predictable regulatory structures. Furthermore, a government-imposed restriction on the number of participants in a particular market segment also serves to prevent many mainstream businesses from providing services in the country.

Conclusions

Providing increased access to ICTs in Africa is a complex problem. Access to the Internet and other telecom services has been held back not only by restrictive regulatory frameworks, but also antiquated infrastructure, high fixed costs, low economic and investment activity, diverse geography, language and culture, and much more. Of the world’s 49 Least Developed Countries (LDCs), 31 are in Africa. The ITU has calculated that it takes, on average, 50 years to reach a teledensity of 50 main lines, a level reflecting high telecommunication development. But until a country reaches 1 main line per 100 inhabitants, it is “virtually impossible” to predict how long it will take to reach higher levels. Thirty-four of the 49 LDCs have a teledensity of less than one.
The Pan-Africa Satellite Survey and case studies conducted for “Open and Closed Skies: Satellite Access in Africa,” also have demonstrated that satellite has emerged as an important tool that is capable of leveraging accelerated access to ICTs, provided that African governments are prepared to actively facilitate its use. VSAT is not proposed as the only tool for Africa’s challenges; it is one of several tools, each of which plays to its respective strengths — fiber for point-to-point services, mobile for voice and narrow-band data, satellite for point-to-multipoint narrow and broadband solutions.
In the satellite area, frequency use, network operations, service provision and the use of radio terminals can be considered as the main elements which have been the target of a number of regulatory measures normally meant to help the development of satellite telecommunications and facilitate market access to satellite providers, but which may also act as market barriers. At the same time, the industry’s competitive structure has also changed at the level of national and international markets: Many Post, Telegraph and Telephone organizations (PTTs) have been privatized, as well as intergovernmental satellite operators. This concurrent evolution of satellite operators, service providers, and applications — as well as their corresponding regulatory treatment — highlights the importance of ensuring transparent and non-discriminatory market access conditions as the best means of promoting an individual country’s development. Like never before, and as stated in the definition of ITU-D Question 17/1, “administrations must ensure that their regulatory treatment provides a level playing field for both existing and emerging satellite operators, service providers and satellite-based applications.”
Liberalization, transparency and a commitment to satellite regulatory harmonization are within Africa’s reach. So too is Africa’s ability to transform the statistics.