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Liberalisation of the Telecommunications Sector: From Public Monopoly to Competitive Telecommunications Markets

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The Liberalisation of the Telecommunications Sector in Sub-Saharan Africa and Fostering Competition in Telecommunications Services Markets

Part of the book series: Munich Studies on Innovation and Competition ((MSIC,volume 6))

Abstract

The analysis of the regulatory framework for competition in Uganda’s telecommunications sector is borne out of the need to determine whether or not the framework adopted by countries in Sub-Saharan Africa is insufficient for purposes of meeting the regulatory requirements in the liberalised telecommunications sector. In order to properly analyse the efficacy of the telecommunications regulatory framework, it is important, as a first step, to trace the origins of competition in Uganda’s telecommunications sector. Therefore, this chapter looks at the reasons behind the introduction of competition in the telecommunications sector which has traditionally been a monopoly. The first section briefly discusses the reasons that triggered the liberalisation of the telecommunications sector from a global perspective. The second section focuses on the key factors that brought about the liberalisation of the telecommunications sector in Uganda. This is followed by an overview of the evolution of the telecommunications policy in Uganda from monopoly to competition.

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Notes

  1. 1.

    Gerald Faulhaber, Telecommunications in Turmoil: Technology and Public Policy (Cambridge, MA: Ballinger 1987) 106.

  2. 2.

    Ibid.

  3. 3.

    Kevin G Wilson, ‘Deregulating Telecommunications and the Problem of Natural Monopoly: A Critique of Economics in Telecommunications Policy’ (1992) 14 Media, Culture & Society 343, 345 defines economies of scale as “the situation where an increase in inputs leads to a proportionally greater increase in outputs”.

  4. 4.

    Eileen M Trauth and Douglas Pitt, ‘Competition in the Telecommunications Industry: a New Global Paradigm and Its Limits’ (1992) 7 Journal of Information Technology 3, 4.

  5. 5.

    Christopher H Sterling, Phyllis Bernt, and Martin B H Weiss, Shaping American Telecommunications: A History of Technology, Policy and Economics (Routledge 2005) 93.

  6. 6.

    Ibid.

  7. 7.

    Kevin G Wilson, ‘Deregulating Telecommunications and the Problem of Natural Monopoly: A Critique of Economics in Telecommunications Policy’ (1992) 14 Media, Culture & Society 343, 352.

  8. 8.

    Martin Cave, ‘Regulating Competition in Telecommunications: British Experience and Its Lessons’ (1991) 21(2) Economic Analysis and Policy 133.

  9. 9.

    There is a significant amount of literature pointing to the natural monopoly characteristics of the fixed local loop. See Mark Armstrong, ‘Competition in Telecommunications’ (1997) 13(1) Oxford Review of Economic Policy 64; and Harald Gruber, The Economics of Mobile Telecommunications (Cambridge University Press 2005) 185. Also see Martin Hellwig, ‘Competition Policy and Sector-Specific Regulation for Network Industries’ in Xavier Vives (ed), Competition Policy in the EU: Fifty Years on From the Treaty of Rome (Oxford University Press 2009) 204, where it is argued that the local loop of the fixed-line network involves significant fixed costs. Due to the significant fixed costs, a duplication of the local loop would be wasteful; because these costs are sunk before any sales occur, warranting the classification of ‘last mile’ as a natural monopoly. Also notable is that telecommunications regulators in the United States and the European Union have recognised that the fixed local loop is a natural monopoly. The Federal Communications Commission in the United States has expressed the view that Local Exchange Carriers (LECs) enjoy substantial advantages due to the natural monopoly characteristics of the local loop, FCC, ‘Implementation of Local Competition Provisions in the Telecommunications Act of 1996, First Report and Order’ (1996) FCC 96-325, 10. The European Commission’s policy of open network provision and local loop unbundling appears to be based on the premise that the local loop is a natural monopoly, see Council Regulation (EC) 2887/2000 on unbundled access to the local loop [2000] OJ 336/4, para. 3.

  10. 10.

    Richard Shin and John Ying, ‘Unnatural Monopolies in Local Telephone’ (1992) 23(2) RAND Journal of Economics 171 in which it is argued that local telephone companies are not classical natural monopolies; and Lisa Correa, ‘Natural or Unnatural Monopolies in UK Telecommunications?’ (September 2003) Working Paper 501/2003 <http://www.econstor.eu/bitstream/10419/62808/1/377033677.pdf> accessed 15 June 2017, which comes to the conclusion that the local loop in the UK is not a natural monopoly.

  11. 11.

    Jean Jacques Laffont and Jean Tirole, Competition in Telecommunications (Munich Lectures in Economics 2000) 3.

  12. 12.

    Adrian Hunt, ‘“Deregulation” of Telecommunications in the United Kingdom: Myth or Reality’ (1997) 18 Holdsworth Law Review 38, 42.

  13. 13.

    Cheikh Tidiane Gadio, ‘Institutional Reform of Telecommunications in Senegal, Mali and Ghana: The Interplay of Structural Adjustment and International Policy Diffusion’ (DPhil dissertation, Ohio State University 1995) 37.

  14. 14.

    Eileen M. Trauth and Douglas Pitt, ‘Competition in the Telecommunications Industry: a New Global Paradigm and Its Limits’ (1992) 7 Journal of Information Technology 3.

  15. 15.

    Ibid.

  16. 16.

    In Sub-Saharan Africa, Comoros, Djibouti, and Eritrea stand out as countries without a liberalised telecommunications sector.

  17. 17.

    Cheikh Tidiane Gadio, ‘Institutional Reform of Telecommunications in Senegal, Mali and Ghana: The Interplay of Structural Adjustment and International Policy Diffusion’ (1995 DPhil dissertation, Ohio State University) 37 observes that privatisation in the region was driven by political power exercised by the World Bank, IMF and donor agencies, especially the US Agency for International Development (USAID) rather than a change in the ideology of revaluation of the commercial benefits of public enterprises.

  18. 18.

    Ibid, 3.

  19. 19.

    Charles Byaruhanga, ‘Managing Investment Climate Reform: Case Study of Uganda Telecommunications’ (2005) 5 <http://siteresources.worldbank.org/INTWDRS/Resources/477365-1327693758977/8397896-1327771331430/byaruhanga_uganda_telecoms.pdf> accessed 15 June 2017.

  20. 20.

    Ibid.

  21. 21.

    Mary Shirley, Fred Tusubira, Luke Haggarty, and Frew Gebreab ‘Telecommunications Reform in Uganda’ (2002) World Bank Working Research Paper 2864/2002 7.

  22. 22.

    Charles Byaruhanga, ‘Managing Investment Climate Reform: Case Study of Uganda Telecommunications’ (2005) 5 <http://siteresources.worldbank.org/INTWDRS/Resources/477365-1327693758977/8397896-1327771331430/byaruhanga_uganda_telecoms.pdf> accessed 15 June 2017.

  23. 23.

    Mary Shirley, Fred Tusubira, Luke Haggarty, and Frew Gebreab, ‘Telecommunications Reform in Uganda’ (2002) World Bank Working Research Paper 2864/2002 20.

  24. 24.

    Cheikh Tidiane Gadio, ‘Institutional Reform of Telecommunications in Senegal, Mali and Ghana: The Interplay of Structural Adjustment and International Policy Diffusion’ (1995 DPhil dissertation, Ohio State University) 3 observes that the adoption of structural adjustment programmes that promoted liberalisation of economic sector as a condition for receipt of financial assistance in implementing economic reforms greatly influenced governments’ decisions regarding telecommunications sector reform. This was evidenced by the privatisation of state-owned enterprises and the liberalisation of FDI in the 1990s and early 2000s.

  25. 25.

    Charles Byaruhanga, ‘Managing Investment Climate Reform: Case Study of Uganda Telecommunications’ (2005) 10 <http://siteresources.worldbank.org/INTWDRS/Resources/477365-1327693758977/8397896-1327771331430/byaruhanga_uganda_telecoms.pdf> accessed 15 June 2017.

  26. 26.

    The involvement of the Ministry of Finance in the development of the telecommunications policy of 1996 was significant as most of its economic reforms or recommendations of reform in different sectors of the economy were influenced by its need to abide by the structural adjustment programmes developed by the World Bank.

  27. 27.

    Uganda has been a member of the WTO since 1 January1995.

  28. 28.

    Ann Buckingham, Camilla Bustani, David Satola, and Tim Schwarz, ‘Telecommunications Reform in Developing Countries’ in Ian Walden and John Angel (eds), Telecommunications Law and Regulation (2nd edn, Oxford University Press 2005) 591.

  29. 29.

    Other core telecommunications services referred to data transmission, telex, telegraph, facsimile, private leased circuit services (resale), fixed and mobile satellite systems and services, cellular telephony, mobile data services, paging, and personal communications services (PCS).

  30. 30.

    This is significant since foreign direct investment has played an important role in the development of the liberalised telecommunications sector in Sub-Saharan Africa countries as elaborated in Chap. 5 of this study.

  31. 31.

    These commitments were revised in 1999 following the entry of the second national operator (MTN) Uganda in 1998 and the privatisation of the incumbent operator (UPTC); see Uganda-Revised Schedule of Specific Commitments in Basic Telecommunications (November 1999).

  32. 32.

    The WTO Reference Paper (1997) 36 ILM 367 sets out regulatory principles for the establishment and maintenance of competitive telecommunications markets.

  33. 33.

    Schedule of Specific Commitments of Uganda under the General Agreement on Trade in Services (GATS/SC/89) as of 24 December 1998. The schedule was later revised in 1999; Revised Schedule of Specific Commitments in Basic Telecommunications (November 1999).

  34. 34.

    Econ One Research, ‘Uganda Telecommunications: A Case Study in the Private Provision of Rural Infrastructure’ (July 2002) 2 <http://www.itu.int/ITUD/treg/Events/Seminars/2005/Thailand/Reference%20Material/Reference%20Material%20-%20Uganda%20Experience> accessed 15 June 2017.

  35. 35.

    Mary Shirley, Fred Tusubira, Luke Haggarty, and Frew Gebreab, ‘Telecommunications Reform in Uganda’ (2002) World Bank Working Research Paper 2864/2002 52.

  36. 36.

    Miruiki Mureithi, ‘Evolution of Telecommunications Reform Policies in East Africa: Setting New Policy Strategies to Anchor Benefits of Policy Reforms’ (2002) (3) South Africa Journal of Information and Communication 58, 63.

  37. 37.

    Mary Shirley, Fred Tusubira, Luke Haggarty, and Frew Gebreab, ‘Telecommunications Reform in Uganda’ (2002) World Bank Working Research Paper 2864/2002 52.

  38. 38.

    ‘Communications in Uganda: A Look at One of Africa’s Fastest Growing Markets’ <https://www.itu.int/net/itunews/issues/2009/06/31.aspx> accessed 15 June 2017.

  39. 39.

    ITU, ‘Country Statistics 2000-2015: Mobile-Cellular Subscriptions’ <http://www.itu.int/en/ITU-D/Statistics/Pages/stat/default.aspx> accessed 15 June 2017.

  40. 40.

    ITU, ‘Country Statistics 2000-2015: Fixed_Telephone Subscriptions’ <http://www.itu.int/en/ITU-D/Statistics/Pages/stat/default.aspx> accessed 15 June 2017.

  41. 41.

    UCC, ‘Recommendations on Proposed Review of the Telecommunications Sector Policy’ (2005) Policy Review Report 28/1/05, had as it main recommendation the full liberalisation of Uganda’s telecommunications sector on the basis that the policy of limited competition was stifling the growth of the sector.

  42. 42.

    Ann Buckingham, Camilla Bustani, David Satola, and Tim Schwarz, ‘Telecommunications Reform in Developing Countries’ in Ian Walden and John Angel (eds), Telecommunications Law and Regulation (2nd edn, Oxford University Press 2005) 606.

  43. 43.

    Ibid.

  44. 44.

    ICC EBITT Commission, Telecoms Liberalisation: An International Business Guide for Policy Makers (2nd edn, ICC 2007) 9.

  45. 45.

    Ian Walden, ‘Telecommunications Law and Regulation: An Introduction’ in Ian Walden and John Angel (eds), Telecommunications Law and Regulation (2nd edn, Oxford University Press 2005) 10.

  46. 46.

    ICC EBITT Commission, Telecoms Liberalisation: An International Business Guide for Policy Makers (2nd edn, ICC 2007) 11.

  47. 47.

    Government of Uganda, ‘White Paper on the Reform of the Telecommunications Sector’ (1994).

  48. 48.

    UCC, ‘Recommendations on Proposed Review of the Telecommunications Sector Policy’ (2005) Policy Review Report 28/1/05, 20.

  49. 49.

    Government of Uganda, ‘White Paper on the Reform of the Telecommunications Sector’ (1994).

  50. 50.

    The privatisation of UPTC is highlighted as one of the important strategies in the Telecommunications Policy of 1996 which was put in place to trigger the liberalisation of Uganda’s telecommunications sector.

  51. 51.

    ITU, Trends in Telecommunications Reform 2006: Regulating in the Broadband World (7th edn, ITU 2006) 6.

  52. 52.

    Michael Tyler, Janice Hughes, and Helena Renfrew, ‘Telecommunications in Kenya: Facing the Challenges of an Open Economy’ <http://www.vii.org/papers/tyler.htm> accessed 15 June 2017.

  53. 53.

    According to Eileen M Trauth and Douglas Pitt, ‘Competition in the Telecommunications Industry: a New Global Paradigm and Its Limits’ (1992) 7 Journal of Information Technology 3, 5, the rationale for state ownership in Britain rested on two assumptions: first, the objective of a universal service could best be met through state ownership of services and products; and second, that the development of infrastructural services such as railways and telecommunications could be most effectively fostered through government management and control.

  54. 54.

    East African Post and Telecommunications Act of 1951 provided for the establishment of the East African Post and Telecommunications Administration.

  55. 55.

    East Africa (High Commission) Order in Council 1947.

  56. 56.

    J D Fage, Michael Crowder and Roland Anthony Oliver (eds), The Cambridge History of Africa: Volume 8 c.1940-c.1975 (Cambridge University Press 1984) 452.

  57. 57.

    The East African Common Service Organisation (Implementation) Agreement Ordinance 1961.

  58. 58.

    This was the era between 1967 and 1977 in which the former British colonies from the East Africa (Kenya, Tanzania, and Uganda) region formed the East African Community with the objective of establishing an East Africa common market.

  59. 59.

    Roger Noll and Mary Shirley, ‘Telecommunications Reform in Sub-Saharan Africa: Politics, Institutions and Performance’ <http://dev.wcfia.harvard.edu/sites/default/files/656_nollshirley.pdf> accessed 15 June 2017.

  60. 60.

    Uganda Posts and Telecommunications Corporation Decree 1977, Order No.15 of 1977.

  61. 61.

    This could partly be explained by the political instability in Uganda between 1979 and 1986.

  62. 62.

    See Mary Shirley, Fred Tusubira, Luke Haggarty, and Frew Gebreab, ‘Telecommunications Reform in Uganda’ (2002) World Bank Working Research Paper 2864/2002 8 where it is observed that Kenya and Tanzania had telephone rates at 1.2 lines and 0.3 lines per 100 inhabitants, respectively.

  63. 63.

    “Initially Museveni’s (the President of Uganda) speeches suggested that he did not view telecommunications as priority; rather, telecommunications was seen as a luxury, of limited importance to the new regime’s supporters.” See Mary Shirley, Fred Tusubira, Luke Haggarty, and Frew Gebreab, ‘Telecommunications Reform in Uganda’ (2002) World Bank Working Research Paper 2864/2002 21.

  64. 64.

    Charles Byaruhanga, ‘Managing Investment Climate Reform: Case Study of Uganda Telecommunications’ (2005) 9 <http://siteresources.worldbank.org/INTWDRS/Resources/477365-1327693758977/8397896-1327771331430/byaruhanga_uganda_telecoms.pdf> accessed 15 June 2017.

  65. 65.

    CIT, ‘Report of the Committee on Investments in Telecommunications’ (November 1993).

  66. 66.

    Econ One Research, ‘Uganda Telecommunications: A Case Study in the Private Provision of Rural Infrastructure’ (July 2002) 2 <http://www.itu.int/ITUD/treg/Events/Seminars/2005/Thailand/Reference%20Material/Reference%20Material%20-%20Uganda%20Experience.pdf> accessed 15 June 2017.

  67. 67.

    Charles Byaruhanga, ‘Managing Investment Climate Reform: Case Study of Uganda Telecommunications’ (2005) 3 <http://siteresources.worldbank.org/INTWDRS/Resources/477365-1327693758977/8397896-1327771331430/byaruhanga_uganda_telecoms.pdf> accessed 15 June 2017.

  68. 68.

    UCC, ‘Recommendations on Proposed Review of the Telecommunications Sector Policy’ (2005) Policy Review Report 28/1/05.

  69. 69.

    That is, basic telecommunications services and international/long-distance fixed voice services.

  70. 70.

    Mary Shirley, Fred Tusubira, Luke Haggarty, and Frew Gebreab, ‘Telecommunications Reform in Uganda’ (2002) World Bank Working Research Paper 2864/2002 17.

  71. 71.

    Ibid.

  72. 72.

    Long title of the Communications Act, Cap.106.

  73. 73.

    The Investment Code Act, Cap 92 was enacted establishing an investment authority to facilitate the procedure for entities and individuals interested in investing in Uganda’s economy, fostering the FDI liberalisation process.

  74. 74.

    Statistics from 1997 indicate that even though the capital city Kampala had less than 10 percent of the population, it had 70 percent of all subscriber lines in 1997, while the Eastern and Western regions of the country, home to more than 50 percent of the population, only had 20 percent. Mary Shirley, Fred Tusubira, Luke Haggarty and Frew Gebreab, ‘Telecommunications Reform in Uganda’ (2002) World Bank Working Research Paper 2864/2002 9.

  75. 75.

    UCC, ‘Recommendations on Proposed Review of the Telecommunications Sector Policy’ (2005) Policy Review Report 28/1/05 19.

  76. 76.

    Ibid, 8.

  77. 77.

    This obligation was stipulated in its operation licence.

  78. 78.

    Mary Shirley, Fred Tusubira, Luke Haggarty, and Frew Gebreab, ‘Telecommunications Reform in Uganda’ (2002) World Bank Working Research Paper 2864/2002 30.

  79. 79.

    Ibid, 29.

  80. 80.

    Mary Shirley, Fred Tusubira, Luke Haggarty, and Frew Gebreab, ‘Telecommunications Reform in Uganda’ (2002) World Bank Working Research Paper 2864/2002 30.

  81. 81.

    Jonathan L Muwonge and Emanuel Gomes, ‘Analysis of the Acquisition Process of Uganda Telecom by LAP Greencom’ (2007) 1(1) MIBES Transactions Online 108.

  82. 82.

    Uganda Communications Act, Cap.106, s 1(o).

  83. 83.

    Ibid, s 1(q).

  84. 84.

    Ibid, s 33.

  85. 85.

    Exception was made for Celtel which continued to have a major licence to provide mobile services.

  86. 86.

    Mary Shirley, Fred Tusubira, Luke Haggarty, and Frew Gebreab, ‘Telecommunications Reform in Uganda’ (2002) World Bank Working Research Paper 2864/2002 49.

  87. 87.

    Ibid, 52.

  88. 88.

    Ibid.

  89. 89.

    Ibid.

  90. 90.

    Ibid, 48.

  91. 91.

    Ibid.

  92. 92.

    Ibid.

  93. 93.

    Ibid, 52.

  94. 94.

    Ibid, 48.

  95. 95.

    UCC, ‘Recommendations on Proposed Review of the Telecommunications Sector Policy’ (2005) Policy Review Report 28/1/05 6.

  96. 96.

    Bernard Krief Consultants, ‘The ICT Africa Marketplace Information & Communications Technologies East Africa and Indian Ocean- Country Profile Uganda’ 5 <http://www.bk-conseil.com/espaceinformation/documentation/ict/Uganda_Country_Profile.pdf> accessed 15 June 2017.

  97. 97.

    Francis Fred Tusubira et al, ‘Uganda Telecommunications Sector Performance Review: A Supply ICT Analysis for Policy Outcomes’ (2007) Research ICT Africa 16 <http://www.researchictafrica.net/publications/Telecommunications_Sector_Performance_Reviews_2007/Uganda%20Telecommunications%20Sector%20Performance%20Review%202007.pdf> accessed 15 June 2017.

  98. 98.

    UCC, ‘Recommendations on Proposed Review of the Telecommunications Sector Policy’ (2005) Policy Review Report 28/1/05 24.

  99. 99.

    The infrastructure licences permit holders to establish and operate telecommunications infrastructure, with a requirement to permit service providers access on a non-discriminatory commercial basis.

  100. 100.

    Service licences permit holders to provide services, using infrastructure provided by infrastructure licensees. They can also establish their own infrastructure if licensed to do so.

  101. 101.

    The competition landscape in Uganda’s telecommunications sector is described in greater detail in Chap. 4, Sect. 4.4.

  102. 102.

    Mary Shirley, Fred Tusubira, Luke Haggarty, and Frew Gebreab, ‘Telecommunications Reform in Uganda’ (2002) World Bank Working Research Paper 2864/2002 38.

  103. 103.

    Ibid.

  104. 104.

    For example, operator Anupam Global had to delay plans to roll out its network due the unavailability of spectrum for mobile voice services.

  105. 105.

    Sanjaya Lall, ‘Multinationals and Market Structure in an Open Developing Economy: The Case of Malaysia’ (1979) 115(2) Weltwirtschaftliches Archiv 325; and Magnus Blomström, ‘Foreign Investment and Productive Efficiency: The Case of Mexico’ (1986) 35(1) Journal of Industrial Economics 97.

  106. 106.

    Richard S Newfarmer, ‘TNC Takeovers in Brazil: The Uneven Distribution of Benefits in the Market for Firms’ (1979) 7(1) World Development 25, which explores the effect of FDI in electrical industry in Brazil. The article notes that MNCs used predatory pricing as a means of gaining a dominant position in the market.

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    Rachel Alemu

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Alemu, R. (2018). Liberalisation of the Telecommunications Sector: From Public Monopoly to Competitive Telecommunications Markets. In: The Liberalisation of the Telecommunications Sector in Sub-Saharan Africa and Fostering Competition in Telecommunications Services Markets. Munich Studies on Innovation and Competition, vol 6. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-55318-3_3

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