Interface between Competition Policy and Sectoral Regulation in the Namibia’s Telecoms Sector

1. Interface between Competition Policy and Sectoral Regulation in the Namibia’s Telecoms Sector Rehabeam Shilimela NEPRU

2. Outline • Background and Set-up • Regulation and Supervision • Market structures in the sector • Performance • Competition policy vs. sector regulation • Potential for greater competition • Conclusions

3. Background & Set-up • Govt Department of Posts & Telecommunications dissolved in 1992 (commercialisation) • Posts & Telecommunications Companies Act (17 of 1992) established Telecom Namibia and NamPost • NamPost and Telecom Holdings (NPTH) – owns Telecom, NamPost and 66% of MTC established in terms of the same legislation • NPTH is a controlling structure for its subsidiaries – property development, cross-subsidisation etc.

4. Background & Set-up (cont’d) • Performance Agreements – efficiency, infrastructure, employment, industry, more revenue for national priorities • MWTC responsible for Telecom and NamPost • MIB for NCC which regulates MTC and other communications sub-sectors (Radio, TV etc) • Cell One is also regulated by NCC

5. Regulation and Supervision • Regulation by establishing laws • MTC and other communications (except Telecom) regulated by NCC, which was established to regulate the whole sector. • A controversial SOE Bill to regulate SOEs including Telecom. NCC regulates entry (not prices and standards) for Telecom as well. • 1999 policy & regulatory framework – liberalisation by 2004 (Cell One) • Draft communications bill of 2002 – single statutory body: Communications Authority of Namibia (CAN)

6. Market Structures • NamPost – Statutory monopoly rights for standard mail services • Telecom – De Facto monopoly for landline services. NCC did not award any licenses which it could have done since 2004. • Mobile sector – two operators with majority ownership by Government. Cell One just started operations covering Windhoek (clients can make international calls), to expand its network coverage across Namibia soon.

7. Performance • NamPost – increased infra, tremendous growth in its savings bank - PA silent about non-mail standards, prices competitive - No info on unit costs, but cost over revenue ratio is rising • Telecom – Developed efficient infra, customer satisfaction weak, - call and service prices increased (real increases) - Job cuts (major) and salary distortions (high wages) - Higher operations costs despite infra (staff, wages), • Conclusion: good performance in terms on infra, but job cuts, wage distortions and rising service costs mean less benefits to the nation. Telecom has potential to pay dividends to Government.

8. Competition policy vs. sector regulation • No sector is exempt from the Namibia Competition Act (2 of 2003), except that the minister of trade with concurrence of NaCC exempt by notice in the Gazette. • NaCC is likely to be instrumental in guarding against any collusions that are possible due to a spaghetti bowl of ownership stakeholders in the sector, also against abuse of dominant position (Cell One complained – SWITCH) • Namibia’s industry policy allows Govt to intervene – monopolies, competition • NaCC vs. NCC/CAN

9. Recent developments in the sector • Amendment of NCC Act in 2004 – Authority to process applications, prescribe fees and other conditions • Portugal Telecom bought 34% of MTC shares in 2006 • NCC allowed MTC to build its backbone infra, including VSAT in 2006 – partly eroding Telecom Namibia’s monopoly, but MTC’s application for intern-data gateway declined, maintaining Telecom’s de factor monopoly for international data and voice services • Telecom introduced SWITCH (cheap) - a fixed-wireless product (mobile technologies that do not allow roaming between cells) –Telecom planned to offer roaming, restricted to town/settlement area by Cabinet decision (27/02/2007) • Second mobile operator – Cell One started operations late March 2007

10. Potential for greater competition • Service standards and prices have improved tremendously in the mobile telecoms sector • With an additional player, competition to intensify and improve terms • In absence of a competition regime, price war or even predatory pricing possible, but may not intensify since these are largely state firms • Things more complicated and slow in finalising SOE law and creation of CAN as a single sector regulator (institutional weaknesses and politics) as well as the need solicit additional landline operators or erode monopoly by allowing more rights to mobile operators.

11. Rounding up • A de facto regulation vacuum for Telecom Namibia at present • Need for implementation of CAN and more denationalisation • Trade and competition laws would ease uncertainties associated with investment decisions • Namibia is lagging behind in terms of efficiency in the region, coupled with high profit margins (MTC) or high operating costs (Telecom Namibia) – these contributes to generally high costs of doing business • SWITCH adds to competition, but may constitute an unfair competition for other service providers (mobile, internet)

12. END