CUTS 7Up3 Project Launch Performance of the Telecommunications Sector and the Need for a National Competition Authority

1. CUTS 7Up3 Project Launch Performance of the Telecommunications Sector and the Need for a National Competition Authority BY Ssemboga Ann Rita Namyalo assemboga@ucc.co.ug Economist UCC. 22nd March 2005

2. Competition in the Telecoms sector • The 1996 telecoms policy • Unbundling of Uganda Post and telecommunications • Introduction of private investors MTN in 1998 and prior Celtel in 1995 • Divestiture of Uganda telecoms in 2001, 51% of shares to strategic private investor • Rural Communications Development Fund in 2001 • 2 National telecoms operators offering fixed services • 3 Mobile service Providers • 1 National Post operators UPL • Full Competition in the Postal Courier sector, 19 service Providers • Full Competition in ISP 18 Licensed, 12 operation • International Data Gateway IDG’s 8 • Liberal Internet cafes etc

3. Economic Performance of the Sector since reforms 1. Contribution to GDP

4. Economic Performance of the Sector Cont. • Investment in the telecoms sector.

5. Economic Performance of the Sector Cont. 3. Turn-over/ revenue generated from the sector

6. Economic Performance of the Sector Cont. 4. Taxes • Government’s tax reforms to support sector have included: • 1997 waived taxes on all telecommunications imports except to VAT • FY 2002, waived all taxes on computers. • However Government introduced excise tax on airtime as follows; • Financial year 2002 – 5% excise duty (collected Ug. Shs 7 billion) • Financial year 2003 – 7% excise duty (collected Ug. Shs 10 billion) • Financial year 2004 – 10% excise duty

7. Economic Performance of the Sector Cont. Tax Cont. There are some consequential negative effects to the sector • Affordability • Negative Impact on revenues generated by operating firms • Negative impact on Investment in the sector.

8. Economic Performance of the Sector Cont. 5. Job Creation.

9. Access to services • All 56 districts of the country have a Point of Coverage with either GSM or fixed technology • Fixed rollout has not been as robust • More optical fiber linking Kampala to Entebbe and Jinja. • VSAT have been deployed where terrain or security doesn't permit but this has also been limited. • Limited backbone infrastructure has had a negative impact on the internet and data markets

10. Voice telephony Market 1.Customer growth

11. Tariffs Fixed line tariffs

12. TariffsMobile tariffs

13. Internet and Data Market • Unlimited competition for ISP excluding IDG services • 18 Licensed ISPs; 12 operational • Estimated internet users 120,000 • Estimated bandwidth uplink and down link combined is 60MPs

14. Internet Cont. • Limitations to internet growth include: • Limited competition/ exclusivity in backbone infrastructure and International services • Limited access/ rollout of broadband infrastructure • High costs of services. High infrastructure and access costs e.g computers and software • Lack of awareness of internet services resulting to low demand for services

15. Strategies for managing Competition within the Sector • Tools for monitoring competition within the sector: • Price Regulation: Price cap regulation (CPI-X) uncompetitive services; Current policy fixed services are subject to price cap ( few operators and defined basic services) • Mobile and Internet pricing is not a strict Price cap regime, tariff notification procedure • Regulation of Interconnection: MANDATORY. Access to essential facilities/ bottleneck services, Developed Communication (Interconnection) Regulation • UCC has developed guidelines for interconnection, developed a default interconnection model, has since its establishment made 1 interconnection determination. • Market Power Definition and Obligations; Based on Market Share, subscribers, volume of traffic, revenue etc, • Account separation, cost based interconnection Reference interconnection offers some of obligations for operators with SMP • Developed regulation on fair competition; The Communications (Fair Competition) regulation Objectives of the Fair Competition Regulation include; • Efficiency, Access, facilitate investment, protection of consumers, promote self regulation among others

16. Challenges in the era of a fully Competitive environment • Convergence of technology; One platform can offer a range of services e.g. VIOP, • A still large illiterate consumer force, not aware of their rights and obligations • Service coverage and distribution still skewed; Rural vs Urban distribution of services, the need to protect and ensure universality • Affordability, low levels of income, more than 50% of population live below a dollar a day (UNDP HD report 2004). • The increasing interface between technology and other sectors e.g Agriculture, health etc worldwide ICTs are being used as a tool for development Malaysia, India, China • Limited Competition Duopoly ends in July 2005, licensing of more service providers is expected, need to ensure fair competition within the sector vis a vis the fact that some operators have enjoyed exclusivity

17. Challenges in the era of a fully Competitive environment • Effective management of competition in the next era shall be the most paramount factor in achieving sustainable growth not only within the sector but as a tool for Uganda’s social economic development • In the new era, Regulations should be based on the Competition law and Practice of the Country • This calls for an urgent need to set up a National competition body.

18. Thank you for your attention