Namibia: WACS cable will arrive in 2011 but monopoly legacy holds back prices and growth

Namibia’s regulatory position is like stepping back ten years if you’re more used to the competitive rough and tumble in Africa’s more developed markets. The historic incumbent Telecom Namibia still has some monopoly privileges and the new incumbent, Government-owned mobile operator MTC is in danger of behaving in much the same way. Sadly the country has closed its regulator with a view to opening a new one. However, this has meant all things regulatory have gone into a holding pattern. Russell Southwood looks at the key market barriers that are holding things back.

Historic incumbent Telecom Namibia has an infrastructure monopoly and although the power utility NamPower has fibre assets, it has only recently tendered them: MTC (which may build a link to South Africa), Telecom Namibia and some ISPs are all interested in the capacity.
Telecom Namibia invested in what was then Africa’s only real international cable, SAT3 but didn’t invest enough to get a landing station. This is something it has regretted ever since because for many years South Africa’s incumbent Telkom South Africa would over-charge it for transit to the SAT3 landing station in South Africa.

But now if you want to get fibre access to South Africa to Telkom South Africa’s SAT3 landing station, you have no choice but to use Telecom Namibia. According to one of its customers:”The route this side of the border is 45% more expensive than what Telkom South Africa offers (in a competitive environment) on a distance basis on the other side of the border.” Telecom Namibia also has a deal with Neotel (in which it is a shareholder) for Seacom bandwidth, further limiting alternative competitive offers.

The new WACS cable will arrive in Q2, 2011 but there are understandable concerns in the market that Telecom Namibia will be the monopoly owner of the only international landing station with no other independent competitive route to South Africa being available. If MTC opened up a route, it would simply be a second Government company offering an alternative and one run by a management that is probably the least price competitive on the continent. In other African countries joint public-private partnerships are being set up to ensure equitable access to the landing station and fair, cost-oriented pricing but there is not even a discussion about this in Namibia.

Pricing has not been set and Telecom Namibia’s formal response to its customers is “it’s too early to say”. But well-informed industry sources say US$ 1,686 per mbps has been discussed. Currently customers are paying US$2,248, about three-quarters of the current satellite equivalent. Both prices seem very high when compared to the kind of wholesale prices available across the border in the more competitive South Africa.

Inevitably this has a knock-one effect to retail pricing strategy for the Internet. One aggrieved customer told us:“At a retail level, we’re paying US$15-20 per mbps. It’s immoral and they should be sent to hell for it”.

Telecom Namibia is owned by NPTH, a state holding company that also holds the Post Office, the new mobile incumbent MTC and a properties division for all three companies. The CEO of Telecom Namibia is the Chair of MPTH. Whilst most acknowledge that there has yet been no practical example of a conflict of interest, it is undoubtedly as one person told us “a fundamentally incestuous” way of running the different companies. There are no currently plans to privatise Telecom Namibia. It has international shareholdings in Multitel in Angola and Neotel in South Africa but looks likely it might pull out of the former.

Both policy and regulation in the sector seem to be in a holding pattern for as one industry insider told us: “The biggest problem is the Namibia Communications Commission (NCC), which is supposed to be changed to the Communications Regulatory Authority of Namibia (CRAN). There’s very few staff left from NCC and not enough are qualified.” There were only 7 staff when NCC ceased to operated. There has been no sign yet of the Gazetted announcement promised in early October to give life to the body.

A good example of the impact of the regulatory holding pattern is number portability. NCC wanted number portability (which might open up competition in the mobile market) but whether this goes ahead, it will now wait for CRAN to “get its feet under the desk”. The new Chair of CRAN is Lazarus Jacobs, a businessman, co-owner of the Windhoek Observer and a pioneering stand-up comedian (No jokes, please.)

In terms of the mobile market, there are three players: Telecom Namibia (with its Switch product); Leo and MTC. Switch (a CDMA 2000 product) was an attempt by Telecom Namibia to act as a spoiler to Leo’s entrance into the market. There was subsequently an argument as to whether the service should be limited to the towns only and in the end there was a trade-off in which it got permission to have national coverage in exchange for there being more than one international gateway. It says it currently has 200,000 subscribers. However, Switch is likely to be closed down and Telecom Namibia will go into GSM.

This makes Leo, which was launched 3.5 years ago, the main challenger. It was set up by local investors including NamPower and Old Mutual with a Norwegian management contractor. Eventually 100% of its shares were bought by what was then Orascom’s Telecel subsidiary. By all accounts, it has the cheapest network to call on but has not made much of dent on MTC, which had many years as sole operator in which to entrench itself. Leo started to offer 3G in Windhoek a couple of months ago and has recently launched Blackberry handsets.

MTC is the largest mobile player and is 66% owned by the Government through NPTH and 34% by Portugal Telecom, which provides strategic management and key personnel. It is offering iPhones (which it did before South Africa) and iPads but does not have a Blackberry offer. It has 85% of voice business and probably 60% of all markets by value, enough for it to be considered as having significant market power. There is an agreement between CRAN and the Competition Commission on addressing issues of this kind either jointly or by CRAN alone but action will depend on CRAN getting its teeth into the barriers that affect the market.

None of the mobile operators operate m-money services like M-Pesa but Mobipay was recently launched. The Bank of Namibia gave Mobicash Payment Solutions authorisation to operate a mobile payment system where clients pay for goods, as well as transfer money, using money that is virtually stored on their cellphones.

The absence of number portability makes it hard for the challenger to peel off new subscribers from the incumbent mobile operator:”People don’t shift their number easily,” was the refrain from all sides. Leo does dual SIM card Samsung handsets (in which unusually, both SIMS are active and you don’t have to switch manually) in an effort to overcome this problem.

In terms of the Internet, there are probably around 120,000 subscribers and MTC has
3G subscribers in the low tens of thousands. By all accounts, it is a relatively slow-moving and conservative market. There are no signs of triple play offers and no e-commerce worth speaking of.

Telecom Namibia’s iWay subsidiary is the largest market player with 60% of the market and it launched ADSL two years ago. The key players are: MTN Business or corporate customers (formerly Verizon/UUNet); ITN (locally owned) and Africa Online (Telkom South Africa) which is completing its merger with MWeb.

Telecom Namibia supplies ADSL wholesale to ISPs but it took one ISP 15 months to get a reseller agreement and obviously it needs to forced to offer wholesale and retail in an equitable way to all players in the market. ITN and Africa Online offer Wi-MAX services.

Although small in population terms, Namibia has a buoyant economy and a great deal more potential than is currently being realised. Perhaps the arrival of CRAN will help take off the artificially imposed brakes but don’t hold your breath.

Create an Internet Action Group for Namibia

Did you know?
• The fifth biggest “country” in the world is Facebook. That’s right, a country that only exists on the Internet has over 200 million people sharing their thoughts, photographs, birthdays, love lives, interests and causes with one another. In the “Nation of Facebook” your every thought is shared with all your friends at once. They can indicate if they like it, or make a comment. In addition, you or a friend can “write on the wall” if you wish to send each other private messages. The photographs area allows you to upload any of your photos and share them instantly with those you know. The best feature is the ability to tag a friend, and everyone they know will be informed that a photo has been loaded.

• In the Twitter application an actor, Ashton Kutcher, beat the news company CNN to having a million users following their “twitting” (Twitter is a service that allows you to send and post SMS messages to a network of contacts.) Kutcher had challenged CNN to the Twitter race, saying he would donate 10,000 mosquito bed nets to charity for World Malaria Day in late April if he beat CNN, and 1,000 if he lost. CNN agreed to do the same. "It's a turning point in media. He's one person who uses a free media platform to reach a large audience. And that really hasn't been done before," Cherwenka said. "He didn't spend a penny on this. And that's kind of the point of any kind of social activity on the Web."

• Digital divide is shrinking through the use of mobile technologies, in countries such as South Africa, Nigeria and Namibia especially in mobile telephony. More than half of the Namibian population has a cellular phone.

• ICTs are technologies that enable us to receive, disseminate and share information and knowledge as well as to communicate – they are the foundation of the Information Society and Knowledge Economy. The Polytechnic of Namibia is a mirror site for most of the information libraries across the world and a key node for connecting Namibia to the information highway.

• Telecommunication is technically defined as the transportation of information from point A to B. Telecom has a fibre optic cable covering almost all of Namibia – a fully digital transmission network (6500 km of Fibre Routes).

What does all this mean for Namibia?
Our challenges are:
• Nationally – the imbalances in basic infrastructure, education, health and government services
• Globally – the technological advances far outpace our national development

“Poverty does not only refer to lack of income, but also includes:
• the deprivation of basic capabilities;
• the deprivation of information needed for meaningful participation in society
• and lack of access to:
• education
• healthcare
• natural resources
• employment
• land and credit
• political participation
• services
• infrastructure, etc.

Neither investment in ICTs or access alone is sufficient for development to occur, ICTs must also mediate the delivery of useful services and civic interaction that contribute to the economic and social well being of the community.”

Creating a better future, Today
Namibia can use the latest technology to the benefit of all its residents. The attitude to education which is presently geared to becoming an industrial country, must be changed to a system where knowing where the information is available is more important than having the information in your head. This means moving from our present agricultural society to a knowledge-base society within five years.

This leapfrogging into a knowledge-based society can be assisted by creating an ICT Action Group (IAG) reporting directly to the President. The IAG should consist of four staff members, of which two should be young people under the age of twenty-five. (The (male and female) staff member should each have software programming skills and should also participate in gaming leagues such as Starcraft. In addition, they should have a minimum competency in the number of words they can SMS per minute on their cellular phone.)

The objectives of the IAG:
• Advise the President and Cabinet on ICT.
• Ensure ICT capability of all members of the Cabinet and their staff.
• Create a Government Ministerial scorecard on Information and Communication Technologies. This includes a baseline survey of computer equipment and civil servant skills, as well as monitoring the information availability over government websites.
• Oversee the creation of a central register for Namibia.
• Ability to declare certain areas to be under-serviced and secure funds from the universal service fund to roll-out infrastructure
• Identify international trends such as Facebook and Chat with the view of encouraging local sites that are able to provide the same service. A social network site for people located in Namibia (in other words within a national local area network) is within the capability of the Polytechnic or UNAM. This will encourage innovation and access to information.
• Promote local content development to enhance the National Identity.
• Host free internet websites for any resident of Namibia.

The funding for the Internet Action Group will come directly from the Universal Fund that is contributed to by the telecommunications companies in Namibia.