Mobile Specific Taxes Hinders Connectivity-Solomon

Gabriel Solomon is senior vice president, The GSMA which represents 750 mobile operators in more 220 countries in Africa, Asia, America and Europe. Solomon builds, leads and develops the GSMA’s public policy agenda and thought leadership programme to ensure that the Association plays an influential role in shaping the global regulatory agenda. He is responsible for raising the GSMA’s profile internationally through effective communications and relationship development with a large number of key audiences. Solomon spoke to hilary okeke.

Mobile Broadband in Africa

The GSMA is promoting HSPA as the pivot for penetration of mobile broadband. If you look across sub-Saharan Africa, broadband penetration is very low and for mobile, HSPA technology will benefit from global economies of scale – total cost of ownership will be much lower than any alternative technology, which is why I think in Africa, you need HSPA to drive access to mobile broadband. It will stimulate an accelerated growth in mobile broadband and prices will be coming down, strictly for handsets and dongles over the next few years, making it more affordable for millions of Africans. With HSPA, you will see a base station capable of having 84MB. That, to your laptops or handsets is huge. Do you need another technology? No. The total cost of owning an HSPA device – whether it is a phone or a dongle on a laptop or embedded on a laptop will come down massively. We are expecting a billion HSPA subscribers by 2012. The price of handsets for GSM users will come down as low as $30. From Qualcomm’s presentation, a low-end HSPA handset is now $53. This is an affordable technology for the mass market.

Mobile Broadband Internet Centres in Nigeria

We are holding talks with operators in Africa such as Vodacom, MTN. We are very open to working in Nigeria on certain projects but at the moment, there is nothing on ground. You know, things move quickly and we are still considering the projects here having spoken with the operators.

Connecting the Unconnected

Well, it depends on the context in which you are speaking. For example in Nigeria, the licences only came in some seven years ago. Now typically, there is an international average – you look at the average market, it takes 10 years to get 90-95per cent of the population connected. Look at what is happening in Africa, there is a massive amount of investment and this is driving coverage in rural areas. I think about 10 African countries have covered above 90per cent of their total populations and that is going to increase tremendously over the next few years. What we are seeing is a massive connection of rural communities, for example, the village phone concept in which MTN Uganda has connected about 500 unconnected people. So long it is the rural area, connection there includes other basic services and in that way, people are getting leverage in ICT, leverage in mobile network. It is true that there is a dearth of connectivity in the rural areas right now and that is regrettable.

Operators, GSMA Going Green

The GSMA development fund has a programme called ‘Green Power for Mobile.’ It is targeted at re-capitalizing the market; provide scale so that green installations become more affordable because for operators, that is the way out. At the moment, many of the green installations are quite capital intensive. Already we have seen green initiatives happening where solar and wind are used to generate power and operators are investing in these installations.

GSMA and Green Projects

The fund really is used in partnership with equipment vendors – solar panel providers, wind turbine providers. Being a new alternative means to generating power, most of our members are looking at it. If it is affordable and makes business sense and not too capital intensive, they will go for it but it has to be reliable and also has to make sense financially. And that is where the fund is trying to have an impact, to lower the prices of the solution and ensure that they operate at typically grade specifications that operators demand. When power is out, the network can be interrupted, calls drop and no one is happy.

Removal of Mobile Specific Taxes and Rural Connectivity

Obviously, people in the rural areas are poorer than those in the cities and affordability is a critical factor. When you impose specific taxes on handsets or airtime, it increases the price and makes services less affordable. It makes it harder for people in the rural areas to connect. Effectively, what these taxes do is constrain the market size, making products and services affordable by only a few people. We are not saying remove Mobile and Mobile services taxes; we are saying treat it like a normal good, not like diamond or caviar.

GSMA Projects for Africa

We are doing a lot in East Africa – in refugee camps. We are connecting refugee camps in Uganda and Rwanda with MTN and Zain’s ‘one network.’ We have leveraged on those to provide connectivity for places you could not imagine possible. There are lots of activities going on there.

Highlights of Abuja CTO

Well, the last time I came here, probably six months ago, I had a lot of calls dropping from my network but this time, I have not had a drop call yet and I am very impressed. So, I think the quality of service issues should be addressed here in Nigeria and I think the operators due to their investments are committed to building capacity and extend their network. I am very happy to see that because it is really happening; and also the roll out of Mobile broadband again, being able to connect my laptop through HSPA – it is all becoming fantastic!

African Regulatory Bodies and Growth of Telecom

I think the regulatory bodies are doing a very good job and what our members need is consistency and transparency and when you have that; when you have a regulator and a government that do not seek to get windfall from the industry now but seems to partner the industry for the long term, that is when you see fantastic results. That is why our members invest as much as their potential. When you see inconsistent regulation, when you see government demanding windfalls from the industry, say from licences; that is when you see constraints in investment; that is when the potentials to invest plummet. We did the research and saw how regulatory inconsistencies can reduce investment by 25% in sub-Saharan Africa and as you probably know, our members have committed to investing $50 billion in Africa for the next 5 years. This is the amount for GSM alone. You will also have investments for CDMA and probably fixed lines. What is going to be very important in underpinning the mobile broadband age in Africa, I think is open access on the sea cable linking Africa to the rest of the world, providing an umbilical cord to the global economy. Those are critical. A cable from West Africa to the rest of the world, I think has a lot of commercial potentials and can deliver a lot of values. So, guaranteeing regulatory consistency means that we might actually increase that investment by $12.5 billion, amounting to $62.5 billion.

Challenges to Growth of Telecoms in Africa

A lot of the challenges have to do with the infrastructure – you talk about getting network to rural areas, there are no roads, there is no electricity, there are no distribution points. For example, if our members in Europe want to connect someone in a very rural area, they have the capacity to do so – electricity, roads to carry out maintenance and other cost effective factors powered by infrastructure. That is not the case in Africa. I believe there is a strong argument for the telecom sector to work in conjunction with other infrastructures in the area – power, roads, railways – and leverage on those. I think also in Africa, electricity is maintained by the state; there is the need to liberalize this sector. I know certainly that in some countries, Mobile operators invest in generators and then provide electricity. They are effectively doing the job of the electricity company. For the investment in Mobile broadband, they are going to need 6 transmission pipes for fibre to effectively carry all these data and doing that in an affordable and efficient manner means you have to look across the industry to see where you can effect a change.

Competition Between GSM and CDMA in African

I think there has been competition particularly as fixed lines have used CDMA at the 450 level, which is quite a good spectrum for them. But the fixed line operators are suffering greatly. In Kenya, they have the CDMA network but they have had to now have a GSM network. Across the world, we are seeing CDMA operators replacing their network with GSM. I think the CDMA market share would decline significantly over the next few years while Mobile broadband would take up that share.

Mobile broadband

One of the issues is about affordability which is the bottom-line particularly in Africa. I think that the great demand for broadband needs the services delivered in an affordable way. How do you do that? How do you issue the licence? How much does the government want to licence the operators for these technologies? In Tanzania and South Africa, operators have been given long term licences and they have not been charged a premium for Mobile broadband services. The NCC would play a critical role in ensuring that there is enough spectrum here for Mobile broadband.