Republic of Ghana

Ministry of Communications

Telecommunications Policy Discussion Document

May 2004

I. Introduction

This Policy Discussion Document is intended to serve as a stimulus for industry comment and input toward the definition of a National Telecommunications Policy for Ghana. It is being issued in preliminary draft form in conjunction with the organization of an industry Workshop hosted by the Ministry of Communications, to encourage stakeholders to share their views and concerns regarding telecommunications policy in a common forum. Both the Discussion Document and the Workshop are part of an ongoing process for the development of the policy, which will continue to solicit and review contributions from the industry and the public.

All stakeholders are invited to present their views on the issues raised in this Document, both through participation in the Workshop, and in further written form, responding to the various topics and questions raised herein. The issues are divided into a range of topics and sub-topics, although many of these are inter-related. For each topic, a brief general discussion of the issue is presented, along with key policy questions. In some cases, a range of specific policy Options is offered, to further stimulate discussion. Commenters are invited to express their views on any topics and questions which may interest them. Wherever possible, it will be most helpful to include specific examples and details concerning proposed choices on policy options.

II. Vision

It is important to set the context of overall telecommunications policy and strategy in relation to a general Vision Statement for the sector. This Vision will necessarily be broad in nature, but it should capture the main objectives, priorities, and long-term targets for sector development, as well as the relationship of telecommunications policy to other Government policies and objectives.

Commenters are invited to present suggested language and principles for inclusion in the sector Vision Statement.

III. International Telecommunications Market Structure

International telephony and data services are an important feature for the facilitation of trade within the sub region and beyond. As such they are a key input to the development of the Ghanaian economy. International telephony and data services also constitute a significant entry point for the incoming foreign currency used by operators to invest in the development of their network. Aiming for the right market structure in this area will be instrumental to achieve the policy maker’s goal set above in its proposed vision statement. The following questions reflect the main issues faced by the policy maker in setting the right incentives for market players.

3.1. What should be the market structure for international gateway access?

Discussion: The international gateway allows its beneficiary to have direct access to international capacity from international bandwidth providers without having to transit through a Ghanaian third party. The main advantage boils down to being able to shop for the best price for international capacity, having direct interaction with the capacity provider when quality of service issues arise and terminating international traffic for an international call termination fee in foreign currency. Competition in access to international gateway services typically forces providers to compete on price and quality, driving therefore end-user prices down. In an environment with limited competition, similar benefits can be derived through the imposition of price controls (wholesale price controls in this case). In order to maximize the benefits of international services to consumers as well as to the Ghanaian economy as a whole, the following options are being submitted for comments.

Options:

• Postpone indefinitely licensing of any additional international gateway operators; require the resale of international gateway services to be priced at cost plus a reasonable margin
• Limit the number of new international gateway licenses to a small number (1 or 2), with strict requirements and limitations for obtaining such licenses.
• Allow any licensed fixed or mobile operator to obtain an international gateway license.

3.2. What policy should apply to Voice-over-Internet Protocol operations?

Discussion:

Incumbent national/international telephone carriers are growing increasingly concerned about the incidence of Voice-over-IP applications, which is permitting many users to “bypass” the traditional telephone network when placing and receiving international voice telephone calls. The result has been a dramatic decrease in revenues earned by these carriers from international traffic. In many countries, these VoIP arrangements are technically “illegal”, as the right to provide international voice telephone connections is reserved for licensed telephone companies only, and VoIP services are usually provided by small Internet-based operations, including Internet Service Providers (ISPs) themselves, which charge users a small fee to complete international voice calls utilizing the Internet. Voice-over-IP services raise fundamental issues for telecommunications regulation in an era of rapidly changing technological and market conditions: Can such services be regulated or prohibited? And how should such regulation be accomplished?

In practical terms, a policy of attempting to prohibit, monitor, and punish Internet-based telephone services is highly difficult for any regulator. Technical restriction is virtually impossible, as data and voice calls cannot be separately identified on the Internet. Public restrictions and penalties for small VoIP operators are very difficult to enforce. More important, there are real economic gains to be realized from the expansion of international communication that low-cost VoIP and similar technical solutions permit. The revenue “losses” that are occurring due to these market and technological shifts are, in this respect, and inevitable consequence of the advance of the telecommunications industry, just as microcomputers changed the market for large computer systems.

The most practical policy option, at least in the short-term, for dealing with VoIP services, may be to “legalize” and license these services. International experience suggests that such legalization will help encourage cooperative participation in the telecommunications sector by Voice-over-IP operators (whether ISPs or others). The regulatory authority can establish a formal licensing regime for VoIP operators, which requires payment of a reasonable registration fee, and compliance with certain regulations. These can include, especially, the obligation to pay connection/termination charges to the local switched telephone operator for termination of incoming international voice traffic on the domestic network. Such termination charges are justifiable on policy and economic grounds, and can make up for some portion (although not all) of the revenue diversion that VoIP produces.

Options:

• Prohibit unauthorized VOIP services, and pursue a policing and enforcement regime aimed at minimizing their impact.
• Provide for limited licensing of authorized VOIP operations, with requirements to contribute financially to sector development.
• Open VOIP services to relatively unrestricted entry as part of a broader open market approach.

3.3. How should access to SAT-3 capacity be treated?

Discussion: SAT-3 is an important asset for Ghana as it provides an alternative to satellite infrastructure for the provision of international telephony and data services and potentially for lower prices and higher volume of international capacity. Access to SAT-3 should be instrumental in driving Internet access costs down as well as improving its quality. An unchecked monopoly on the access to SAT-3 may prevent the consumers and the Ghanaian economy from fully deriving the benefits of Ghana’s connection to the SAT-3 submarine cable. At the same time, one should ensure that the operator who incurred significant investment in participating into the SAT-3 consortium should be rewarded fairly. In this context, the following options would benefit from the industry views.

Options:

• Maintain the status quo on access to SAT-3
• Impose a price control over the access to SAT-3 capacity, priced at cost plus a reasonable margin. Third parties to access to SAT-3 services through designated location as is the case today.
• Impose a price control over the access to SAT-3 capacity, priced at cost plus a reasonable margin. Third parties to access to SAT-3 services through connection to Ghana Telecom network at point closest to SAT-3 landing point.

3.4. What policy should apply to VSAT licenses and technology?

Discussion: The use of VSAT technologies has been instrumental for the development of businesses with a high level of consumption of international services and with a reliance on international data transmission (banks, etc.). Although this may constitute a significant portion of the international telephony and data services market (bypassing the use of local networks and therefore not contributing to the funding of Ghanaian networks), views are sought on maintaining a status quo so as not to create a disincentive on these businesses which are crucial for the development of the economy. Views are also sought on exploring the opportunity to have VSAT licensees contribute to the national GIFTEL fund as well as the opportunity to extend the availability of VSAT licenses to schools, hospitals and telecenters in rural areas.

IV. Access Network and Basic Telephone Services

This market segment addresses the “local loop” and related telecommunications network components, which deliver basic (fixed) access connections to end users. Traditionally, most telephone services have been provided over the basic access network, which was typically regarded as a “natural monopoly”, and reserved exclusively for the state operator (e.g., Ghana Telecom). More recently, Governments have introduced options for liberalizing the deployment of access network facilities, and Ghana was among the first countries to license a second network operator, Westel. Although the most common model combines the access network with national and international backbone and transport networks under a single license, there is a trend to recognize these as separate market segments, with the potential for different policy, licensing, and regulatory treatment.

4.1 (General) What restrictions, if any, should be placed on construction and operation of local telephone access networks and services?

Discussion: Expansion of local access is one of the fundamental goals of telecommunications policy. Traditionally, development of the access network has been subsidized by revenues from other services, especially international, as it has been considered economically infeasible to roll out widespread network facilities on a purely commercial basis. However, new technologies and market dynamics are creating the potential for a variety of alternative business models in the local telecommunications access industry. It is still not clear how successful some of these approaches may be in expanding access to underserved locations and populations, and what effect competition for local access might have on the market. However, it may be worth promoting innovation and experimentation in this segment by relaxing restrictions on entry and introducing a more open licensing regime.

Options:

• Retain restrictions on local network deployment, requiring a full operator’s license to build and operate such networks.

• Consider licensing new local access networks on a case-by-case basis, in conjunction with other policy and regulatory initiatives, such as Universal Access programs; entertain proposals for unique network development plans as they may arise.

• Actively open the market for local access network investment, subject only to basic license authorization and standard requirements for interconnection and fair competition.

4.2 What role should mobile licensees play in providing fixed access services?

Discussion: From the first stages of the cellular telephone revolution, “fixed” and “mobile” telephony have been considered separate and distinct telecommunications market segments. The distinctions have been based on the underlying technologies (wireline vs. radio transmission), as well as the pricing and service characteristics of each type of operator. However, along with most other aspects of the telecommunications industry, mobile and fixed technologies are “converging”, and these traditional distinctions are becoming less clear all the time. One important feature of this convergence is the potential for wireless “mobile” licensees to offer the equivalent of “fixed” telephone services over their networks. Technically, this requires only the placement of dedicated terminal equipment that is compatible with the existing radio network signals. From a policy and regulatory perspective, however, questions arise regarding the possible requirement for separate license authorization for such service, its tariff treatment, interconnection agreements, and other concerns. These issues relate to the use of fixed-wireless technology both basic individual telephone services, for public “pay” telephone service, and for switched data applications as well.

Options:

• Restrict the use of mobile networks for providing fixed telephony service; require separate license authorization for such service.

• Allow existing mobile operators to provide fixed voice telephone service, subject to the same obligations and requirements as fixed line operators.

• Allow unrestricted provision of fixed voice and data services by mobile operators, within the terms of their basic mobile service licenses.

4.3 What should be the licensing regime/market structure for rural access networks?

Discussion:

As discussed generally under 4.1 above, there are a growing number of potential new opportunities for providing local telecommunications access on a commercial basis. Although the most attractive business models typically remain in more developed urban centers, rural access services are also candidates for innovative new development schemes. Because other policy priorities emphasize rural development (see Universal Access, Part V), there may be a need for a distinct licensing regime relating to rural access.

Options:

• Restrict deployment of independent rural access networks; allow only licensed basic telephone operators to build and operate such networks.

• Allow rural-only networks to be built and operated by independent investors, in the context of Universal Access policy initiatives, subject to license terms and conditions that are specific to each deployment plan.

• Broadly open the market for rural access network deployment, encouraging operator innovation and investments wherever they may choose, subject only to basic licensing, interconnection, and regulatory oversight requirements.

4.4 What form and degree of liberalization and licensing regime should apply to the market for payphones/telecenters?

Discussion:

Public telephones are an important component of the local telephone access market, and in Ghana this market has proven to be quite profitable, more so than in many other African countries. This market segment includes traditional payphone instruments, through which users may automatically place calls, either paying by coin or utilizing pre-paid phone cards. It also includes small local “telecenter” or “phone shop” operations, at which callers may pay the proprietor to place calls, and may also access a variety of other services. (Internet cafés are another version of this type of business, but may require different regulatory treatment.) Traditionally, public telephones have been provided exclusively by the fixed-line telephone operators themselves; however, competitive pay phone operations are beginning to become available in many countries. These systems must still rely upon the underlying public telephone network for connectivity, just as private telecenters only “resell” basic network access, generally for prices that are significantly higher than end-user telephone tariffs. The advantages of payphone competition and telecenter services are that they can greatly expand availability and choice for many telephone customers. However, they raise a number of concerns, including price gouging, quality of service, and fraudulent practices.

Options:

• Restrict provision of public payphones to licensed network operators only; public telecenters must be licensed and authorized as affiliates of the licensed operators.

• Allow independent provision of public telephone services by individual local businesses through the telecenter model; establish regulatory standards for such telecenters, including pricing and service requirements.

• Open the market for public telephone services as much as possible, allowing both competitive payphones and relatively unrestricted private telecenter services; concentrate regulation on consumer protection and fair competition.

4.5 What policies should apply to broadband and cable network deployment?

Discussion:

Beyond basic voice-grade telephone service, local fixed access networks are now increasingly expanding in capacity, to offer broadband level connectivity, for high-speed data/Internet services, and even cable television and multimedia applications. The investments required to provide such capacity, whether for fiber optic lines, coaxial cable, or Digital Subscriber Line (DSL) transmission facilities, can be very high, requiring a substantial degree of market demand to justify the costs. However, when combined with other telecommunications services, economies of scope may allow more cost-effective deployment of broadband systems. Ideally, policy and regulation should find ways to encourage expansion of such networks as widely as possible, including in rural areas. However, selective deployment of such networks could result in “cream-skimming” of high revenue customer groups, potentially inhibiting broader sector development objectives.

Options:

• Allow only fully licensed operators to deploy and offer broadband networks and services.
• Open the market for broadband access to new, specialized operators, but limit their services to wholesale capacity provision.
• Allow open entry into the market for broadband network access, while regulating such operators in the same manner as other competitive providers.

V. Other Market Structure Issues

5.1 Backbone network services: What options should be considered to maximize the benefits to the sector of the development of Voltacom’s backbone?

Discussion: With the existence, through Voltacom’s fibre network, of a foundation for a national fibre backbone network, Ghana is in a unique position in Sub-Saharan Africa. The benefits to be derived are however yet to be fully realized. For the currently state-owned Voltacom’s network to be expanded and activated, several key issues have to be addressed including ownership, access to the network, pricing of wholesale services, ability to serve end-users directly.

Options:

• Option 1: Delay options for ownership issue, concentrate on developing Voltacom network clarify its mode of operation and it position in the market (wholesale bandwidth services only, or wholesale and retail bandwidth services). Later privatization of Voltacom.
• Option 2: Sell the Voltacom assets to an existing operator and have that operator undertake the network extensions required, meanwhile using the capacity to support its existing business. Place some conditions on access by third parties (and price level) so as to maximize benefit to the sector as a whole.
• Option 3: Sell the Voltacom assets to a new operator and have that operator undertake the network extensions required. Place some conditions on access by third-parties (and price level) so as to maximize benefit to the sector as a whole.

5.2 Internet Service Providers: What regulatory treatment should be established for ISPs to promote a competitive and growing national market for Internet services?

VI. Licensing Policy

Most of the key policy issues relating to development of the Ghana telecommunications market structure, as detailed above, ultimately depend upon some form of licensing regime to implement whichever options are chosen. Thus, whether a given market segment will be relatively restricted or relatively open in the short run, the mechanism for formalizing that market structure will be the licensing process. To date in Ghana, telecommunications licensing has largely consisted of ad hoc, often inconsistent procedures, which lack the transparency that is essential to stable development of a liberalized market. For the new telecommunications policy to be effective therefore, a clear and rational licensing regime must apply across all market segments. Two main components of this regime stand out, and should be formally established within the policy: (1) criteria for awarding any given category of license; and (2) obligations associated with receiving a license, including payment of fees. It should then be the responsibility of the National Communications Authority for issuing licenses under these policy provisions, and for establishing the more detailed procedures for inviting license applications, setting terms and conditions, and ultimately awarding licenses on a transparent and non-discriminatory basis.

Comments are invited on the following policy questions, and any other aspects of licensing policy that should be considered:

6.1 What types of criteria and qualifications should apply to license applications, and how should such criteria be determined in different cases?

6.2 How should the specific obligations and other terms and conditions attached to various licenses be determined?

6.3 How should license fees be determined for various types of licenses, and what principles should apply?

VII. Universal Access Policy

The overriding objective of the telecommunications policy is to promote expanded access to communications services throughout the country. The motivation for liberalizing the sector and encouraging active competition is to allow market incentives to play the lead role in stimulating network development, to remove artificial barriers to growth. Where market forces may be insufficient to bring affordable services to certain geographic regions and customer groups, an affirmative Universal Access policy can be an effective complement to the market. The Government has already taken initial steps to create such a policy through the establishment of Giftel, a funding mechanism which can provide a means for channeling targeted financial support to network development efforts in rural and remote areas, among other objectives. The details of Giftel’s operation, and the guiding principles for access policy still need to be established. Comments are invited on these and related issues:

7.1 What should be the main priorities and target objectives for Universal Access policy?

7.2 How should Giftel be structured and managed, and how should be its operating procedures be established?

7.3 What should be the network development obligations of various licensed operators in the context of market liberalization policy, and how should these relate to the functions of Giftel?

VIII. Competition Policy

As the liberalization of the Ghana telecommunications market proceeds, competition will become the driving force in industry development. The success of sector policy will depend greatly upon effective regulation of the competitive market. The principles embodied in Ghana’s commitment to the World Trade Organization establish general guidelines for competition policy: transparency, non-discrimination, independent regulation, and fair treatment of all market participants. In practice, implementation of these principles will be among the most important functions of the NCA. Among the key issues that competition policy and regulation must address are the following:

8.1 Interconnection: Ideally, operators competing in a market segment, or connecting across different markets, will find the incentive to work out equitable interconnection agreements among themselves, to their mutual benefit. However, in many cases interconnection disputes may arise, whether over technical terms and conditions or financial arrangements. The telecommunications policy must set out clear principles for the obligations of licensed carriers regarding establishment and enforcement of interconnection agreements. NCA’s regulations must then determine a range of specific procedures and criteria for implementing such principles in a timely and equitable manner. These may include facilitating operator negotiations, developing “Reference Interconnection Offers”, and defining specific methodologies for calculating access costs.

Comments are invited on the nature and scope of interconnection principles that should be embodied in the national telecommunications policy, and on the procedures and mechanisms for interconnection regulation by NCA.

8.2 Regulation of Dominant Operators: A key responsibility for regulation in a competitive environment is dealing with the potential distortions in the market that can arise from the presence of operators with “significant market power” or dominance. Such dominance can result from the pre-existing monopoly position of a carrier such as Ghana Telecom, from control over key network bottleneck facilities in specific locations, and/or from market developments over time that may limit competition in various segments. Without strong regulatory oversight, dominant operators may inhibit further competitive growth and curtail the customer and economic benefits of telecommunications development through such practices as cross-subsidies and predatory pricing, restrictions on network access, and preferential treatment of affiliated operations. There are a range of mechanisms for addressing the impacts of market dominance, among them accounting oversight, sanctions and penalties, and structural separation of competitive and bottleneck operations.

Comments are invited on the appropriate policy and regulatory measures required to address existing and potential dominance in various market segments.

8.3 Facility Sharing: Efficient development of a competitive industry will depend partly on the ability for operators across the sector to take advantage of scale economies in many of the capital-intensive facility investments that telecommunications operations demand. These can include almost any major component of the transmission and switching networks, especially such major fixed investments as telephone poles and conduit, radio towers, backbone transmission capacity, and even central office buildings and equipment. Costs for constructing such facilities can be compounded by the need to acquire rights-of-way. The telecommunications policy and regulation should encourage competing operators to share facilities wherever possible on an equitable basis, subject to strict rules preventing anti-competitive practices.

Comments are invited on the principles and mechanisms that should be established to promote competitively neutral sharing of network facilities.

IX. Other Issues

Comments are also invited on the following aspects of telecommunications policy:

9.1 Tariff Regulation: What principles should apply to the regulation of tariffs for services by various types of operators, and what mechanisms should the NCA establish to implement such regulation?

9.2 Consumer Protection: What consumer protection measures should be incorporated into the policy, and how should they be enforced?

9.3 Spectrum Policy: How should management of the frequency spectrum be implemented and what principles should apply? What are the key spectrum allocation and management challenges that should be addressed most urgently?