MARCH 2019 ECOWAS ICT African Regulatory Watch Initiative on Licensing Regimes, OTTs and International Gateway Liberalization Publication of the first edition of the RWI index, dissemination and communication campaign Contact : Olivier Jacquinot olivier.jacquinot@progressus-corp.com - 1/43 - Table 1 Objectives and content of the report ............................................................. 3 1.1 Objectives of the Study .........................................................................................3 1.2 Objectives of the report Task 3 .............................................................................4 1.3 Content of the report Task 3..................................................................................4 2 Communication Plan....................................................................................... 5 2.1 Objectives .............................................................................................................5 2.2 Organization .........................................................................................................5 2.3 The workshop .......................................................................................................6 3 Branding and website ..................................................................................... 7 4 Monitoring and evaluation framework ......................................................... 15 5 Sustainability note and draft TORs.............................................................. 17 5.1 Sustainability note ............................................................................................... 17 5.2 Proposed topics and regions for the second phase of ARWI ............................... 17 5.3 Draft TORs.......................................................................................................... 18 5.3.1 Background ................................................................................................................ 18 5.3.2 The first phase of the African ICT Regulatory Watch Initiative Program ................... 19 5.3.3 Objective .................................................................................................................... 19 5.3.4 Scope of Work ............................................................................................................ 20 6 ARWI Executive Report ................................................................................ 22 - 2/43 - 1 OBJECTIVES AND CONTENT OF THE REPORT 1.1 Objectives of the Study The objective of this study is to implement the first phase of the African Regulatory Watch Initiative (ARWI), which will initially focus on licensing regimes, OTT and International Gateways Liberalization in the ECOWAS region. More precisely, the objectives of the study are: (i) Conduct a thorough regulatory and competitive assessment and diagnosis of the impact of African Regulatory Watch Initiative on regulatory regimes, OTT and international gateway liberalization and its taxation in the ECOWAS region; (ii) Identify guiding principles, main regulatory bottlenecks, opportunity costs, policy recommendations and remedies pertaining to African Regulatory Watch Initiative on regulatory regimes, OTT and international gateway liberalization and taxation in the ECOWAS region; (iii) Design the ICT ARWI index to capture the above-mentioned regulatory bottlenecks (Identify the specific measures, on which to base the Index, and the process for gathering the data); (iv) Benchmark the current regulatory and legal framework using the ARWI index within the region, rank and map the countries according to the ARWI index. The benchmarking includes and evaluation of the effectiveness of the index in highlighting the downstream impacts on the consumer and the extent of the digital divide – the development of the market; (v) Design and implement (in association with ECOWAS countries) a communication plan to disseminate the ARWI index and annual report including, but not exclusively: logo, PowerPoint presentation, dissemination tour plan, press releases, communication campaign; (vi) Evaluate this phase of the project through a monitoring and evaluation framework agreed with Bank team and consistent with the theory of change principle. The deliverables of the study are the following:  Inception report with precise planning of the assignment.  Report Task 1 – Thorough legal, regulatory and competitive analysis of issues related to regulatory Regimes, OTT and International Gateways Liberalization in the ECOWAS region  Report Task 2 – Model of the ARWI index, benchmark and comparison  Report Task 3 – Publication of the first edition of the ARWI index, dissemination and communication campaign  Final workshop (final presentation of the study findings)  Submission of final study (ARWI) - 3/43 - 1.2 Objectives of the report Task 3 This report represents the fourth deliverable for the study on “ECOWAS ICT African Regulatory Watch Initiative on licensing regimes, Over the Top (OTT) services and international gateway liberalization. The objectives of the report Task 3 are to publish the first edition of the ARWI Index and to establish a plan for dissemination and communication campaign. In more details, the report Task 3 will address the following issues: → Prepare, design and implement a communication plan which could be structured as follow: strategic overview, Communication Platforms, messaging, and campaign; → Brand the ARWI index and annual report (photos, logos, cartoons, graphics, tables, graphs, etc.); → Draft a publication in line with the communication scheme developed before and which will highlight the findings of the study including regulators with the best and worst practices; → Convene a workshop with all stakeholders to present and validate the findings of the study including any updates and make recommendations on the way forward and next steps; → Create a monitoring and evaluation framework which will be utilized throughout the duration of the framework and should be consistent with the Digital Development Partnership/theory of change; → Prepare a “sustainability note� for the ARWI index and draft the TORs for the consultants who will be recruited to undertake phase 2 of the initiative. 1.3 Content of the report Task 3 The present report Task 3 contains the following chapters, that address the objectives indicated above. Chapter 1: Introduction and objectives Chapter 2: Communication plan including strategy, targets, means and organization Chapter 3: Branding and website Chapter 4: Monitoring and evaluation framework Chapter 5: sustainability note In appendix is presented the ARWI Executive Report. - 4/43 - 2 COMMUNICATION PLAN 2.1 Objectives The reports for Task 1 and Task 2 of the ARWI study have provided a whole framework for the analysis of the regulatory, market and competitive position of ECOWAS countries in regard of the three topics of ARWI, as well as the Index methodology and results. The communication plan is intended to promote the ARWI index and main results to policy makers in the ECOWAS region and ultimately be a tool for proactive change in regulations and their implementation in the region. In view of these objectives, the main issues of the communication plan are: - The recognition of the ARWI as setting standards and best practices that should be an objective for all countries. This is not obvious, since many countries do not share the same vision on what should be an efficient regulation (in terms of licensing, of applying regulations, etc.), or do not have sufficient power to effectively implement a competitive framework; - The appropriation of the country benchmarking. It is important that the ARWI should be taken seriously by the ECOWAS Member States, and fully recognized as a strategic objective; In addition to being recognized as a strategic objective, it is essential that the country positioning is well adopted and not contested by each country. The ARWI index must here demonstrate its objectivity, soundness and completeness; - This means that there must be a process by which Member States agree to adopt it, rather than seeing it as something the World Bank is using to determine from above which the ‘good’ countries are; - The creation of competition between countries: It would be ideal if attaining a high position in the ARWI will be seen as a challenge by countries and would motivate new policies and decisions. There is a risk which must not be underestimated that some poorly ranked countries believe the ARWI index is inappropriate or based on wrong methodologies and data. Such a situation is common in other domains and will need to be addressed in a clear process to ensure that all countries buy in to the index. In order to push the dissemination, three levels of communication have been identified: 1) Key stakeholders, including Fund Stakeholders and World Bank management; 2) ECOWAS Commission, Ministries in charge of ICT and Regulators; 3) Operators and other stakeholders. 2.2 Organization The communications tools are based on the current reports, executive memos and website, with the following organization. - 5/43 - Who Outcome Fund stakeholders (GSMA) � Exchange of information / strategic issues � Agreement on main conclusions World Bank Management and � Appropriation of main issues country Managers � Validation of the reports � Agreement on further communication steps ECOWAS Commission � Appropriation of main issues � Endorsement by ECOWAS Commission for communication to Member states Country Members governments / � Initiation of appropriation process regulators and policy makers � ARWI to be considered as a potential tool for moving ahead Operators and other stakeholders � Awareness from industry and potential lobbying issues Press / Analysts / Investors � Broad diffusion of ARWI concepts and main messages The communication tools will be used in accordance of the communication targets: - Full reports will be reserved to the World Bank and possibly sent (with the prior authorization of the World Bank) to ECOWAS Commission and Member states - ARWI Executive Report is intended to be sent to ECOWAS Commission, Member States, Regulators and Operators with the prior authorization of the World Bank; - The website is intended to be publicly accessible, with the prior authorization of the World Bank. In a first step, the website may be only accessible by designated parties (such as ECOWAS Commission, Member States and regulators) by using a restricted access. 2.3 The workshop The communication process includes a workshop to be held and organized by ECOWAS Commission with the participation of ICT policy makers from Member States and high-level representative from the Telecommunication’s Regulators. This specific workshop will include a half day session of presentation of the ARWI methodology and results and discussions with the participants. The organization is currently in discussion. The workshop should be organized before the end of 2018. The workshop will be a key event for the promotion of the ARWI. Therefore, it must be carefully prepared in order to maximize the impact. The workshop: - Should take place in an attractive location to attract the maximum number of key stakeholders; - Must be sufficiently anticipated to build awareness among stakeholders, - Provide invitations to the press and ensure sufficient press coverage, - Gather a maximum of stakeholders from public administrations (governments, agencies and NRAs, operators, other industry leaders, associations, etc.), - In addition, it could be more efficient to have more than one workshop to facilitate the buy-in process. The best option would be that the process would be driven by the ECOWAS Commission. - 6/43 - 3 BRANDING AND WEBSITE The ARWI Index will be provided as a dedicated website. The website is currently in construction on a test platform within the Consultant’s premises and will be transferred to an operational platform according to decisions to be made by the World Bank. The website is organized as follows: - Front page: broad description of the ARWI and results per country (for the Index and clusters) - Country page: for each ECOWS country, a specific page will include: � The detailed results for the country � Market information and benchmarks - Reports and other information: the website will provide the accessibility to designated reports (ARWI Index memo and other reports, links to other sites, etc.) Models of the pages are provided below. - 7/43 -  Front Page - 8/43 -  Front Page (contd) - 9/43 -  Cluster pages - 10/43 -  Cluster pages (contd.) - 11/43 -  Country Page - 12/43 -  Country Page (contd.) - 13/43 -  Country Page (contd.) - 14/43 - 4 MONITORING AND EVALUATION FRAMEWORK The monitoring and evaluation (M&E) of the ARWI is presented in the table below, which is designed in accordance to the Theory of Change framework for the Digital Development Partnership (DDP) as defined by the World Bank. Theory of Change Development DDP Offering Outputs Outcomes Impact Challenge Lack of awareness Integrated indicators Increased Increased Inform the design of about the and statistical awareness about understanding of the the Bank’s ICT opportunities of frameworks for SDG the opportunities of impact of ICT on interventions and to digital development target monitoring digital development, households in the better align them to and the means to and the policy and bottom 40% in the the Bank’s twin reap digital Client feedback loops regulatory reforms region goals – poverty dividends to monitor needed to reap reduction and implementation of digital dividends shared prosperity Lack of capacity to policies and foster data driven preparedness Policy makers and Increased and evidence-based agencies have understanding of digital development better data to potential impact of manage and the Bank’s ICT monitor their interventions on programs some of the SDGs targets Output Indicators No. of Reports Completed No. of Laws/ Regulations Drafted No. of Laws/ Regulations Improved Target: 3 Target: 0 Target: 3 Achieved: 3 Achieved: 0 Achieved:0 No. of Entities Advised No. of Training Events No. of Participants in Training Events Target: 15 Target: 1 Target: 50 Achieved: _____ Achieved: _____ Achieved: _____ No. of Participants Giving Feedback % Feedback of Satisfied and Above No. of Media Appearances Target: 10 Target: 30% Target: 5 Achieved: _____ Achieved: _____ Achieved: _____ - 15/43 - Intermediate Outcome Indicators ARWI Impact (Licensing): No. of ARWI Impact (OTT): No. of ARWI Impact (International countries increasing openness in countries alleviating tax and Gateways): No. of countries licensing regulatory burden on operators abolishing SSIT or increasing international open access Target: 4 Target: 2 Target: 2 Achieved: _____ Achieved: _____ Achieved: _____ ARWI Impact (Licensing): No. of ARWI Impact (OTT): No. of ARWI Impact (International countries increasing countries increasing Gateways): No. of countries Licensing Index by 1 in 1 year OTT Index by 1 in 1 year increasing Intl Gateway Index by 1 in 1 year Target: 4 Target: 2 Target: 2 Achieved: _____ Achieved: _____ Achieved: _____ No. of Laws/ Regulations Improved/ No. of Entities Implementing Eliminated Recommendations Target: 3 Target: 3 Achieved: _____ Achieved: _____ Outcome Indicators Increased Broadband penetration Increased Internet bandwidth and Lower Internet prices consumption Target: 80% of population Target: 3 GB per month per user Target: TBD Achieved: _____ Achieved: _____ Achieved: _____ Impact Indicators Increased consumer surplus Increased producer surplus Increased state revenues Target: TBD Target: TBD Achieved: _____ Achieved: _____ - 16/43 - 5 SUSTAINABILITY NOTE AND DRAFT TORS 5.1 Sustainability note The first edition of the ARWI has covered three topics for ECOWAS countries. The continuation of ARWI raises five issues: (i) Operate ARWI Index: this is a technical and functional issue related to the database and website of ARWI. ARWI data are constituted of reports and Excel spreadsheets and need to be hosted on a secured server, as well as the website. The volume of data is limited (GB is the order of magnitude) so there are not complex issues of data management; (ii) Consolidate existing ARWI Index. This refers to the actualization and potential refinement of the ARWI Index set up in the first phase. The first index is mainly based on 2017 data, and since the objective of ARWI is to push forward the evolution of regulation, this needs to be measured in yearly evolution of the index and its components. This implies that ARWI data are updated each year and that potential refinements may be introduced in order to adapt the index to market evolution; (iii) Extend ARWI topics. The limitation of three topics for the first edition was a realistic decision to allow an effective realization of the index. However, many regulatory issues need to be added to the index. They are described below; (iv) Extend ARWI countries / region. There is also a great importance to extend ARWI to other regions in Africa, once the first ARWI has proven useful and effective; (v) Animate ARWI. This is of prime importance. The first edition of ARWI will have produced reports, a website and a workshop that will have built a first step towards awareness among policy makers and other stakeholders. However, this will not be sufficient in the future, and there needs to be a constant animation in the production of reports and data, animation of the website and other regular communication such as press and radio, future workshops or other communication means. 5.2 Proposed topics and regions for the second phase of ARWI Among the likely priority areas for future inclusion in the Index would be: 1. Spectrum regulations – availability of wavebands and details of fees. Spectrum access is one the key constraints on network development and limited or costly spectrum is a common problem for many operators. See for example the Benin government dispute with MTN1. 2. Publication of sector specific taxes, import duties, regulatory fees and USF levies required from operators and customers. This would provide a direct indication of the sector specific burden, and would avoid depending on third parties for data (requires operators to publish all fee structures). 3. RIO scope – indicators to track the technical information provided – e.g. if reference offers are limited to national stakeholders only, and bandwidth range (STM and low voice oriented bandwidth availability), and locations of international and national points of presence. 1 https://www.ticmag.net/benin-mtn-parvient-a-accord-gouvernement-paiement-frais-de-frequences/ - 17/43 - 4. Requirements for publication of the license text attributed to the operators 5. Passive infrastructure sharing requirements and dig once policies – infrastructure sharing and dig once policies can make a major difference to the costs incurred by operators in rolling out services. Indicators here could include price controls on passive infrastructure - masts, poles, ducts, etc. (especially for 3rd party towerco operators which may have dominance in the tower market following increased sell offs by mobile operators.) 6. Dispute resolution mechanisms – operators in some countries benefit from the right to go before the regulatory authority, but the same may not true for other member states. 7. Regulation of Mobile Payments, Mobile Money and e-Commerce. These services are increasingly important sources of revenue for mobile operators looking to diversify their services away from their core business of voice and sms. 8. Rules on use of scarce resources (voice fixed/mobile phone numbering, IPv4/IPv6 allocations, and spectrum). 9. Rules on reporting use of scarce resources by operators. Voice phone number reporting also needs to include use by VoIP and OTT communication service providers. VoIP providers depend on local number block allocations and OTT service providers such as Whatsapp depend on users’ mobile numbers for authentication. This means each of these groups have precise data on the number of users of their service in every country and the frequency of use. Where data is privately held by operators, legal frameworks may be needed to compel reporting of these valuable data points to regulators for publication in consolidated format as part of their market status monitoring. 10. Scope of QOS targets and 11. Penalties for missed license targets/obligations. 12. Handset import duty. 13. Cyber Legislation, network readiness and emergency response frameworks 14. ccTLD Registration (DNS) requirements/rules 15. Procedures required for personal data processing – classification of types of data subject to/exempt from declaration. Procedures relating to requesting, processing and storing personal data. E.g. on consent and legitimacy, accuracy, confidentiality and security, choice, prohibition of direct prospecting, etc. Rights to Information Access. In addition, it is proposed that the ARWI would be extended to another region, which could be ECCAS, as being in geographic continuity with ECOWAS and having similar bottlenecks. However, this issue is left to future decisions of the World Bank. In this perspective, the following draft TORs constitute the requirements for the action plan aimed to address all these issues. 5.3 Draft TORs 5.3.1 Background After a period of successful implementation of efficient regulation that led to market liberalization, fast development of the mobile market and huge investment in international capacities, there are today strong challenges for the development of the digital economy in Africa. Despite a large spread of digital technologies, digital dividends have lagged behind, - 18/43 - with a persistent digital divide across gender, geography (rural areas), etc. Many regulatory factors hinder uptake of broadband usage: QOS, roaming, licensing, spectrum allocation and assignment, taxation, liberalization and tariff related issues and a number of issues are preventing countries from achieving a single telecoms market with seamless connectivity, such as regulatory institutions unable to take into account the new paradigm of Digital Transformation, complexity of regulation, lack of a cohesive regional regulatory framework and insufficient effective implementation or enforcement. From a broader perspective, current regulatory frameworks have not given their respective domestic markets the “big push� that is needed to shift the current market dynamics led by innovation, rapid technological changes and new features such as digital platform, big data and Over-the-Top (OTT). These new dynamics of competition and regulatory challenges call for a New Deal in regulation and competition policy. The ICT African Regulatory Watch Initiative (ARWI) launched by the World Bank is aimed at making ECOWAS Member States move toward a second phase of reform to remove the last bottlenecks due to monopolies or dominant positions and unnecessary regulatory barriers to entry on the market, remove gaps in regional harmonization, take into account new actors such as OTT and avoid excessive tax burden. 5.3.2 The first phase of the African ICT Regulatory Watch Initiative Program The first phase of the African Regulatory Watch Initiative (ARWI), has been focused on licensing regimes, OTT and International Gateways Liberalization in the ECOWAS region. More precisely, the first phase of the ARWI has provided: (i) A thorough regulatory and competitive assessment and diagnosis of the impact of African Regulatory Watch Initiative on regulatory regimes, OTT and international gateway liberalization and its taxation in the ECOWAS region; (ii) The guiding principles, main regulatory bottlenecks, opportunity costs, policy recommendations and remedies pertaining to African Regulatory Watch Initiative on regulatory regimes, OTT and international gateway liberalization and taxation in the ECOWAS region; (iii) The methodology for the design and calculation of the ARWI index to capture the above-mentioned regulatory bottlenecks (Identify the specific measures, on which to base the Index, and the process for gathering the data); (iv) The provision of reports including the regional competitive and regulatory analysis, the index methodology and results with appropriate benchmarks among countries; (v) The realization of a communication plan to disseminate the ARWI index and annual report including the documentation, a dedicated website and a regional workshop. 5.3.3 Objective The objective of the overall activity is to support the second phase of the African ICT RWI which will focus on spectrum regulation in the ECOWAS region. This includes tackle the - 19/43 - new legal, regulatory and competitive challenges which are delaying the uptake of digital technologies and the spread of digital dividends. The objective of this consultancy is to: i. Conduct a thorough regulatory and competitive assessment and diagnosis of spectrum regulation in the ECOWAS region; ii. Identify guiding principles, main regulatory bottlenecks, opportunity cost, policy recommendations and remedies pertaining spectrum regulation in the ECOWAS region; iii. Model the additional components of the African ICT RWI index to capture the above mentioned regulatory bottleneck; iv. Benchmark the current regulatory and legal framework and ARWI index within the region, rank and map the countries according to the ARWI index; v. Design and implement a communication plan to continue the dissemination of the ARWI index and annual report including, but not exclusively: power point presentations, dissemination tour plan, press releases, communication campaign; vi. Evaluate this phase of the project through a monitoring and evaluation framework agreed with Bank team and consistent with the theory of change principle (attached in annex). 5.3.4 Scope of Work The scope of work includes the three following tasks. → Task 1 – Thorough legal, regulatory and competitive analysis of issues related to spectrum regulation in the ECOWAS region - Review the current regulatory framework for spectrum management including fees, processes for attribution, monitoring, etc. and analyze the economic and competitive impact on the market; - Evaluate the various options for regulatory interventions necessary at the national level, taking into account the background and rationale for the study as well as best practices. → Task 2 – Model of the ARWI component index for spectrum management, benchmark and comparison and update existing ARWI Index (Licensing regimes, OTTs and International gateways) - Identify the indicators to be used to calculate the ARWI component index for spectrum management on the basis of the following criteria: relevance, data availability. - Collect data and interview regulators, ECOWAS commissions, and regulatory experts. - Prepare a complete report containing: (i) a global analysis of the ARWI index, (ii) a country analysis, (iii) a sensitivity analysis and, (iv) recommendations. → Task 3 – Publication of the first edition of the RWI index, dissemination and communication campaign - Prepare, design and implement a communication plan in continuity of existing communication and awareness of ARWI. - 20/43 - - Draft a publication in line with the communication scheme developed before and which will highlight the findings of the study including regulators with the best and worst practices - Convene a workshop with all stakeholders to present and validate the findings of the study including any updates and make recommendations on the way forward and next steps. - 21/43 - 6 ARWI EXECUTIVE REPORT The ARWI Executive Report is also provided as a separate document from this report (ARWI Executive Summary). - 22/43 - THE WORLD BANK ECOWAS ICT African Regulatory Watch Initiative on Licensing Regimes, OTTs and International Gateway Liberalization Executive Report 13th August 2018 Contact : Olivier Jacquinot Tel : +331 45 25 53 12 / +336 83 57 08 59 Email : olivier.jacquinot@progressus-corp.com - 23 - 1. A CALL FOR A NEW DEAL IN REGULATION AND COMPETITION POLICY During the last two decades, ECOWAS countries have managed to implement an efficient regulation that led to market liberalization, fast development of the mobile market and major investment in regional and international capacity. However, ECOWAS countries are now facing, as everywhere in the world, the new challenges and market issues resulting from the rapid development of data, the emergence of OTTs as disruptive innovative market players, and the operators’ revenue shift with a significant decrease in voice revenues being only partially compensated by the growth of data revenues. There are some additional issues in ECOWAS resulting from (i) the lower level of revenues of the operators2 and (ii) the higher cost of overheads in the region (national and international capacity costs, power, transport, etc.). Indeed, there are still today strong challenges for the development of the digital economy in ECOWAS. Broadband development is still far behind developed countries, digital dividends have lagged behind, with a persistent digital divide across gender and geography (rural areas). Many regulatory factors continue to hinder the uptake of broadband (Quality of Service, licensing, spectrum allocation and assignment, taxation, liberalization and tariff related issues), and a number of issues prevent countries from achieving a single telecoms market (across countries) with seamless connectivity. From a broader perspective, current regulatory frameworks have not yet given their respective domestic markets the “big push� that is needed to shift to the current market dynamics led by innovation and rapid technological changes such as digital platforms, big data and Over-the- Top (OTT) services. These new dynamics in competition and regulatory challenges call for a New Deal in regulation and competition policy. The ICT African Regulatory Watch Initiative (ARWI) launched by the World Bank is aimed at helping ECOWAS Member States move towards a second phase of reform3 to remove the remaining bottlenecks resulting from monopolies or dominant market positions, as well as unnecessary regulatory barriers to entry in the market. Initiatives in this area also need to take into account new actors in OTT services, hurdles to regional harmonization and tax burdens on the sector. The objective of this study is to implement the first phase of ARWI which will initially focus on licensing regimes, OTT and International Gateway Liberalization in the ECOWAS region. Further developments of ARWI should encompass more countries and more subjects. 2 In OECD countries, ARPUs are in a range of US$15 to US$30, whereas they are in a US$3 to US$6 in ECOWAS countries, according to ITU data and Progressus Corpora tion’s research. 3 The first phase was the adoption of the Supplementary Acts in 2006 - 24 - 2. STRONG DISPARITIES WITHIN ECOWAS ECOWAS countries present large differences in telecom markets. Indeed, the big picture, as presented in Table 1, shows that each of the key market indicators covers a large range of values. Table 1: Main ICT indicators per country er ***** Index ser iona user ity ** **** data ** r us rato ile ope acitie tional ity ** r **** ** s* (dom e per u ta ** l) ** ens th pe r ) ** s *** ice & (inte oice pe ISP s ens rna acke ines mob rs * estic e da eled dwid eled er of ** ic r inte e vo ead of vo ry tr rnat er of nd t il pric of v ile T ban b cap es fo il pric ork r ulato Num dba utes utes b Reta Num Mob net Netw Pric Reta Broa Reg Min Min Inter Benin 5 9 80% 8% 2 136 30 4 38 184 2,9 61 Burkina Faso 3 3 84% 20% 6 96 32 3 50 221 NA 81 Cape Verde 2 3 113% 68% 21 5 127 15 11 NA 3,8 83 Côte d'Ivoire 3 4 113% 43% 6 60 70 3 28 159 3,4 62 Gambia 4 3 138% 21% 13 55 49 5 85 NA 3,3 76 Ghana 6 52 139% 71% 10 45 153 4 31 60 3,5 88 Guinea 3 4 85% 15% 1 NA 55 3 12 88 2,6 70 Guinea-Bissau 2 0 77% 8% 5 NA 38 5 50 424 NA 48 Liberia 2 1 71% NA 3 200 37 6 45 325 2,8 57 Mali 3 3 111% 23% 1 300 31 5 45 115 2,9 70 Niger 4 0 48% 2% 6 580 17 3 47 151 NA 23 Nigeria 4 99 84% 54% 11 7 93 2 16 31 3,2 78 Senegal 3 3 97% 26% 5 50 115 5 18 238 3,4 78 Sierra Leone 3 6 98% 23% NA NA NA NA 130 395 NA 49 Togo 2 3 73% 15% 4 130 23 3 27 185 NA 72 Sources: *: Progressus Corporation ‘s research, 2018 **: ITU data base completed by Progressus Corporation ‘s research, 2016 ***: Progressus research, 2018 ****: Operators’ web sites and Progressus Corporation ‘s research, 2017 *****: World Economic Forum, Global Information Technology Report 2016 ******: ITU Regulatory tracker 20164 Chart 1 below presents a summary of these indicators. 4 High value of this index indicates a positive situation, see https://www.itu.int/pub/D-pref-BB.REG_OUT01- 2017 - 25 - Chart 1: Market development in ECOWAS Mali Niger Cape Verde Senegal Gambia Guinea-Bissau Burkina Faso Guinea Benin Nigeria Sierra Leone Tier 1 Cote Ghana Togo Tier 2 D’Ivoire Tier 3 Liberia Tier 4 Tier 5 It is interesting to observe that this market assessment is clearly correlated to a regulatory assessment 5 . This may be seen by comparing the previous chart with Chart 2, which represents the position of ECOWAS countries according to 10 regulatory criteria: the licensing framework, the regulation of ISPs, alternative infrastructure providers and VOIP, the level of autonomy of operators, the existence of open access provisions for international connectivity and the existence of taxes on international incoming traffic. Chart 2: Regulation in ECOWAS countries Mali Niger Cape Verde Senegal Gambia Guinea-Bissau Burkina Faso Guinea Benin Nigeria Sierra Leone Tier 1 Cote Ghana Togo Tier 2 D’Ivoire Tier 3 Liberia Tier 4 Tier 5 5 Except for Benin which has modernized its regulatory framework, but too recently to observe changed market effects - 26 - There are four main regulatory issues that may be pointed out: (i) Compliance with the regional framework is nearly achieved With the notable exception of Sierra Leone, and to a lesser extent The Gambia, most ECOWAS countries have adopted laws and regulations broadly in line with the ECOWAS Additional Acts and the WAEMU6 Directives. (ii) However, the regional framework is outdated and not oriented to the development of broadband, for the following reasons: - The licensing regime is very restrictive, despite the prohibition of exclusive rights and the non-limitation of the number of licenses, due to the classification of licences (need to obtain individual licenses for all types of networks open to the public, irrespective of the use or otherwise of scarce resources, and for the provision of "public voice service"), whereas market developments justify the move to a unified licensing system, or even a simple declaration for all electronic communications activities, with the exception of those requiring the use of reserved radio resources; - New players such as OTTs are not taken into account (through the affirmation of the Net Neutrality principle, the determination of an appropriate status, the establishment of fair competition conditions with operators / ISPs / OTTs, etc.); - The market analysis framework has become unsuitable to the current market development, being largely focused on voice and interconnection whereas it should now focus on access to essential infrastructures, such as national and international connectivity for any authorized / declared sectoral actor. As a result, with the notable exception of Benin7, which has just modernized its regulatory framework, and soon Senegal, which is doing the same8, the laws and regulations in force in the ECOWAS countries are for most of them unsuited to the evolutions of the sector. In addition, in many countries, these texts are partially or poorly implemented because of the lack of resources and the necessary tools (and political will?) to carry out the required analyses and take the appropriate decisions. (iii) Best practices are observed in Nigeria, Cape Verde and Ghana, and to a lesser extent in Senegal and Côte d’Ivoire. These best practices could be use as basis for a future regional reform: - Except Nigeria, Ghana and Cape Verde, ECOWAS countries are experiencing bottlenecks in national and / or international bandwidth: either because of the lack of 6 For WAEMU State Member States, namely Benin, Burkina Faso, Côte d'Ivoire, Guinea Bissau, Mali, Niger, Senegal and Togo. 7 Subject to the content of the implementing decree to be adopted concerning the licensing system. 8 Although the licensing regime in Senegal seems to be more restrictive than that adopted in Benin. - 27 - open clear and transparent licensing regimes, or lack of appropriate regulation of access to national / international connectivity. - The cases of Nigeria and Cape Verde are particularly interesting: in Nigeria, there is competition regulation, through a particularly open market access regime, while Cape Verde still has a monopoly situation, despite the opening of the licensing system, because of the narrowness of its market, but fills this "disadvantage" with dynamic and appropriate sectoral regulation. - With the exception of Ghana, Nigeria, Benin and Senegal, ECOWAS countries have not yet integrated OTTs into their thinking, neither, a fortiori, their regulatory environment. (iv) Finally, there remains some practices which may have dramatic consequences for the development of broadband: - In some countries (Guinea, Gambia, Sierra Leone, Benin?), despite the abolition of exclusive rights, unregulated public monopolies on national / international transmission capacity markets, which in addition are not designated as dominant and are not subject to the appropriate obligations, are surviving (this failure to open the market and / or appropriate regulation often aims to protect these actors, and through them, employment, and / or State resources). - The survival of the tax on international traffic entering certain countries (Ghana, Guinea, Liberia, Sierra Leone), although its harmful nature is no longer to be demonstrated, and for this reason has been suppressed in other countries. - A lack of transparency almost general regarding the interconnection and / or access operators’ catalogues. - 28 - 3. THE ARWI INDEX To guide the regulatory development priorities of ECOWAS Member States and to support their harmonization efforts, a systematic description of regulatory environments across the region can be used to help identify bottlenecks and areas where improvements may be needed. The ARWI Index is a way to rationalize and systematize the analysis for external regulatory factors that may affect the development of the market of electronic communication services. In essence the Index is a checklist for regulators to help identify areas that may need attention their regulatory framework. This initial Index is focused on the three specific areas of the regulatory environment – 1) Licensing regimes, 2) OTTs and 3) International gateways. The value of each regulatory indicator is based on a category value ranging from 0 to 2 to indicate the extent to which the regulations have been implemented, and the scores are then simply added together to derive the Index values for each cluster and then these are summed to derive overall Index value. These indicators have a broader coverage than the regulatory indicators presented in the previous section in order to cover all the relevant aspects: Cluster Indicator License Regime Openness Clarity and transparency Infrastructure licensing Market Data Published by Regulator Mobile Number Portability in Force Dominant Operators Identified under SMP system Public Wholesale Reference Interconnection Offers Required Competition Law & Authority 2016 Over the Top Favorable Regulation (OTT) Services Data Protection Legislation VoIP / Virtual Numbers (DIDs) support 2018 Favorable Sector Specific Tax Burden 2015 USF Levy 2016 Consumer Taxes 2015 International Competitive/ Open Access International Capacity Gateway International capacity pricing included in RIOs Liberalization Access to International / National Connectivity Govt Surtax on International Incoming Voice Traffic (SIIT/IGMS) - 29 - The resulting values are presented in Table 2 below. Table 2: ARWI Index (see Table 3 for notes per country) Nigeria 28 Benin 25 Ghana 23 Côte d'Ivoire 23 Cape Verde 23 Senegal 23 Mali 21 Burkina Faso 20 Togo 20 Guinea 19 Liberia 16 Niger 16 Gambia 11 Guinea-Bissau 11 Sierra Leone 9 0 5 10 15 20 25 30 License regime OTTs International gateways Notes: (i) The ARWI Index is included in a [0-36] score, 0 being the worst case and 36 the best case; (ii) The ARWI Index is based on a very extensive range of data that is precisely listed and sourced in the detailed report on the elaboration of the Index; (iii) As indicated above, the ARWI Index is a structured approach for determining current regulatory bottlenecks, taking account the current status of the Legal and Regulatory frameworks. However, in some countries such as Benin or Senegal, the Legal framework is very new and/or in the process of adoption, and may lead to a high value of the ARWI Index despite not having yet had any market effects; (iv) Table 3 below provides comments for each country; (v) The main underlined issues resulting from a detailed analysis are described in the four next sections and concern the impacts of regulation on market development, the bandwidth issue, the opera tors’ revenue shift and the emergence of OTTs as a disruptive innovation. - 30 - Table 3: Country Notes Country Notes / ARWI Benin - Licensing regime more open than regional framework (due to the recent nature of the law); - Taking OTTs into account in the regulation (through the affirmation of the principle of net neutrality in the law); - Regulation of relevant markets in accordance with Community regulations and relatively well implemented; - Abolition of the tax on international traffic. Burkina - Licensing regime consistent with regional framework; Faso - Not taking into account OTTs in the regulations; - Regulation of relevant markets in accordance with Community regulations but mainly voice-oriented and unsuitable for broadband regulation; - No tax on international traffic. Cape - Licensing regime more open than regional framework but uncompleted liberalization; Verde - Not taking into account OTTs in the regulations; - Regulation of relevant markets in accordance with Community rules and effective and transparent implementation; - No tax on international traffic. Côte - Licensing regime consistent with regional framework but relatively complex (multiple categories of licenses); d'Ivoire - Not taking into account OTTs in the regulations; - Regulation of relevant markets compliant with Community regulations and regulation adapted to broadband, although difficult to implement; - No tax on international traffic. Gambia - Licensing regime opaque and more restrictive than regional framework (ex: obtaining prior authorization for the deployment of new technologies or the provision of new services); - Restrictions on the use of VoIP OTT services; - Regulation of relevant markets opaque and a priori in conformity with the Community regulations but not implemented; - No tax on international traffic but existence of an unregulated public monopoly on the routing of international traffic. Ghana - Licensing regime consistent with regional framework but relatively opaque and complex (tempered however by a transparent and extremely open allocation policy); - Non-consideration of OTTs in regulation but favourable provisions in some texts and constructive approach of public authorities and sectoral actors; - Weak regulation of relevant markets (framed by competition law) and not implemented; - Existence of a tax on incoming international traffic and close monitoring of this traffic by the NRA. Guinea - Licensing regime more restrictive than regional framework (ex: authorization for Internet services VS declaration); - Not taking into account OTTs in the regulations; - Regulation of relevant markets in line with Community regulations but inadequate regulation of broadband and existence of unregulated monopolies on national and international transmission capacity; - Fixation by the State of the price of the International termination and existence of a tax on the incoming international traffic. Guinea- - Licensing regime more restrictive than regional framework (extensive scope of individual licenses); Bissau - Not taking into account OTTs in the regulations; - Regulation of relevant markets compliant with Community regulations but not implemented; - No tax on international traffic. Liberia - Licensing regime consistent with regional framework but relatively complex (multiple categories of licenses); - Restrictions on the use of VoIP OTT services; - Regulation of relevant markets in accordance with Community regulations but insufficient regulation; - Existence of taxes on incoming and outgoing international traffic. Mali - Licensing regime consistent with regional framework; - Not taking into account OTTs in the regulations; - Regulation of relevant markets compliant with Community regulations but inadequate regulation of broadband and non-availability of wholesale offers for ISPs; - No tax on international traffic. - 31 - Country Notes / ARWI Niger - Licensing regime more restrictive than regional framework (relatively extensive scope of individual licenses); - Not taking into account OTTs in the regulations; - Insufficient regulation of relevant markets and incomplete market analysis decisions; - Abolition of the tax on international traffic. Nigeria - Licensing regime consistent with regional framework but relatively complex (tempered however by an extremely open and transparent allocation policy); - Draft Internet Code establishing Net Neutrality and constructive approach of public authorities and sectoral actors; - Weak regulation of relevant markets (framed by competition law) and implemented relatively efficiently but insufficiently; - No tax on international traffic Senegal - Licensing regime more restrictive than regional framework but being modified in the direction of greater openness; - Draft code of electronic communications establishing the Neutrality of the Net, with some restrictions; - Regulation of relevant markets in line with Community rules but insufficient implementation and excessive and / or inappropriate nature of certain provisions of the draft EC code; - Abolition of the tax on international traffic. Sierra - Licensing regime not in line with regional framework (extensive design of telecommunication operator activity requiring Leone a license and total absence of transparency); - VoIP regulation project; - No regulation of the relevant markets; - Probable existence of a tax on international traffic. Togo - Licensing regime consistent with regional framework; - Not taking into account OTTs in the regulations; - Regulation of relevant markets in accordance with Community rules but partially and / or not implemented; - No tax on international traffic. - 32 - 4. THE FOUR MAIN REGULATORY BOTTLENECKS 4.1. Regulation impacts market development Mobile penetration has followed a smooth and competitive evolution Looking backward over two decades a rapid and smooth development of mobile telephony can be observed. However, taking into account multiple Sim cards, which arises in all African countries except Ethiopia, the real penetration rate is only 48%9. Other studies made by the Consultant tend to show that the multi equipment rate is around 1.6, which leads to a real penetration rate of 58% 10 . The multi equipment phenomenon is also present in OECD countries, though probably at a lower level. As shown in Chart 4 below, mobile penetration has reached 94% in ECOWAS, according to ITU data during the last two decades, with a constant 10 years delay behind OECD countries. It has followed a natural S-curve which is generally observed in all new markets that are pushed by natural forces arising from competition. Chart 3 : Evolution of mobile penetration – real vs. modeled S-curve Mobile Teledensity (ECOWAS vs. OECD) 140% 120% 100% 10 years 80% 60% 40% 10 years 20% 0% 1980 1985 1990 1995 2000 2005 2010 2015 2020 ECOWAS S-Curve ECOWAS OECD S-Curve OECD Sources: ITU, Progressus Corporation ‘s research This is naturally a consequence of the implementation of favorable legal and regulatory frameworks in all the countries of the region at the beginning of the 2000 decade. These changes were based on the attribution of mobile (and/or global) licenses through competitive processes, and the establishment of regulatory frameworks enabling fair competition with the access to scarce resources, interconnection and access for these new operators, in parallel with the restructuring and privatization of incumbent operators in a majority of countries. 9 According to GSMA data. There are many reasons for multi equipment use, the main ones being the historically high differences in prices between on net and off net calls (i.e. calls to respectively the same operator and a different operator) and to benefit from special offers that were limited to on net calls. Some countries (Morocco, Tunisia, Mauritania, Côte d’Ivoire) have issued regulations to limit or prevent price differentiation between on net and off net prices. 10 Field enquiry in Mauritania in 2017 - 33 - Broadband penetration is developing along a more inconsistent trend. The average penetration rate of mobile broadband in ECOWAS is 28%, compared to 89% in developed countries. However, the level of broadband penetration among Member States has a large spread, ranking between 2% (in Niger) and 71% (in Ghana). Internet dynamics are illustrated in the bubble chart in Chart 5 below. The size of the bubbles is proportionate to the number of Internet users in each country, which makes Nigeria appear as the biggest, followed by Ghana, Côte d’Ivoire and Senegal. The horizontal axis represents the 2016 Internet penetration rate, showing Nigeria, Cape Verde, Ghana, Senegal and Côte d’Ivoire having the largest penetration rate. The vertical axis represents the 2000 to 2017 growth, with Mali, Liberia, Côte d’Ivoire, Ghana and Senegal having the most important 1-year growth. Chart 4 : Penetration (12/2017) and 1-year growth of Internet in ECOWAS Sources: Internet World Stats, Internet live stats The countries with the highest penetration of broadband are Nigeria, Cape Verde and Ghana, Senegal and Côte d’Ivoire. These countries have either a modern and transparent license framework and/or a strong enforcement of the regulatory framework or a favorable market situation: → The license regime in Nigeria is very flexible, entirely determined by the regulator (NCC), with specific categories for an extremely wide range of different services (20 individual license categories and 5 class license categories). The implementation is transparent, with application forms available on-line, fees clearly available on the NCC’s web site and the process seems effective, with 98 registered ISPs; - 34 - → The regime in Ghana includes individual licenses for ISPs with a registration process to the regulator (NCA), with 52 authorized ISPs, and a minimum of regulatory intervention due to the competitiveness of the market; → The license regime in Cape Verde is based on a general regime of authorization for all electronic communications services, except for services requiring scarce resources (radioelectric frequencies and numbering) (a similar regime has been implemented in Benin in 2017, but it is too early to observe any market effect). The small size of the market limits the competition, but there is a very strict enforcement of the regulatory framework which is obviously one of reasons for the development of the market; → The case of Senegal is different. In theory, the licensing regime, which is defined by the 2011 Telecommunication Act11, modified by a law published in January 201712, limits individual licenses to global operators using scarce resources or using the public domain, except for Internet access providers. There are only three Internet Access providers in operation. Internet access providers and infrastructure operators are submitted to an authorization regime. However, it should be noted that the Licensing Regime should be modified by the new L&R framework currently in the process of being adopted; → In Côte d’Ivoire, the licensing framework, defined in 2015 13 , is also relatively restrictive. An individual license is required not only for operators providing public services using scarce resources, but also for infrastructure providers. There is a distinction between Internet service providers, submitted only to a declaration, and Internet access providers, submitted to an individual license. On the opposite side, the countries with the lowest Internet penetration rate (less than 15%- 20%), and also with a low growth rate (less than 10%) for broadband penetration are Benin, Burkina Faso, Guinea, Guinea-Bissau, Niger, Sierra Leone and Togo. All these countries14 have a restrictive license regime, with significant difficulties for new entrants to be granted the possibility to enter the market. There are generally no authorizations for ISPs or infrastructure providers (or with limited scope of service or access to national or international capacities), and the process of granting licenses is long and complex. The development of broadband is correlated with licensing practices This analysis shows that there is a relation between the openness of the licensing regime and its enforcement in favor of competition, and the development of broadband. Chart 6 below confirms that a maladjusted licensing regime inhibits the development of Internet penetration, although an open licensing regime alone is not sufficient to foster Internet development. Only countries with an ARWI licensing index greater than 10 have managed to improve Internet penetration (the chart shows also that this is not a sufficient condition for broadband development). 11 Loi n° 2011-01 du 24 février 2011 portant Code des télécommunications abrogeant la loi n° 2001-15 du 27 décembre 2001 et modifiée par la loi n°2017-13 du 20 janvier 2017, being currently revised 12 Loi n°2017-13 du 20 janvier 2017 modifiant la loi n° 2011-01 du 24 février 2011 13 Décret n° 2015-80 du 4 février 2015 définissant les catégories d’activités de télécommunications et fixant les modalités d’accès aux ressources rares 14 except Benin which has recently modernized the regulatory framework, but it is too early to observe the effects in the statistics - 35 - Chart 5 : ARWI Licensing Index and Internet penetration Sources: Internet World Stats, Internet live stats, Progressus Corporation’s research Therefore, it may be concluded from the analyses that the practices in the most advanced countries present some clear characteristics: � Establishing a general authorization regime for all kind of operators and providers, except for the usage of certain reserved frequency bands, including inter alia: fixed operators, ISPs, infrastructure providers, long distance or international carriers, etc.; � The granting individual licenses, on the basis of a transparent bidding or competitive process, only for operators using reserved frequencies, such as 2G/3G/4G; � Publishing on the website of the National Regulatory Authority all the relevant conditions and documentation (fees, application, processes, Reference Interconnect and Access Offer, and delays). - 36 - 4.2. The search for bandwidth Access to large international capacity is no longer a key bottleneck in the region, although landlocked countries still suffer from high transit prices and restricted capacity. All coastal ECOWAS countries have (or will shortly have in the case of Guinea Bissau) at least one landing station, and the current upgrades of some submarine cables (ACE and WACS) have considerably increased the international capacity for all these countries. Therefore, maintaining high prices for this capacity is monopolistic behavior which creates artificial bottlenecks. The bandwidth availability varies considerably within ECOWAS. The bandwidth per user is highest in Cape Verde, Gambia, Nigeria and Ghana, with more than 10 kbps per user15. On another hand, the lowest bandwidth is observed Liberia, Benin and Guinea, with less than 3 kbps per user. Chart 7 shows that the level of bandwidth-use correlates with the price of international capacity, which range from less than US$7 per Mbps per month in Nigeria and Cape Verde to more than US$200 per Mbps in Liberia (not mentioning landlocked countries where prices are even greater). The most competitive countries have the largest number of landing stations (Nigeria and Ghana) or efficient regulation of international capacities (such as Cape Verde, where there is a full transparency for access to international capacities, the reference offer being publicly available on the operators’ web sites). Chart 6 : Bandwidth per user and price of International Capacities Sources: ITU, Progressus Corporation ‘s research In the least competitive countries, such as Liberia, though the regulatory framework for international access is compliant with ECOWAS regulations, it lacks real enforcement (no publication of reference offers, unavailability of market analysis decisions, etc.). The case of 15 This remains extremely low compared with OECD countries, where the bandwidth per user is over 300 kbps per Internet user. Alternatively, it is considered that 4G requires a minimum of 25 kbps per user for providing a minimum fluidity in the service. - 37 - Guinea is similar: international access is provided by a SPV without any transparency on prices and technical conditions. Another aspect is that the development of high capacity backbones is a key element for the growth of broadband services. These backbones present the characteristic of having high economies of scale, generally being natural monopolies, and lead therefore to a re- monopolization of the infrastructure, in particular in countries or areas with high costs, and to a re-nationalization for countries who have built these backbones under state control. The consequence could be a mid-term decline in competition on retail markets, unless a strong open access regulation with strictly controlled prices is imposed on these backbones. Another way is to encourage the development of infrastructure, in order to restore a maximum competition at the infrastructure level, which is the best way to ensure a real competition on retail markets. This is tightly linked to the market shift and the decline of retail revenues for operators described in the next section, where the operators have to optimize their investments in order to maintain their presence on the retail markets. All these analyses show that there is a strong presumption that the retail usage of Internet, depending on the price and the abundance of bandwidth, will be pushed forward by the implementation of some key practices, such as: � Promoting competition for international capacity, i.e. favoring the existence of multiple submarine cable landing stations and/or cross-border fiber links; � Where there is an absence of economic justification for multiple landing stations or competitive cross-border links, monitoring and enforcement of open access provisions is needed, with inter alia: o Effective provision of international capacities for all market players (operators, ISPs and other players) with a range of services covering the needs of all players; o Wholesale Price regulation based on strict cost-oriented prices allowing effective competition on the retail markets with affordable retail prices; o Publication on the website of the organization in charge of the landing station of a Reference Access Offer approved by the National Regulatory Authority; � Enforcing infrastructure competition and development in order to decrease the cost of data for operators. These include: ensuring that the dominant fiber infrastructure operator shares its network on terms that do not disadvantage smaller players1; making sure that the excess fiber network resources used to manage other activities (for example, water, electricity, railways) are made available as dark fiber to all operators; and the opening up of ducts to all operators. One particular issue that will substantially lower the cost of deployments and improve the speed of network upgrades is ensuring the cost of rights of way are capped at a reasonable level, and the speed with which they are obtained is considerably improved. o - 38 - 4.3. The Revenue Shift Until 2013 operator revenues enjoyed continuous growth since beginning their operations. However, the situation has since changed, as presented in Chart 8. The same phenomenon is also observed in OECD countries, but has arisen earlier, since 2008. Chart 7: Revenues Rise and decline of mobile revenues 90 80 70 60 50 40 30 20 10 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Benin Côte d'Ivoire Mali Nigeria Senegal Togo ECOWAS Sources: ITU, Progressus Corporation ‘s research Note: for comparison purposes, the revenue is divided by the population The change in trend in 2013 is largely a consequence of voice to data substitution in parallel of the rise of OTT services, and the use of messaging (email, instant messaging, etc.) in place of voice. The effect of OTT services’ rise on domestic and international traffic is already clearly visible. ITU data in Chart 9 shows that there has been in average in ECOWAS a 25% decline in incoming international traffic during the period 2013-2016. Chart 8: Loss in incoming international traffic (2013 to 2016) Sources: ITU, Progressus Corporation ‘s research The decline of voice traffic has significant impact on operators’ revenues: concerning international traffic, even if the volume is low in comparison to domestic traffic, international - 39 - traffic is traditionally highly priced. This is illustrated by the fact that the average retail price per minute from Europe to ECOWAS remains in the range of $0.516, and there is thus no question of using the PSTN for the average European customer who now expects unlimited domestic calls and a monthly volume of 10 to 50 GB which provides virtually no limit to call a correspondent in Africa using OTT services. This argument is also valid for domestic traffic, since domestic prices remain high in ECOWAS countries (a difference with Europe, where voice is generally unlimited and thus is less submitted to substitution to OTTs). These high retail prices for international incoming calls are clearly related to the level of ITRs17, as shown in Chart 10. Chart 9: ITRs and retail prices for voice communications Europe to ECOWAS Sources: NCC, Lycamobile web site, Progressus Corporation ‘s research ITRs should not be high in a truly competitive market. They should at least not be significantly higher than National Termination Rates. The reasons for observing high ITRs are two-fold: first, there is the presence of taxes (such as in Ghana and Guinea), and second the level of MTR may be imposed by regulatory decision or result from collusive behavior from operators. In Europe, it has been recently observed that ITRs have increased, probably as a “waterbed effect� of the implementation of free roaming. In conclusion, it may be observed that the best regulatory practices should favor the competition and fluidity of access to international gateways and capacity, and thus that (i) all taxes and price floors imposed on incoming international traffic should be removed, (ii) all potential collusive behavior that tend to maintain high ITRs should be carefully analyzed, and (iii) all exclusive rights for international gateways should be abolished. 16 Lycamobile prices from France and UK in March 2018 17 International Termination Rates are taken from a document from Nigerian NCC: an assessment of international voice traffic termination rates, Policy, Competition & Economic Analysis Department, July 2015 - 40 - 4.4. OTTs: a disruptive innovation Looking at OTTs only from the perspective of the voice to data substitution phenomenon is misleading for both operators and policy makers. OTTs represent in fact a market disrupting innovation in the sense that they have initially created a new market for non-consumers, and then attracted existing consumers with low cost and high reward services. As such, it is clear from the strategic literature18 that the fast development of OTT services may threaten the competitive position of the existing operators, and that the telecom market will face considerable changes in the future. From the operators’ point of view, the effect of OTTs is naturally a loss of revenue, along with some direct decrease in state revenues (taxation on international incoming traffic). However, limiting the analysis to these effects obscures the larger picture. Indeed, what is usually called a loss of market value is not a loss in any case. The decrease of operators’ revenues is outweighed by the gain in surplus that consumers take from the OTTs. In the simple case of international traffic, the increased surplus is the sum of lower expenditure on voice traffic (the price ratio for an international call between traditional telephony and OTTs may be estimated at a minimum of 100) and of increased consumption resulting from lower prices. A very conservative estimation19 leads to a total gain in surplus of nearly US$600 million for the ECOWAS region. In addition, OTT services have brought far more to the consumers, taking account the same effects on domestic traffic and also all the additional services that have been provided. Thus, the revenue shift, though being a crucial issue for operators, is fully beneficial to consumers. In addition, it may also be said that the revenue shift is not detrimental to the tax revenues taken by the states nor by the producers. It is generally argued that the decrease in international traffic volume causes a direct loss in tax perception, because there is less VAT, and less revenues and profit from operators, so less taxes. This statement is however incomplete because it does not take into account the indirect effects of gain in consumers’ surplus. Indeed, if consumers gain an additional surplus, it leads to an additional wealth which unblocks new spending, in the digital economy sector or in other sectors, and creates jobs, taxes and value, thus bring additional surplus to the producers and additional taxes to the states. From a broader point of view, this is the driver for pushing the development of digital economy, which is exactly what many countries are doing through the implementation of national strategies or other measures, thus acknowledging that the development of digital services is beneficial for all of the economy. This being said, it remains true that there are fairness issues in the competitive playground between operators and OTTs, since OTTs do not have any of the obligations imposed by 18 See for example Harvard Business review, December 2015, What Is Disruptive Innovation? By Clayton M. Christensen, Michael E. Raynor and Rory McDonald 19 This estimation is based on a total of 1.2 billion minutes of international traffic and a 26% substitution to OTTs, with only a price effect of doubling the volume transferred to OTTs. These data are taken from ITU publications and from Progressus Corporation’s research. - 41 - regulation to operators, since there is no sense to apply national rules to players that have no presence in the country, so regulating OTTs could be envisaged only at a regional level, and even at the ECOWAS level, there is little probability that any regulation could be applied. However, there are some initiatives that can be analyzed. First, blocking OTT services is certainly amongst the worst solutions and is contrary to principles in countries seeking to preserve human rights and looking for Net Neutrality20. In addition, it would be an economic failure, just by imposing an additional burden on local consumers, as it is the case with any protectionist measure 21 . However, it has been temporarily implemented in Morocco (and is strongly implemented in countries such as China or North Korea, or Azerbaijan, Belize, China, Iran, Kuwait, Oman, Pakistan, Paraguay, Saudi Arabia and United Arab Emirates 22 ). The key motivation for considering blocking OTT services is for these governments to preserve their tax revenues on international voice calls (or maintain or increase the control of the communications) and are likely to be supported by the operators wishing to maintain their international traffic revenues. Secondly, some countries (Senegal, Ghana, Mali and Nigeria) have raised23, or are currently raising a debate on the possible ways to address fair regulation. Nothing has clearly come out of these debates24, although developing domestic OTT services for operators or partnering with existing OTT service operators seems to be a possible solution. Imposing obligations on OTT providers has been discussed, but as recently demonstrated by the Belgium example25, this cannot be done at a national level. It could perhaps be tried only at a regional / continental / global level, looking for instance to the new telecommunication package in the European Union, however the process for implementing this could take some years, by which time the issues may have become increasingly moot for most countries. Alternatively, the question of lowering operators’ obligations (i.e. taxes or other obligations imposed in licenses) to provide a fairer playground between OTT providers and operators does not seem to have been considered. 20 Benin and Senegal have adopted the principle of Net Neutrality in their law (or law project) ; Nigeria and Ghana are thinking about it. 21 In addition, the introduction or re-introduction of the blocking of OTT services would without any doubt encourage by-pass through VPN 22 https://www.quora.com/In-which-countries-is-Skype-or-WhatsApp-calling-blocked#PbOBP 23 See also the conclusions of the TRAI report here: https://trai.gov.in/sites/default/files/OTT-CP-27032015.pdf 24 Though some countries have introduced legislations concerning Net Neutrality, such as Benin or Nigeria 25 Skype has been fined in 2016 by the IBPT, The Belgium regulator, for refusing to notify itself as operator for the SkypeOut service. Skype has brought this decision to the Court of Appeal, which has referred the case to the Court of Justice of the European Union. The Belgian court considers that it makes no sense to pronounce only for Belgium, but that the question must be decided for all the Member States. - 42 - In this respect there are some regulations or some practices that could be put in place. � Removing or alleviating unnecessary burdens imposed on operators. This includes specific sectoral taxes, license fees, Universal service levies and quality of service obligations; � Favor operators’ initiatives to bundle or develop partnerships with OTT service operators. This could be done with a changed regulatory framework temporarily applied to new initiatives and development. This path is already followed by operators (such as MTN and Vodafone) and regulators, in Senegal, Ghana, Mali or Nigeria. No solution has come out of this strategy clearly yet, but it is likely to be the only way for operators to maintain a competitive position in the retail market with high value services for their customers. On the other hand, some safeguards should be clearly stated, such as including Net Neutrality principles and preventing any blocking measures against OTT services. Such measures would not be only contrary to net neutrality, but they would be shocking in countries as they affect human rights, and where the Constitution guarantees citizen access to information. On similar manner, the parliament of Uganda recently decided to impose a daily tax for the usage of social networks26. Though being limited to a small amount (US$0.0531 per day), this tax is clearly a major obstacle for the development of mobile Internet and does not address any regulatory of competitive market issue. Other issues include cybersecurity provisions such as the protection of consumers’ personal data or national security. These issues are not directly connected to the ARWI topics and therefore are not analyzed in detail in this report. However, it is clear that these issues have to be addressed at a national or regional level. 26 https://www.reuters.com/article/us-uganda-internet/uganda-imposes-tax-on-social-media-use- idUSKCN1IW2IK - 43 -