The gorilla in a developing country

Many at times people tend to fault the government on its many decisions due to propaganda rather than appreciating its genuineness to create as much as possible an equitable advantage to the entire populace. Who knows, most decisions may be for the good of the country after all, which is always the case anyways.

Palgrave Boakye-Danquah

“Government, through the Ministry of Communications, has directed the NCA to enforce the provision of the Electronic Communications (EC) Act 2008 and the National Telecommunications Policy to address glaring disparities in market share and revenue share in the sector.”

MTN is classified as the Gorilla in our developing country, Ghana because it appears to be running away with the “telco crown”. They have the largest share of subscribers for both voice and data as well as the largest number of Mobile Money users and such an instance in a business plan does not depict “free market” from a think tank perspective and the opportunity MTN has poses a threat. Thus, the decision of the government to reverse this disparity index.

This unanticipated decision to break telecom monopoly cannot be a deterrent to SCANCOM (MTN). Rather, the government basically seeks to ensure a proper and healthy competition among telecommunications players, secure a much better pricing policy for the consumers and facilitate a sound regulatory regime.

Kandifo Institute highly commends government for this decision to implement its already existing Regulatory Policy to Industry players to prevent a mere monopoly of the mobile network operator (MNO). We also commend the government in respect of the channels, telecom and development phase and the decision for declaring MTN Significant Market Power (SMP) and how this positions the other mobile network operators for a fair playfield.

If we care to know, Ghana holds just about 5% shares in MTN which can rightly be measured as peanuts and as a state, we must rectify this. Many other telecom networks would continue to perform greatly low and with time, MTN would eventually take over all the others in the sense that:

  1. It would get to a time where Ghana would lose her power to MTN dictating to the state.
  2. This would negatively impact competition and would not allow free market therefore, rates or charges should be the same across all networks.
  3. It does not give the consumer the choice to decide which network to subscribe to, more or less consumers are forced to stick to one (MNO).
  4. It does not enable any investor interested in Telecom Networks to come into the country since there is no room for competition.

From the above, Kandifo Institute as a Libertarian, Conservative, Free Market Think Tank supports the decision by the government.

Many would ask, why give MTN a higher share before bringing out this regulation?

The normal Ghanaian who feels this could have been implemented a long time ago would want to know why Regulators are targeting MTN now. Truth is, the decision is not a punishment but rather, the government acknowledges the investments MTN has made in their operations over the years and noted that their investments have enhanced their operations, however, its growing dominance has impacted negatively on competition and consumer choice, necessitating corrective action.

Government seeks to create an opportunity where All (Consumers) could be able to have a freedom of choice in terms of network usage. This depicts the Individual Liberty we (Kandifo Institute) stand for as a think tank.

When this is implemented;

  1. It will ensure healthy competition between the telecom networks and good pricing for all consumers.

SCANCOM (MTN) has 75% and from a free-market perspective, it is not equitable (obviously unfair for MTN to have that much share). After all the MNO has had many backlashes overtime. MTN Ghana gave its goodwill package to its data subscribers as compensation for the recent disruption in services due to the supposed cuts to the undersea cable delivering the service (double undersea fibre optic cable cut in Europe). The situation believed to have affected all operators and customers in the West Africa region due to cut on the West Africa Cable System (WACS) however many believe it was a strategic stunt. Also, a subscriber of MTN Ghana, Martin accused MTN Ghana of capping the speed of their network after they compensated customers with data over the 3 days network disruption. He alleged that MTN after giving subscribers 2 GB data capped the network speed to 25 kbps to prevent people from using the supposed dashed data. Narrating that as soon as he topped up, his speed rose to 370kbps and urged NCA to put some measures in place with regards to his concerns.

The above accusations have huge repercussions if not checked since both scenarios affected two-thirds of consumers.

The advantage of identifying or defining telecommunications market is that it aides in identifying operators with significant market power in particular market segments.

It is, therefore, reasonable to designate MTN as an SMP in at least the following areas:

  1. Minutes
  2. Mobile Data services
  3. Wholesale Data Services
  4. FinTech VAS Services

The implementation of this policy initiative is to correct the imbalance between these telecommunications market. The latest reports received from the industry shows a worrying trend which demands immediate action to correct the growing market imbalance and creation of a near-monopoly in the telecoms sector. This imbalance exposes the country to the dictates of the dominant operator, militates against effective competition and impacts negatively upon investment in the sector. The impact of what government wants to do is good for the consumer

From a think tank perspective, the statistics shown below is not equitable enough because MTN still dominates in the average Voice Subscriber Market Share for the various operators for 1st quarter 2020.

  • MTN      57%
  • Vodafone   21%
  • Airtel-Tigo   20%
  • Glo      1%

Average Data Subscriber Market Share for the various operators for 1st quarter 2020 is in a range of:

  • MTN      74%,
  • Vodafone   12%
  • Airtel-Tigo   13%
  • Glo      84%

The revenue market share figures show MTN having almost 75% of all industry revenues and over 90% of mobile financial services revenue.

It is evident that the above statistics clearly create an uncompetitive and unprofitable environment for other industry players and is not free-market enough from a think tank perspective and so Kandifo Institute is in support of the fact that government wants to create room for competition.

Section 101 of the Electronic Communications Act 2008, (Act 775)(“EC Act”) for instance, defines significant market power to mean a situation where a network operator or service provider, either individually or jointly with other operators or providers, has a position that allows it to behave in a way that is appreciably independent of its competitors and customers.

Therefore, any operator with 40% or more market share in voice, data, SMS and value-added services like Mobile Money, is considered a Significant Market Power (SMP) under the National Telecommunications Policy (NTP) and attendant corrective measures should be implemented to facilitate more market competition than is currently available.

MTN clearly possesses this Significant Market Power which has been declared by the National Communications Authority (NCA). From a free-market think tank perspective, the above is not competitive enough as MTN seeks to benefit entirely leaving out the other telecommunication Networks. To correct this imbalance, the NCA shall apply the following measures:

  1. 30% Asymmetrical Interconnect rates in favour of the disadvantaged operators, in accordance with the law.
  2. Setting of floor/ceiling pricing on all minutes, data, SMS, Mobile Money, etc
  3. Review and approve all pricing by the SMP as required by law.
  4. Require SMP not to have differential prices for on-net and off-net transactions.
  5. Ensure various operator vendors are not subject to exclusionary pricing or behaviour.
  6. Ensure that SMP’s access to information does not disadvantage any Value-Added Service of non-SMP operators.
  7. Require operators to present implementation plans on National Roaming Services within the next 30days for execution on or before the next 90 days.

In relation to SMPs, MTN is in control of 80% of the top-ups for the period of January – March of 2020, and more than 90% of Mobile Money transactions for the same period. This is not a healthy long-term position for the nation to tolerate this monopoly, especially when MTN has not fully cooperated with GRA and NCA in recent times.

In Tanzania, MTN was required to not have differential prices for on-net and off-net calls under a Multilateral Agreement among all the four MNOs and the two leading banks in 2013. Even in its own original Jurisdiction/home territory, South Africa, the Asymmetric Interconnect rates were imposed by the Minister in 2014. We can also take a look at Bangladesh Regulator’s SMP Designation of Grameen Phone (GP) where GP was declared as holding SMP in two categories (subscribers and revenue). The operator accounted for 46.33% of the country’s active customer base in 2018 while its revenue share has been more than 50% for many years. All these came with the necessary SMP restrictions. Norway Regulator’s SMP designation of Telenor has been upheld by Norway’s Telecoms Regulator (Nkom) to have special obligations imposed upon it as of June 1st, 2020.

This is to facilitate the continued rollout of a third nationwide mobile network by ice and involves controls over colocation and data pricing, and Telenor is also required to give access to its network for MVNOs with controlled prices. UK Regulator’s Designation of BT as SMP and Investigation also examine whether there are reasonable grounds to believe that BT has failed to comply with its obligations under a number of specific SMP conditions, Telegeography 19 July 2019. Finally, Luxemburg Regulator has published a series of decisions regarding the country’s wholesale broadband markets for operators designated as having SMP, Telegeography 1st April, 2019.

The National Telecommunications Policy Section 4.3 – Competition shows the establishment of a fair, transparent, and non-discriminatory telecommunications market environment. This section describes the general framework for the functions and responsibilities of the NCA, and of licensed operators, in achieving effective competition. Based on this policy framework, the NCA has the authority to define specific procedures, rules, regulations and administrative structure to ensure that competition policy is effective.

This runs through with Interconnection as well. Companies licensed to operate public telecommunications networks and to provide public telecommunication services are obligated to provide interconnection, subject to negotiated commercial agreements. The NCA shall establish and administer an interconnection regime, which will be non-discriminatory and transparent and will promote fair and effective competition for all operators, including cost-oriented charges for interconnection services.

Operators may be free to negotiate interconnection agreements among themselves on such terms and conditions as they may choose, so long as such terms are non-discriminatory to other market participants, and consistent with the principles of this Policy. The NCA shall facilitate such negotiations, and encourage operators to achieve agreement in a timely manner.

Again, a look at Equal Access shows that for the greatest extent possible, customers shall be offered equal access to all competing service providers in the market, meaning that any customers should have the opportunity to choose among the services of all competing providers, without cost penalties or unduly burdensome technical barriers. Operators of the dominant or bottleneck networks will be required to facilitate such equal access by any technical modifications that may be necessary. The costs of providing equal access will be shared on a non-discriminatory basis by all competitors

Finally, Electronic Communications Act, 2008 Act 775 (Section 25) -Tariffs propose the following:

  • Tariffs for electronic communications services, except those which are regulated by the Authority under this section shall be determined by service providers in accordance with the principles of supply and demand.
  • The Authority may establish price regulation regimes, which may include the setting, review and approval of prices by Regulation, where;

(a) there is only one network operator or service provider or one network operator or service provider that has significant market power,

(b) a sole network operator or service provider or a network operator or service provider with significant market power and cross-subsidises another electronic communications network or service, and

(c) the Authority detects anti-competitive pricing or acts of unfair competition.

  • A service provider shall provide rates that are fair and reasonable and shall not discriminate among similarly situated persons, including the service provider and anybody corporate with which it is affiliated except as otherwise provided in this Act.
  • The Authority may prescribe a method to regulate the cost of the service for any public electronic communications service in which a service provider is dominant by establishing a ceiling on the cost, or by other methods that it considers appropriate.

(5) A service provider shall publish the prices, terms and conditions for its public electronic communications services at the times and in the manner that the Authority shall specify and the prices, terms and conditions shall, be the lawful prices, terms and conditions for the services subject to this Act and the conditions of the licence.

In conclusion, NCA has exercised its mandate under section 20(13) of the Electronic Communications Act, 2008 (Act 775) by declaring its intention to classify MTN as a Dominant/Significant Market Power thereby implementing specific policies mentioned afore to ensure a level-playing field for all network operators within the telecommunications industry. Mtn should be able to consider this Regulatory Act in light of the common good of the country and the investment opportunities it comes with.

Credit: Palgrave Boakye-Danquah, Executive Director Kandifo Institute.

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