<B>Ashok B. RADHAKISSOON</B>

<I>Former chairman of ICTA</I>

Ever since the Green paper published by the then government in 1997, there have been renewed official statements to the effect that the Information and Communication Technologies (ICT) sector should be nurtured into the fifth pillar of the national economy. Certain bold and progressive decisions have been taken to map the track towards achieving that lofty objective. This is only attainable if the right conditions are set up by the government principally and the regulator accessorily.

An examination of the sector reveals that the achievement of this objective has been the object of major obstacles, which unless removed in the short term can very well cause irreparable damage to the realization of an ICT driven Mauritius. It is worthwhile taking stock of what has been achieved so far to carve out the way forward and mitigate the negative effects of the obstacles mentioned earlier.

The enactment of the Telecommunications Act 1998 triggered all that has been achieved in the ICT sector so far. The essential innovations brought by this Act were the creation of a new regulatory body, the Mauritius Telecommunications Authority. Moreover, the time frame for achieving liberalization of the telecommunications sector was clearly laid down reflecting the commitment of the then government to the WTO Working Group on basic telecommunications services. Two indispensable elements underlying the advent of new entrants - interconnection and access - were given the legal corpus around which interconnection and access agreements could be negotiated between operators.

Around that time the players in the sector were Mauritius Telecom, Emtel Ltd and Paging Services Ltd. There was competition in the cellular mobile and paging market segments.

In terms of its commitment regarding the basic telecommunications services market, the government sold 40% of its shares to form a strategic equity partnership with France Telecom.

<B>Big promises for investors</B>

In April 2001, Data Communications Ltd started its ISP operations and was the only new licensee to compete with Telecom Plus, a subsidiary of Mauritius Telecom. In December 2001, the Information and Communication Technologies Act was enacted and the Information and Communication Technologies Authority replaced the Mauritius Telecommunications Authority. Moreover in October 2001, the ICT Act was amended to end the exclusive rights granted to Mauritius Telecom on 31 December 2002 instead of 31 December 2003.The telecommunication sector was liberalised on 1 January 2003.

The preponement of liberalization held big promises for investors in the sector in as much as the financial performance of the incumbent indicated that certain market segments could be the terrain for new entrants to venture into. The international long distance telephony market was the first target. Indeed practically all applications for licences in the wake of liberalisation were for international long distance telephony.

With the diversity of new players on the supply side, it was realistically thought that prices would go down generally and that consumers would have wider choices. It was also expected that the development of the telephony market on the origination side would lead to job creation especially in the area of marketing. On the termination front, it was reasonably believed that an increase in foreign currency earnings would accrue to the country.

The situation in which the new entrants are today clearly indicates that the promises of liberalisation have not materialised in as much as they are confronted with enormous difficulties which, unless solved, will wreck the new sector. These problems are the direct consequences of the present policy in this sector.

This present policy is articulated in the ICT Act and the National Telecommunications Policy 2004. Whilst the Act is an instrument primarily designed to liberalise the sector with the onus being inter alia on licensing, interconnection, allocation of frequencies, numbering, tariffs, etc. the National Telecommunication Policy maps out the way forward towards complete liberalisation and effective competition. There is an urgent need to revisit the ICT Act in terms of the National Telecomunications Policy to make it more responsive to the demands of an open and investor friendly ICT environment. The present legal framework is not favouring the emergence of new operators.

Regarding the business of the new entrants, the compounded effect of the vertical margin squeeze on call termination, the stifling of the call origination market due to unreasonable and discriminatory tariffs as well as an above cost interconnection usage charge is negatively impacting on the sector. One of the new entrants is already out of the market after having invested substantially.

<B>Competition policy missing</B>

The new entrants have also felt the perverse effect of the absence of an effective competition policy in spite of the clear provision of the National Telecommunications Policy 2004. This is an indispensable element of telecommunications regulation. As a consequence, the regulations regarding tariffs, interconnection, access to bandwidth are lending themselves to uncompetitive practices and to the consolidation of the dominance of the incumbent operator in total contradiction with the primary objective of liberalization.

Moreover, the law-designated arbitrator has for reasons best-known to itself allowed its authority to slip out of its hands and left the new entrants stranded and exposed to the super dominance of the incumbent in practically all the segments of the telecommunications market. Consequently, another cornerstone of liberalisation and competition i.e. a strong and independent regulator is glaringly absent.

The policy maker seems at this point in time to be confronted with the difficult task of having to manage a situation where it has to enunciate new policies, which would impact negatively, in the short term, on its shareholding in Mauritius Telecom. These new policies are the sine qua non conditions for the sector to come to terms with the profound changes taking place therein.

Competition, convergence, technological change and globalisation have to be taken into consideration when policies regarding (1) access to essential facilities – (the basic telephone network, SAFE Cable); (2) the competitiveness of Mauritius as a BPO destination; (3) the protection of foreign investments; (4) network integrity and security; (5) effective competition in the sector - (definition of dominant operator and operators with significant market power) – and (6) remuneration orders for the sector.

Furthermore, the very nature of the communication industry is undergoing major transformation with (1) the advent of new players on the supply side; (2) growing impact of the Internet; (3) challenge to existing players by products and services from outside the traditional sector; (4) change from a single product business (voice telephony) to an array of services/products well beyond the scope of the traditional telecommunications sector; (5) data traffic outgrowing voice traffic; and (6) reduction in the cost of telecommunications in general.

There is therefore an urgent need to re-regulate the sector to respond to the above changes on the one hand and ensure that new entrants function in an operational and regulatory environment, which reflect local realities. Such factors as market size, cost of bandwidth, the weight of the presence of the incumbent, the limited scope for duplicating essential facilities and affordability have once and for all to be taken into consideration in shaping the future regulatory framework.

<B>Give regulator legal instruments</B>

Experience in the countries of the European Union shows that effective telecommunications regulations need to be buttressed by an effective competition policy. Beside the regulator of operations, there is a competition watchdog. The latter body can be accessed by operators in cases of uncompetitive practices such as (1) abuse of dominant position (predatory pricing, cross subsidization, excessive pricing, tied sales or bundling, refusal to deal); (2) anti-competitive agreements (price fixing, bid rigging); (3) mergers and acquisitions likely to have a negative impact on competition. Moreover the regulator of operations can seek the views of the competition regulator regarding tariff and market definition and dominance.

Another crucial decision has to be taken as to whether such liberalized services as telecommunications and broadcasting should be brought within the purview of the Competition Act 2003. It has become a must for the Office of Fair Trading and the Competition Appeal Tribunal to be urgently set up.

The policy maker must give the legal instruments to the regulator(s) to enable them to live up to their mandate. Once this task is completed, the regulator(s), well manned with specialist economists, lawyers, engineers, accountants and statisticians, can in total independence monitor, control, adjudicate, remedy and sanction where circumstances so warrant. This is the mark of a healthy sector, which is the signal for attracting investments both local and foreign.