The Internet: The Role of the Regulator

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The InternetThe Role of the Regulator

• Ant Brooks
• ant_at_hivemind.net

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Some fundamental truths

• 1. Competition is good for the Internet
• 2. Regulation is usually bad for the Internet
• 3. Internet development is GOOD for existing
  telecommunications operators

The effect of competition on bandwidth in
Nepal1995-1999 64kb -- 320kb (year)May 1999-Dec 1999 320kb -- 5Mb (1600 in
8 months)
See the World Banks Economic Toolkit for African
Policy Makers (http//www.worldbank.org/infodev/p
rojects/finafcon.htm)
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Regulatory approach
No correct way to regulate the Internet
Remember the prerequisites!(power, phone, PC)
Try to avoid accidents(1998 EU personal data
protection laws)
Special structures(e.g. Tunisian Internet Agency)
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Telcos as ISPs
In about 2/3 of African countries, the incumbent
telco is involved in the Internet services market.
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Telcos as ISPs
Telcos must talk to ISPs!
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ISPs as Telcos International gateways
Problem Highest component of ISPs price Slow
speeds are bad for customers In most of Africa
6 dial-up users per 1 kbps bandwidth
Solution Let ISPs provide their own internationa
l gateways VSAT has been critical to development
in Nepal and Uganda So far only six African cou
ntries have allowed this
Problem Telcos see this as a huge threat (all IS
Ps stopped using NTC) Legal action against VSAT
users in Jamaica
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ISPs as Telcos
National If deregulation of International gateway
s has been so beneficial, why not deregulate
nationally Examples Wireless linksAsymmetrical
satellite links
When to start worrying Lack of clarity? In Sout
h Africa, Telkom claims that reselling leased
lines is illegal Bad news long-term commitments?
Telkom Kenya has a monopoly on international
links until 2004!
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Regional Networking

• Most Internet links are to the US or Europe
• Traffic from Africa to Africa travels via the US
• Not a uniquely African problem by any mean
• Often a national as well as a regional problem

This costs money!
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Internet Exchange Points(a worked example)
Johannesburg Internet exchange point (JINX)
Current peak throughput 27 Mb/s
Costs 440/month Equivalent cost (34 Mb circuit
, SA USA) Telkom 360,000/month US provi
der 120,000/month Savings Internet industry
5.75 million annually Foreign exchange 2.75
million annually
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InterconnectionProblems and Solutions
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Internet Telephony
Voice
Voice
Conversion to voice
Conversion to data
Data transport (IP network)
Reactions Ban it (Botswana, Cote d'Ivoire, Kenya
, Madagascar, South Africa) Let the Telco use it
somehow (Egypt, Uganda) Deliberate or accidental
policy vacuum (Most places)
Question Why would any regulator want to ban a
technology which drastically reduces prices for
consumers?

Perception IP telephony is bad for incumbent te
lecomms operators (erodes monopoly)

Reality in NepalA ban on outgoing VoIP means
everyone losesNTC is losing incoming net
settlementsNepalis cannot make low cost intl
calls
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• Who should be licensed?

ISPs? Maybe - it depends on the market. What is
an ISP? (accident warning!)
Licensing
Cybercafes? No! They provide low cost access and
are key to Internet development
Telcos? Yes! It is important for the Internet ma
rket that telcos play fair
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Benefits Fees (licence fees, universal service)
Clarity of rights
Drawbacks Bureaucracy Limited licences means lim
ited competition
Blocks smaller players
Licensing
Example Zambia No limit on numbers -- feasibilit
y is the criteria 25 Zambian ownership No fees/
restrictions for rural or underdeveloped
Problem high licence fees is a barrier to entry
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Universal service
Importance Recent estimates suggest that
investments in rural telephony can have annual
economic returns of over 40 percent. -- World
Bank
Options Tax ISPs (Uganda -- 1 to development
fund) Give ISPs specific obligations (e.g. 10
of coverage must be rural) Leave the market alon
e and hope (South Africa 40 - 600k per year)
Stimulate demand (government, schools, hospitals)
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Internet prices are high.Should the regulator
regulate tariffs?
What makes up the cost? For user 50 of cost i
s telephone or ISP cost For ISP 50-90 of costs
are international circuit costs
What reduces these costs? Well-regulated competit
ion, particularly in the high-cost area
international links
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More on tariffs
Single nation-wide access code
Well done to Benin, Burkina Faso, Cape Verde,
Chad, Ethiopia, Gabon, Malawi, Mali, Mauritius,
Mauritania, Morocco, Senegal, Togo, Tunisia, and
Zimbabwe
Free Internet access? Model 1 Free local calls
(US model) Model 2 No ISP charges (UK model)
Both require telco co-operation Incumbent
monopolies dont want to lose money
(Sometimes access is subsidised by advertising)
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(No Transcript)
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IP addresses
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Domains
, .pn
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Internet content
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Advanced Regulation

• Upcoming problems
• Security/hacking
• Digital signatures/authentication
• African status
• Few e-commerce applications
• Few government initiatives (Tunisia, South
  Africa)
  
• Some pointers
• Modify existing legislation where possible
• Realise that accidents happen and be prepared for
  changes

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Some Conclusions...

• 1. Good regulations are highly dependent on the
  state of the market. Each country will need a
  different approach -- learn from others
  mistakes.
• 2. Be gentle concentrate on removing barriers
  rather than forcing a rigid market structure.
  
• 3. Encourage grass-roots use Regulators must use
  e-mail and have a useful web site. The regulator
  should set the pace for the rest of government.
  
• 4. A good question to remember to ask Will this
  be good for the consumer?

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/end

• ant_at_hivemind.net