Regulations and taxes stymie Africa's interconnection

Stringent regulation and taxation issues between countries have stymied the drive for affordable connectivity as regional companies seek ways to offer services beyond borders.

Telecommunications firms in the region have been accused of failing to lower connectivity costs even after the entry of fiber-optic cables bolstered infrastructure in the region. Carriers say, however, that cross- border connection policies and vandalism of fiber cables have added to the cost of laying infrastructure, keeping costs high.

Sub-Saharan Africa is now connected with six fibre-optic cables and extensive terrestrial fiber, but landlocked countries have been unable to enjoy affordable services because governments demand license fees, tax and other fees before allowing companies to offer services from one country to another, according to industry insiders.

"It may be because of lack of understanding of internet business but some countries insist that fibre operators crossing the border must pay license fees, which is some cases is prohibitive," said Muriuki Mureithi, CEO Summit Strategies, a research company based in Nairobi.

Muriuki, who was presenting at the Africa Peering and Interconnection Forum in Accra, Ghana, said that some governments insist that because the telco is importing capacity from one country to the other, then it must attract applicable taxes and VAT, which makes the cost higher than satellite services.

In some cases, governments appoint a fibre operator and insist that any transaction must pass through that operator. In Ghana, MTN has laid fibre to the border with Togo but it can not offer cross-border services.

"We have laid fibre up to the border with Togo, we can not cross over and offer services because Togo Telecom has not laid its fiber in readiness for interconnection," said Richard Densu,acting executive, MTN Business, Ghana.

In West Africa, there is extensive fibre laid but interconnection costs are still high, due to a lack of competition among cross-border link providers as well as the high cost of national capacity and local hosting.

"There are few wholesale/carrier licenses issued and in some cases discrimination against new entrants, including alternative infrastructure providers," said Mike Jensen, an independent consultant, who has been involved in setting up IXPs in Africa.

In his presentation at the peering forum, Jensen said that alternative infrastructure providers such as electric power or transport utilities are at times unaware of market trends, charging higher prices when telcos want to use the power or transport lines to lay fiber.

While regulation and taxation has inhibited cross-border fiber connections, companies that can lay and sell fiber often have monopoly positions, keeping prices high.

In Malawi, the cost of connecting Blantyre, the commercial capital, and Lilogwe, the capital city, is $1,000 per megabyte, which has made it harder for Malawi IXP to set up a POP in Lilogwe.

"Malawi Telecom operates the fiber link between Blantyre and Lilogwe and it will be very expensive for the IXP to pay - we are in discussions with Malawi Telecom, which peers at the IXP, to explore ways to interconnect affordably," said Paulos Nyirenda, coordinator at SDNP Malawi, a government program dealing with internet and information services.

Nigeria poses a unique case, since there is more than one terrestrial fiber provider, yet the cost of interconnecting between Lagos and Abuja is more expensive than the cost of international transit to London.

Nigeria also has the problem of "community boys" who are people from the local areas that expect to be paid in order for the fiber to pass through the area. Failure to pay might delay the project.

"We have had to change the location of Nigeria IXP to a street where all telcos were able to interconnect, which boosted the content; however, there are other costs that are not for seen, 'community boys' expect to be paid for fiber to pass through -- this is a challenge," said Yen Choi, a board member at NIXP.

Nigeria may be unique with the challenge of "community boys" but issues of regulation and competition in cross-border and inland fiber sales has contributed to the high cost and may need political intervention for connectivity costs to fall.