African Network Conditions

African net quality tests users' mettle: Dearth of digital facilities, subpar conditions, costs pose obstacle to users extending nets to continent.

(First of a two-part series examining network conditions throughout Africa.)

by Vineeta Shetty
Special to Network World
[14 Oct 91; 8:41, pp. 33-5]

Global network managers who think they've got problems extending U.S. networks to Asia or Europe should try to deal with conditions in Africa. The continent is characterized by low telephone penetration, slow network growth, antiquated systems, suboptimal reinvestment of profits, high pricing of private facilities, poorly dimensioned intercity telephone links and widely varying national network infrastructures.

In countries such as Mauritius and Madagascar, the prosperous islands that enjoy high tourism, value-added services are an essential part of the infrastructure. By contrast, some countries in the continent's interior have no phone links between capital cities and remote towns.

In comparison with other areas of the world, the sub-Saharan region, which excludes the Republic of South Africa and the North African countries of Algeria, Egypt, Morocco and Tunisia is characterized by chronic underfunding for equipment. Lack of skilled labor and the absence of strategic planning and management also contributes to the primitive state of telecommunications.

However, change is in the wind. Restructuring of telecommunications administrations from the traditional monopolistic structure to independent commercial entities has eased a number of institutional constraints on operators. Financing options, such as equity participation from local companies, have become realities.

The economic and political clout of user organizations-- especially in industries such as finance, tourism and air transport--is also beginning to change the service orientation of administrations from a subscriber-driven focus to a customer-oriented one. This opens the door for users to influence the development of telecommunications policy and tariff reform in the planning and prefinancing stages.

PAYING THROUGH THE NODES

Typically, installed network capacity in Africa is low, while demand from customers is high. As a result, the total number of telephones is a burden on the central exchange and transmission equipment and network efficiency suffers.]

Unlike other continents that have developed domestic manufacturing, Africa has little indigenous production of telecommunications equipment other than cable and, in a few countries, telephones. Therefore, telecommunications in Africa does not demonstrate the much-vaunted multiplier effects on research and development, services or employment.

With the exception of South Africa, which has its own production of integrated circuits, the continent relies heavily on imports for its equipment needs.

According to some native viewpoints, this situation ties procurement of materials to the trading policies of its suppliers' host governments, often forcing the African countries to buy equipment and make investments not suited to actual needs.

Problems of maintenance and management of spare parts are also blamed on the multiplicity of equipment. All these factors result in high tariffs and operating costs.

The pricing structure in African countries poses tough challenges for users. Telecommunications administrations in developing countries traditionally subsidize basic telephone and telex services with enhanced offerings. Subsidies to postal and rural phone services also compete for funds with telecommunications in the urban, industrial and commercial sectors.

This policy militates against investment, innovation and deployment of new services. Cellular and data communications, used by business and industrial entities, often become the target of higher prices. Compounding the problem is the tendency to retain obsolete network equipment, usually because of the lack of finances to purchase new systems.

Modernization of the network is essential to make new services affordable and to enable the network to expand quickly and reduce the cost of providing basic service. To this extent, the pattern of procurement and installation of digital switching and transmission systems is of interest to the corporate user.

PERSISTENCE IS KEY

For intrepid global network managers of companies operating in Africa, ingenuity and persistence are essential. Users have been pressuring administrations to secure more reasonable prices for private facilities.

A case in point is the Society for Worldwide Interbank Financial Telecommunication, S.C. (SWIFT). The consortium of users and shareholders for crossborder electronic funds transfer operates a network that encompasses South Africa, Morocco, Tunisia and the Ivory Coast.

Banks in Algeria come on-line this year, while Mauritius and Madagascar are expected to have SWIFT service by 1992.

SWIFT must negotiate the murky waters of post, telegraph and telephone administration approval for leasing circuits in each country where it has members.

Banks are charged for circuits to the access point, in addition to the charge for international lines. Apart from the problem of high circuit costs, the cooperative faces problems with downtime. However, through persistence, SWIFT has been able to negotiate better prices in some of the countries.

International tariffing is also undergoing changes that are important to telecommunications users. According to presentations made at Africa Telecom '90, the International Telecommunication Union conference in Harare, Zimbabwe, there is a serious attempt being made by subregional organizations, such as the Pan-African Telecommunications Union, to encourage the use of the African transit center, which is a carrier facility used to relay traffic to another country or geographical area.

This is seen as a means to reduce the outflow of hard foreign currency. Telecommunications administrations have seen equitable results in balance of payments when traffic had been diversified, creating direct circuits to individual countries.

According to Margarida Sagna, director general of the Cape Verde PTT at Africa Telecom, this diversification enables the administrations to develop relations of a more commercial nature, rather than to depend on "political compromises made since our independence, which have prevented us from turning elsewhere."

PANAFTEL PROMISES QUALITY

Although the state of telecommunications networks is for the most part inadequate on the continent, the level of development differs from country to country (see graphic, page 33 [Map, digital lines per 100 inhabitants]). With the exception of regional networks, such as Pan- African Telecommunications (Panaftel), which involves some 39,000 kilometers of radio-relay systems, about 39 international telephone switches and 8,000 kilometers of submarine cable, user organizations can expect to see some dramatic improvements in the quality, uniformity and availability of intra-African services.

One of the benefits of Panaftel will be the harmonization of policies among the 45 member countries. The network links are long, not sufficiently available and often powered by solar energy. Therefore, coordination between the various countries affected by the routes is critical.

Under the Panaftel program, intra-African telecommunications traffic will be increasingly routed through African transit centers. There is a good chance that the tariff restructuring resulting from this will benefit major customers.

Another objective of Panaftel is the resolution of cross-border interconnection problems, such as those between Kenya and Malawi; Kenya, Ethiopia and Djibouti; and Cameroon and Chad.

Similarly, pan-African initiatives such as the Regional African Satellite Communications (RASCOM) project are expected to result in cost savings for telecommunications administrations, although the jury is still out on whether a regional satellite system will prove more economical than using existing International Telecommunications Satellite Organization circuits.

If RASCOM does materialize, it is likely to follow the pattern of Panaftel, which has become a new arena for competition between carriers and a point of interest for corporate telecommunications network planners, who can pick countries that offer lower rates for transit traffic.

The Ethiopian Telecommunications Administration (ETA), for instance, lowered its transit rates below those of traffic carriers outside Africa. ETA also introduced lower rates for leased circuits in Panaftel links. By doing so, the office hopes to attract more intra- African traffic.

[Part 2] Private sector helps Africa improve nets:

Governments encourage corporate participation in bringing better telecom nets to the continent.

[Network World, 21 Oct 1991 (8:42; pp. 29-30, 33)]

Despite less than optimal network conditions across Africa, countries there have made progress over the last four years toward liberalizing telecommunications policies and, in some cases allowing private sector participation.

Perhaps more timidly than governments on other continents, African governments are allowing private sector participation through joint ventures and subcontracting of installation and maintenance service with the aim to improve network conditions.

There have even been moves toward more advanced privatization, such as the sale of shares of state-run telephone operators to the public sector, as is the case in Zambia.

Telecommunications policy reforms have taken place in Benin, Botswana, Burkina Faso, Burundi, Central African Republic, Gambia, Ghana, Ivory Coast, Mali, Niger, Nigeria, Senegal, Tanzania, Togo and Zambia. Reform is also expected in Angola, Rwanda, and Sudan.

The participation of the private sector in the provisioning of telecommunications and the entry of foreign suppliers has realigned priorities toward promoting economic, trade and industrial development.

One illustration of this phenomenon is Companhia Portuguese Radio Marconi (CPRM), which created an international division to search for and analyze new partnership opportunities at the international and national level. CPRM has effectively exploited Portugal's historic ties with its former colonies on the continent: Angola, Cape Verde, Guinea- Baas, Mozambique, Principe and Sao Tome.

The company plays the role of investor and advisor to local telecommunications administration. It has a 51% stake in Guide Telecom, the operator in Guinea-Baas.

As one of the first private companies in Africa, Guide Telecom has made significant advances since it began operation in 1989 under CPRM's involvement, doubling the number of subscriber lines in the country to 7,000.

One of the most active foreign telecommunications operators has been France Telecom, which has lent a new market-oriented slant to the administrations of the French-speaking countries in the western and central regions of the continent.

Consolidation of its traditional operations in Africa in 1988 has been one of the main strategic lines defined by France Telecoms's subsidiary, France Cable & Radio (FCR). Despite the continuing economic difficulties on the continent, Africa remains a prime operation zone for the company.

In Chad, France Telecom has stimulated the use of electronic telephone directory and videotex services. It also installs servers and specific applications in Morocco and Niger. The carrier is involved in an operating assistance plan for a data transmission network in North Africa.

FCR lately has combined its operational expertise with Sofrecom's engineering talent to implement projects in Africa.

For instance, it participated in the installation of the International Telecommunications Satellite Organization Standard A earth stations in Gabon, provided engineering for switching and transmission networks in Niger and Mauritius, and delivered and operated a packet net in Egypt.

FCR has also been active in setting up local X.25 networks: Togopac in Togo, Chadpac in Chad, Senpac in Senegal, Nigerpac in Niger, Egyptnet in Egypt and Sytranpac in Ivory Coast.

The predominance of packet-switched networks in West Africa is due in part to the presence of foreign oil firms in the area that need access to remote locations and their home countries.

This decade ought to see a spurt in telecommunication activities across Africa. The World Bank is increasing official development assistance to the continent and is exhorting telecommunications entities to take on a more proactive role in emphasizing to their ministries of planning and finance the role of telecommunications in economic development.

Regional financing has also been increasing. The African Development Bank, for example, has financed several telecommunication projects in 30 countries.

Bilateral lending and technical assistance from Nordic countries and Japan indicate a shift is underway from Southeast Asia to the Middle East to Africa in project ratio.

For instance, in the case of Nippon Telecom Consulting Company, Ltd. (NTC), Malawi, Ghana and Zimbabwe account for 45% of NTC's revenues. But most of these projects have been in the area of basic voice services.

Although value-added services are critical as a boost to business activities and the economy as well as being profitable to the operator, proposals for services such as electronic mail and packet switching are not viewed favorable by potential financial backers.

Basic types of services involving improvements to the network are viewed in a more positive light.

Investors are also likely to direct more funds to the local and national network and deemphasize international services. In light of this, foreign and private companies play an increasingly important role in ensuring that the profit-oriented, enhanced services become available.

ENCOURAGING INVESTMENTS

Several African telecommunication administrations have even instituted reforms on their own that foretell progressive pricing and efficient management of the network.

Nitel of Nigeria is one example of an administration fostering the long-term view, having embarked on a program to encourage outside investors to buy company stock. Senegal also has a program for involving large users in its advanced new service. Sonatel, the company's service provider, recently installed a national packet-switched data communications network, which a group of 12 leading companies were closely involved in defining and launching.

Promising developments are also present in Ghana. AT&T International, Inc. and MCI International, Inc. have created new accounting arrangements in order to stimulate traffic. AT&T provides and installs digital compression equipment for the link between a satellite earth station and the international exchange in Accra, Ghana's capital. Instead of currency, the post, telegraph and telephone administration pays AT&T via an adjustment in tariffs.

Other PTTs are attracted to this scheme because it makes their invested plant more productive. This year, AT&T plans to focus on several countries where the revenue stream has the most potential, such as Nigeria, Ghana, Kenya and possibly, Gambia. The companies have been prioritized by call completion rates and have been selected for their geographic situation.

FOCUS ON THE NETWORK

International carriers such as AT&T are putting pressure on telecommunication administrations to focus attention on the network rather than adding local loops. The case of Gambia highlights the benefits of improving the network infrastructure. Gamtel increased its call completion rate significantly and now has an international call completion rate that is 20% higher than the average found in West African nations.

Administrations are recognizing that this could be a competitive difference in attracting trade opportunities and business from foreign companies.

Currently, the trend is to distinguish development efforts in each economic and social growth sector. The national operator is responsible for providing vital telecommunications needs.

Telecommunications can be expected to play an increasingly important role with the creation of the African Economic Community in the year 2000. Throughout Africa, there is an increasing awareness that those countries that delay in implementing new telecommunication structures stand to lose important multinational user clients that would eventually enable the operators to place themselves in a competitive position.

As a result, multinational users of Africa's telecommunications networks have the opportunity to place themselves strategically in a consultative role to telecommunications administrations and influence important long-term decisions.

Shetty is an independent researcher and writer on global telecommunicatons based in London.