THE AFRICAN GREEN PAPER Telecommunication policies for Africa November 1995 THE AFRICAN GREEN PAPER Telecommunication policies for Africa November 1995 TABLE OF CONTENTS Paragraphs FOREWORD 001-007 EXECUTIVE SUMMARY 001-011 SUMMARY OF RECOMMENDATIONS - Recommendations CHAPTER I. - INTRODUCTION 001-027 Telecommunications evolution 001-004 The telecommunication sector in Africa 005-008 The need for a policy framework 009-015 The policy formulation process 016-019 Content of the policy framework 020-022 Organization of the Green Paper 023-027 Recommendations CHAPTER II. - EXISTING SITUATION 028-077 (a) Global trends 028-041 Search for an appropriate institutional framework 032 Information and communication technologies 033-035 The need for restructuring 036-041 (b) The situation in Africa 042-077 The economy 043-047 The democratic transition 048 Demography 049-052 Telecommunication networks and services 053-058 Financing of telecommunication projects 059 Bill collection 060 Network maintenance 061-062 Human resources 063 Regional and subregional cooperation 064-066 Existing operating structures 067-070 Rural telecommunications 071-074 A platform for action 075-077 Recommendations CHAPTER III. - LEGAL CONSIDERATIONS 078-108 Introduction 078-082 The regional/subregional scenario 083 The national scenario - The National Regulatory Authority (NRA) 084-090 The alternatives to NRA 091-096 The PTO's new legal structure 097-098 Further legal issues 099-100 Procedures for the resolution of disputes 101-108 Recommendations CHAPTER IV. - THE REGULATORY FRAMEWORK 109-138 Actions to be taken at regional/subregional level 110-116 Reserved and competitive telecommunication services 117-121 Integrity of basic network infrastructure 122-124 Access to network infrastructures 125 The ONP concept 126-127 The ONA concept 128-129 Liberalization-cum-regulation 130-132 Other action to be taken at the regional/subregional/and national levels 133-136 Functions to be performed by the NRA 137-138 Recommendations CHAPTER V. - RESTRUCTURING OF NETWORK OPERATIONS AND SERVICES 139-160 Introduction 139-140 Autonomy versus State control 141-144 Separation of postal and telecommunication services 145-148 Management problems 149-151 Importance of strategic planning 152-154 Detailed diagnosis of agency management 155-156 The special case of human resources management 157-160 Recommendations CHAPTER VI. - ECONOMIC, FINANCIAL AND TARIFF ISSUES 161-214 Investment necessary to develop the basic network 161 Profitability of telecommunication investments 162-164 Investment required to develop the basic network 165-167 Sources of funding 168-169 Telecommunication investments and other national priorities 170-174 Recommended action 175 Action required at the national level 176-182 Action required at the subregional level 183 Action required at the regional level 184-186 Tariff issues 187-189 Tariff principles 190-193 Viewpoints on tariff principles 194-198 Utilization of the PANAFTEL network 199-201 Settlement of accounts 202-203 Sender Keeps All Accounting (SKA) 204 The PTA multilateral clearing facility 205 Action required at the national level 206-210 Action required at the subregional and regional levels 211-214 Recommendations CHAPTER VII. - TELECOMMUNICATION NETWORK DEVELOPMENT 215-269 Development policy 215-218 The need for balanced development of the national telecommunication network 219-221 Introduction of new technologies and associated services 222-227 Interconnection of public and private networks 228-231 Rural telephony 232-235 Technical options 236-237 Installations maintenance 238-239 Communications charging 240 Accompanying measures 241 Network operation 242 Charging for products 243-245 Network development structure and management 246 Integration of development policies 247-249 Interconnection of national network with a particular type of global network 250-252 The regional level 253-258 Setting up a common infrastructure/common support system 259 Service interconnectivity 260-263 Harmonization of network development norms/standards 264-266 Industrialization policy 267-269 Recommendations CHAPTER VIII. - REGIONAL AND INTERNATIONAL COOPERATION 270-279 Organizing regional cooperation in a simpler and more efficient manner 271-273 Issues to be tackled within the framework of regional cooperation 274-275 International cooperation 276-277 Least developed countries in the region 278-279 Recommendations ANNEXES Annex I List of reference documents Annex 2 African Telecommunication Development Conference (Harare, 1990), Resolution ATDC/90-RES1 Annex 3 African Economic Community: Draft OAU Protocol on transport and communications (Article 10 - Telecommunications) Annex 4 Model organizational structure and staffing of a National Regulatory Authority (NRA) Annex 5 Example of a draft law determining a regulatory framework for the telecommunication sector Annex 6 Open Network Provision (ONP) - the European concept Annex 7 Open Network Architecture (ONA) - the United States concept Annex 8 Methods of granting licences - Renewal (Excerpt from the December 1993 draft of The Blue Book - Telecommunication policies for the Americas) Annex 9 Financial sources, instruments and strategies Annex 10 The Buenos Aires Action Plan Annex 11 Terms of reference of the ITU-D Study Groups Annex 12 Glossary FOREWORD 1. The increasingly widespread awareness of the fundamental role of telecommunications in overall economic development makes it all the more unacceptable that African countries should be so far behind in this respect. The Lagos Plan of Action, which was approved by the Heads of Member States of the OAU, recognized this as far back as 1980 and resolved that the telecommunication sector should be given the necessary backing it deserves in the overall development of our continent. It was in the full knowledge of this that the African Telecommunication Development Conference (ATDC) (Harare, Zimbabwe, 1990) created within the framework of the International Telecommunication Union's Telecommunication Development Bureau (ITU/BDT) a standing African Information and Telecommunication Policy Study Group (AITPSG), entrusting to it as a matter of the utmost urgency the task of elaborating a first draft of the regional telecommunication policy document to be known as the African Green Paper (ATDC-90/RES1) (see Annex 2). 2. In assuming this task, the AITPSG entrusted the preparation of the document to an ad hoc team of four experts from African telecommunication administrations, under the coordination of a consultant. The team met on three occasions (Geneva, 9-12 November 1992; Addis Ababa, 15-19 March 1993; Geneva, 6-7 July 1993), carrying out the tasks assigned to it in close collaboration with the African administrations and the regional and international organizations concerned. 3. The inspiration for the Green Paper was drawn from the similar measures taken by the European Commission which in 1987 issued guidelines to the governments of its member countries with a view to harmonizing national telecommunication sector policies within the framework of European economic integration. 4. It should, however, be emphasized that since the African continent does not yet have a political framework as firm as the European Union, the African Green Paper should be viewed more as a thought-provoking document suggesting an appropriate approach and offering a number of potential options for defining and bringing about, as harmoniously as possible, restructuring of the telecommunication sector in Africa. 5. In line with Resolution No 1 of the ATDC, it is suggested that following the adoption of the Green Paper by the AITPSG, studies continue within the four African economic subgroupings or even within a smaller group of countries, as well as within each individual country. Meetings, seminars and workshops could also be organized in a more goal-oriented way than is possible at the continental level, with a view to defining a tighter and more specific policy and regulatory framework, both at the subregional and national levels, based on the Green Paper and other relevant working documents. 6. In these different forums, appropriate measures in terms of human, material and financial resources should be decided upon prior to implementation of the policy adopted by common consent. 7. For their part, the ITU/BDT, the regional and subregional organizations such as the ECA, ECOWAS, ECCAS, OAU, UMA, PATU, SADC, PTA, should collaborate in evaluating their entire process with a view to reporting on it to future African regional telecommunication development conferences and thereby facilitating the adoption of appropriate measures. EXECUTIVE SUMMARY 1. Throughout the world, and in particular since the early 1980s, far-reaching changes have taken place in telecommunications as a sector of economic activity. These changes mark the end of a period of several decades characterized by the existence of national, generally State-run monopolies. 2. At the moment, Africa is somewhat removed from these changes. The continent's acknowledged lack of equipment in telecommunications and the poor performance of its public network operators call for very close scrutiny of the approaches adopted since the 1960s, in particular with regard to investment and technical assistance policies. Do the changes which have taken place elsewhere in the world have any relevance for improving the performance of the African telecommunication sector? 3. One of the basic assumptions of the Green Paper is that the African countries would benefit considerably if they were to join forces in approaching the subject at the continental and subregional levels so as to promote to the greatest extent possible the integration of their telecommunication networks and services and, hence, of their economies. 4. Breaking away from resorting to short-term plans to bring about improvements, such as in investment or technical assistance, the Green Paper is a tool for pursuing at the highest level of the States, bringing together as they do the various players in the telecommunication sector, the formulation of explicit policies. These might follow the example of what has been done elsewhere to: - shift government responsibility away from the ownership and management of public companies towards the establishment of a policy, legal and regulatory framework; - restructure the telecommunication network operators as fully autonomous corporations and make them more market oriented; - involve the private sector in the management and implementation of the national telecommunication network and introduce some form of competition. 5. Policies should be subject to periodic review by assessing the effects of measures already taken. The Green Paper proposes to focus on: - determination of the legal and regulatory framework governing telecommunications; - restructuring of operations and redefinition of the type of control by the government; - future development of African telecommunication networks and services; and - regional cooperation. 6. The "regulatory framework" covers the various legal instruments establishing the regulatory body and prescribing its powers, rights and obligations, the rights and obligations of public operators and other entities subject to regulation, and the relations between the regulatory body and other ministerial departments, the legislative authority and the judiciary. 7. No perfect model emerges from the experience acquired by countries which have already initiated such changes. But a methodical approach can be suggested. Prior to actually defining the regulatory framework, it would seek to identify the objectives, scope and modes of application of the regulations, as each of these three elements offers various options with advantages and disadvantages. 8. As telecommunications are largely State-dominated, any restructuring attempt will inevitably entail close scrutiny of the State's role and, consequently, of the merits of private participation in ownership and management. The African countries should approach the issue with equanimity. The principal challenge is to adapt the sector in a coherent and systematic manner to market forces and to the requirements of the State institutions. Privatization may be a useful tool among others in this process to succeed with reform. 9. At the same time, the attention of senior executives in telecommunication administrations is drawn to the fact that it is their duty to remove all obstacles to the efficient management of their units. Such obstacles are often the result of cultural inadequacies in administrative bodies which are not run as businesses. Hence the importance of proper human resources management in implementing the necessary changes, which are more closely bound up with staff members' values, attitudes and behaviour than with their technical skills. High priority should also be given in the future to strategic planning, which makes it easier not only to identify objectives and obtain the resources required to achieve them, but also to clarify the organization's relationship with the public authorities and the socio-economic environment in general. 10. Moreover, the Green Paper points to the need to devise ways and means of making regional cooperation simpler and more efficient. The common objective should be to meet the African population's needs through the best possible use of human, material and financial resources. The new approach should lead to the identification and completion of projects in the regulatory, technical and managerial fields. This is the way for achieving integration of more efficient national telecommunication networks which would herald the economic and political integration to which the peoples of Africa aspire. 11. In operational terms, the African Green Paper seeks to: (1) initiate a dialogue among all the actors concerned in designing and creating legal and regulatory frameworks that strengthen the sector's economic, socio- cultural and technical contribution; (2) promote the gradual introduction of competition in the provision of advanced services and terminal equipment in response to business and individual requirements; (3) improve the operational efficiency and productivity of Public Telecommunication Organizations (PTOs) to enable them to face competition whilst better responding to customer demands and social needs; (4) create momentum towards establishing a regional market for telecommunication equipment and services; (5) work towards common procurement arrangements and common technical standards for African PTOs, and towards building up manufacturing capacity for telecommunication equipment; (6) foster the implementation of an African telecommunications network to facilitate the creation of the African Economic Community. SUMMARY OF RECOMMENDATIONS RECOMMENDATION 1 Creation of a national committee for the coordination of national information and telecommunication policies The Green Paper incorporates the relevant provisions of Resolution ATDC-90/RES1 of the African Telecommunication Development Conference (Harare, 1990) which calls for the creation in each country of a national inter-ministerial coordination committee to study and propose to the government appropriate national information and telecommunication policies. These policies, while forming part of the country's socio-economic development policy option, would take into consideration the realities of the international telecommunication ennvironment and the pressing need for African economic integration. RECOMMENDATION 2 Role of the State in telecommunication development While recognizing the State's continuing role in the development of telecommunication networks and services in Africa, the Green Paper recommends a thorough re-examination of that role, which should be concerned with defining sectoral policy. RECOMMENDATION 3 The regulatory framework for telecommunications As the existence of an appropriate regulatory framework is a prerequisite, in the current world context, for any telecommunication development strategy, the Green Paper recommends: (i) the creation of a separate national body for the regulation of telecommunications. Although the structure and procedures of such a body would depend on a number of factors including some specific to each country, it is important, in this connection, to take the following elements into account: the purpose of the regulatory body must be clearly defined, inter alia by answering certain questions, such as how and why regulation should take place and what should be regulated; data derived from the international environment, among other sources of information, should make it possible for the regulatory body to anticipate change; in examining and seeking solutions to the problems which have been submitted to it, the regulatory body must be guided by a spirit of transparency without which it would lack credibility and would not be in a position to carry out its crucial arbitrational role with respect to all interested parties, including the State authorities; the position of the regulatory body in the overall government sttructure, its organic relations with the other parties and the way in which it is financed will determine the degree of autonomy granted to it by the public authorities; (ii) the harmonization, at the subregional and regional levels, of the different national regulatory structures will have the dual effect of creating a homogenous and viable market for telecommunication services responding to a variety of both household and professional needs on a competitive quality and cost basis, and of fostering the integration of the economies of the region as well as the settlement of eventual disputes among States. RECOMMENDATION 4 Reform of the telecommunication sector The Green Paper recommends that a bold institutional reform of the telecommunication sector, comprising both organizational and operational measures, should be carried out where this has not already been done. These measures should highlight the commercial nature of telecommunication services, even if they do retain a "public service" dimension which should not be disregarded. RECOMMENDATION 5 Competition The Green Paper recommends the opening to regulated competition of market segments for which State operator(s) either offer no services or fail to provide the customer with the most cost-effective solution. RECOMMENDATION 6 Concerted action The Green Paper recommends that all of the social and economic partners concerned should be actively involved in the restructuring and development of telecommunications in an atmosphere of complete transparency; indeed, consultation among partners must precede any reforms in this sector. RECOMMENDATION 7 The financing of telecommunications Though the results have been relatively poor, considerable efforts have been made, particularly since the 1980s, to increase the financial resources allocated to the development of telecommunications in Africa. However, financing needs remain disproportionate to the financial resources which can be mobilized under the present circumstances. For example, in order to achieve a penetration of two main lines per 100 inhabitants as a regional average by the year 2000, an annual investment of two billion US dollars is required, an amount considerably exceeding the investments made during the period of strong economic growth. Consequently, the Green Paper recommends: at the national level (i) that an institutional reform be carried out in the telecommunication sector in a legal and regulatory environment which would provide sufficient incentive to attract capital from various sources, including the domestic and foreign private sectors; (ii) that due emphasis be placed in ongoing or planned reforms in the telecommunication sector, on structural and operational measures which would make it possible to increase the self-financing component of the various projects while at the same time facilitating access to sources of financing on favourable terms; (iii) that an innovative approach be adopted with respect to the search for fresh sources of financing. This could include, for example, the issuing of national bonds, co-financing, joint ventures and agreements of the Build, Operate and Transfer (BOT) type. at the subregional and regional levels (i) that the incentive measures taken in each country of a given subregion be harmonized in order to ensure that the disparity in conditions for access to loans does not constitute a further impediment to the financing of subregional and/or regional projects; (ii) that an ad hoc group be created to follow up the implementation of joint projects. The main activity of the group would consist in mobilizing the necessary financial resources. RECOMMENDATION 8 Telecommunication network development Generally speaking, the existing telecommunication network is underdeveloped in relation to demand. Furthermore, owing to the poor quality and high cost of services offered, most networks are exposed to the risk of "bypassing" of international traffic, which often accounts for the bulk of their operating income. Moreover, the interconnection of networks is weak, especially in the Central African subregion. In order to remedy these different shortcomings, the Green Paper recommends: (i) that a coherent policy be formulated for the development of public and private telecommunications, taking into account the urgent need to ensure the interconnection of networks and services at the subregional and regional levels; (ii) that the integrity of the national telecommunication network be safeguarded through the development of precise standards for interconnection with the public network of private networks introduced on the basis of concessions; (iii) that, other than in exceptional situations where there is economic justification, countries stop buying new analogue switching or transmission equipment for the extension of the existing network. Network digitization must be carried out within the framework of a plan and not on a piecemeal basis, each country adopting the most economical digitization scenario with respect to its particular situation; (iv) that the efforts undertaken with a view to providing rural areas with a minimum high-quality service at non-discriminatory cost be pursued. To this end, radio systems may, in certain cases, provide the best technical solution for serving rural areas, along with satellite systems and/or cellular telephony; (v) that the problems of maintenance and repair of existing installations be taken into account in programmes for the renewal and extension of the network. RECOMMENDATION 9 Human resources Human resources are the principal resource necessary to the development and rational operation of telecommunication networks, particularly in an environment such as Africa where the latest technology has to be used in particularly difficult conditions. Regardless of the legal status of the entity responsible for the development and management of telecommunications, the Green Paper recommends that sufficient investments be made in the development and management of human resources and that measures be taken to ensure that procedures and rules relating to personnel management are compatible with the commercial nature of the telecommunication services which must be provided in a dynamic and highly competitive environment. RECOMMENDATION 10 Cooperation The Green Paper takes up the declaration made by the representative of the Economic Commission for Africa (ECA) at the World Telecommunication Development Conference (Arusha, Tanzania, 1985), according to which "... it is essential for the countries of the African Region to realize the similarity of their objectives and the complementarity of their needs, to combine their resources in order to obtain better results and, collectively, to take maximum advantage of the region's resources". To this end, the Green Paper recommends: (i) a thorough examination of the mandates and operating structures of the subregional and regional organizations responsible for cooperation in the telecommunication sector in order to increase their efficiency and eliminate any duplication of work and, if necessary, a reduction in the number of such organizations; (ii) the drawing up of a strategy for cooperation with the other international organizations involved in the development of telecommunications in Africa, ensuring that all actions undertaken are directed towards the same objective and are carried out at optimum cost; (iii) more active cooperation between developing countries at the subregional and regional levels and a periodic evaluation of such cooperation with a view to constantly improving its cost-effectiveness. RECOMMENDATION 11 Tariffs The setting of tariffs for telecommunication products in Africa has already given rise to a number of important technical contributions, particularly by the TAF Group. The fact is, however, that no adequate solution has yet been found for the determination of accounting rates for intraregional communications and the settlement of the related accounts, either at the subregional or the regional level. One of the reasons for this difficulty is that tariff structures and levels in most of the countries are determined without any reference to the actual cost of the services offered. As tariffs are the "ultimate competitive weapon", the Green Paper recommends: (i) that studies be undertaken to determine the cost price of the services and benefits supplied, data which is essential for the fixing of equitable tariffs and quotas; (ii) that updated statistics be kept on the different intraregional traffic flows, whether routed directly or through transit centres located within or outside the region; (iii) that until objective elements are available for determining accounting rates for intraregional communications and choosing the optimum solution for the settlement of accounts, a provisional solution be adopted. This solution should encourage the routing of intraregional traffic through transit centres available in the region, while at the same time creating direct links between the States of the region as soon as this is justified by the volume of terminal traffic; (iv) that a study group should be set up at the national level to examine the question of tariffs for telecommunication products and to provide all the technical elements required to determine tariff structures and levels. RECOMMENDATION 12 Industrialization While practically all of the telecommunication equipment installed in Africa is produced outside the region, the African equipment market is not large enough to alter the production policy of suppliers, who are more concerned with satisfying the needs of their main customers, the big network operators. Moreover, the market for the productioon of telecommunication equipment is currently in the process of being restructured in response to the drastic changes in production technology and the new situation with respect to the competitive supply of telecommunication services. In this context, the Green Paper recommends: (i) that the problem of industrialization in the field of telecommunications be made a priority objective, it being understood that to this end the States must create, on a subregional or regional basis, a favourable legal and regulatory environment providing sufficient incentive to attract private sector investments in the manufacture of telecommunication equipment in Africa; (ii) that the necessary technical and regulatory measures be taken at the appropriate level to harmonize standards for the equipment used. The technical information relating to such equipment and to new purchases would be organized into a database, constantly updated and made available to potential developers of a local industry for the manufacture of telecommuication equipment. Studies would have to be made in this connection in order to determine the conditions in which such a project could be viable from the financial point of view. RECOMMENDATION 13 Separation of postal and telecommunication services In certain African Administrations, posts and telecommunications are subject to the same management regulations, in spite of their specificity. Postal services are generally considered to be structural loss-makers. However, there are examples which prove that postal and financial services, if well managed, can generate profits. The Green Paper recommends that, where possible, postal and financial services should be managed separately from telecommunication serrvices. In this connection, a certain amount of clarification and diagnosis is essential before the evaluation, distribution and devolution of initial joint assets can take place. Wherever possible, balance sheets should be drawn up prior to the actual start-up of the new entities. RECOMMENDATION 14 Infrastructures and basic services A number of factors specific to Africa, such as the size of the telecommunication market, the imbalance in the level of development between rural and urban areas, and the legal and regulatory framework in force in most of the countries of the region militate in favour of a prudent approach to liberalization. In this connection, the Green Paper recommends that a monopoly be maintained over basic infrastructures and services. However, the survival of such monopolies will depend on their ability to adapt to the new international telecommunications environment. THE AFRICAN GREEN PAPER Telecommunication policies for Africa CHAPTER I. - INTRODUCTION Telecommunications evolution 1. Since the beginning of this century, telecommunication services throughout the world have been supplied on a monopolistic basis. In most of the developed countries, moreover, the monopoly was traditionally run by an administration or a State-owned enterprise, while a few countries opted for the system of issuing licenses to private sector monopolies on a territorial or functional basis. 2. As a result, by the end of the Second World War, the majority of the developed countries had set up national networks providing a practically universal service, which satisfied the needs of both households and the economy. 3. In the 1980s, under the pressure of technological progress and expanding business requirements, some changes began to occur in the traditional way telecommunications were organized. The process started in the United States when competition was fostered in the supply of long-distance telecommunication services, following the break-up of the Bell system. After that, the United Kingdom, Japan, Australia, New Zealand and an increasing number of developing countries have introduced competition in the supply of services. At present, many countries are at some stage or another of restructuring their telecommunication sectors. 4. The form this restructuring takes varies from one country to another, but, in general, it has resulted in more attention being paid to the needs of customers and to tariff structures and levels more in line with production costs and market demand. The telecommunication sector in Africa 5. In African countries, as in most of the developing countries, telecommunication network operators, which were originally either private companies or colonial administrations, were mostly nationalized at the time of independence in the 1960s and transferred to the public sector. It is not easy to arrive at any accurate and quantified evaluation of the performances of public network operators in Africa on account of inadequate statistics which reflect shortcomings of existing management methods, since these are not explicitly founded on operating statistics and performance indicators. One has to recognize that the results obtained by nationalized enterprises could on the whole be said to be unsatisfactory despite the elaboration of a host of master plans as shown in Table 1. 6. According to data compiled in the indicator series of the ITU (see Table 2 and item 1 of Annex 1), Africa is very unfavourably placed compared with other even little developed regions of the world, such as the low-income countries of Latin America and the Caribbean or Asia and the Pacific. For instance, the telephone density of sub-Saharan countries in 1994, which was 0.5 lines per 100 inhabitants, is only 1/10th of that of Asian countries and 1/15th compared with countries in Latin America. The efficiency rate of calls is less than 30%, compared with 70% in many developed countries. TABLE 1 MASTER PLANS CARRIED OUT IN AFRICA WITH ITU ASSISTANCE* COUNTRY PUBLICATION YEAR** SUB-SAHARAN ANGOLA 1984 BENIN 1985 BOTSWANA 1984 BURKINA FASO 1989 BURUNDI 1992 CAMEROON 1989 CAP VERDE 1989 CENTRAL AFRICAN 1984 CHAD 1993 CONGO 1983 COTE D'IVOIRE 1985 GUINEA 1991 GUINEA-BISSAU 1976 MADAGASCAR 1989 MALAWI 1987 MALI 1989 MAURITANIA 1992 MAURITIUS 1987 MOZAMBIQUE 1992 NIGER 1993 NIGERIA 1973 RWANDA 1982 SAO TOME AND PRINCIPE 1989 SENEGAL 1980 SOMALIA 1983 SUDAN 1993 TOGO 1986 ZAIRE 1982 ZIMBABWE 1986 * No master plans were carried out in North Africa except Libya (not completed). ** All master plans cover a period of about 20 years. TABLE 2 Basic indicators / Indicateurs de base 7. Network growth is between 5 and 7%, well below the theoretical rate of 12% required to sustain satisfactory growth of the sub-Saharan African economies. In 1991, these countries invested 3.7% of their Gross Fixed Capital Formation (GFCF) in telecommunications, a percentage higher than those obtained in other regions of the world (see item 1 of Annex 1; see also the ITU African Telecommunication Indicators, June 1993, table 22). 8. What these figures do not reflect is the abnormally high number of staff per 1000 main telephone lines, of pending applications, inadequate coverage of the national territories, to the exclusion particularly of rural areas, poor service quality, the absence or scarcity of new services required by business and the growing pressure on the part of companies to have their own networks. The need for a policy framework 9. The question thus facing African countries, which like all other countries are exposed to the pressures of technological progress and demand, is how to cope with this unsatisfactory situation, which is all the more frustrating since a considerable amount of investment and technical assistance has been committed over the last 30 years, as a result of bilateral and multilateral contributions from outside. 10. It will not be sufficient to do more of the same, that is, to design new investment programmes or to improve individual aspects of telecommunication network management. Not only are the countries unable to mobilize the enormous amounts of capital required to catch up with demand within a reasonable period, but some operating agencies do not even have the capacity to deploy efficiently the financial resources they would otherwise need. 11. This traditional approach based on State-owned enterprises has shown its limitations and is no longer really in line with the new economic strategies introduced in many countries in the form of successive programmes of structural adjustment, under the auspices of the World Bank and the International Monetary Fund. 12. A new approach is needed which explicitly formulates a policy framework setting out the development objectives of the telecommunication sector. Future actions can then fit within a coherent vision, offering greater appeal to traditional financial institutions and to new financial partners, for instance potential contributors from the private sector. Moreover, as such actions are introduced, they can be better assessed and adjusted in order to achieve the desired objectives. 13. The establishment of sectoral telecommunication policies in Africa is facilitated by four main factors. Firstly, compared with other sectors such as public works or transport, the number of players (operators, technology suppliers) at national and international level is more limited, which may be considered as a point in favour of the preparation, recognition and implementation of general policies for the sector. Secondly, most African countries with their structural adjustment programmes have agreed to adopt new economic strategies, including measures to liberalize trade, promote competition, reduce restrictions on incoming foreign capital and restructure State enterprises. These measures tend to give pride of place to the telecommunication sector, both as an infrastructure which is essential to implement the new economic fabric and as a typical public enterprise in need of restructuring. Thirdly, the changes occurring in the telecommunication sector in developed countries, which were mentioned above, have highlighted, in international terms, a broad range of new concepts and actions, while demonstrating the feasibility and value of moving away from the traditional state monopoly approach in the sector. Fourthly, and lastly, as a result of the globalization of telecommunication service supply, which has followed domestic changes in the telecommunication sector in individual countries, the telecommunication network operators of the developed countries are at present actively searching for new opportunities abroad, and especially in the developing countries (see item 2 of Annex 1). 14. In confirmation of the above analysis, which applies across the regions of the world, reforms have been undertaken and are being implemented in a host of the countries. Individual examples vary from one country to another with three main features in common: (1) A shift of government responsibilities away from the actual ownership and management of public companies towards the establishment of a policy, legal and regulatory framework; (2) Restructuring telecommunication network operators as independent corporations, making them more market oriented; (3) Participation of the private sector in the management and implementation of the national telecommunication network and the introduction of some form of competition. Reforms have been most marked in Latin America, Asia and most recently in Central and Eastern Europe, with the privatization of State enterprises, the creation of joint venture companies with foreign operators and the granting of licenses to private companies for enhanced services (see item 3 of Annex 1). 15. In Africa, a significant number of countries have separated the postal sector from telecommunications and have altered the status of the telecommunication administration to make it more market-oriented (Senegal, Mali, Côte d'Ivoire, Burkina Faso, Nigeria, Gambia, Central Africa, etc.). Côte d'Ivoire is seriously considering privatizing its national network operator CITELCOM. Ghana has left the implementation and management of its cellular network in private hands. Steady pressure has been brought to bear in many ways by the private sector for governments to liberalize participation in the supply of telecommunication services. The policy formulation process 16. The main responsibility for establishing a policy framework for the sector must lie with the government and more specifically with the ministry concerned. It has to be recognized, however, that this fundamental action is still not being routinely or efficiently undertaken by governments in the continent, even for other sectors of activity. It is therefore important that the formulation of policies should be properly mastered as a specific process, using appropriately established guidelines. The way forward to such policy making is by linking in a logical and systematic manner the main stages, which are: identifying the problems to solve analysing and selecting solutions, specifying actions, mobilizing the human and other resources, and periodically reviewing and assessing results. 17. A further significant point to consider is that within the domestic context these policies concern a number of players who represent different interests, either convergent or divergent, such as agencies involved in national planning, ministries, local authorities, user groups, the suppliers of goods and services in the sector, trade unions, etc. Clearly defined procedures must be laid down to ensure that they are all duly involved in the policy making process from the beginning. It is also worth considering the judicious use of group dynamics, in the form of seminars, roundtables or workshops, as well as the establishment of steering committees and special task forces. 18. One of the main ideas underlying the Green Paper is that the African countries stand to gain a great deal by adopting this approach, which is new for most of them, by coordinating their efforts at a continental and subregional level, not only for obvious reasons of resource savings and efficiency, but also because it would inevitably facilitate the introduction of homogeneous and compatible national policies, and hence the economic integration of the African continent, which is an essential pre-condition of a genuine economic take-off. 19. On the other hand, isolated reforms here and there may not only prove ineffective, but can lead to the development of antagonistic national characteristics, which will be harmful to the future integration of African telecommunications. Content of the policy framework 20. The establishment and maintenance of a policy framework must be considered by governments as one of their permanent, normal activities leading to the systematic implementation of the general scheme referred to earlier. On the other hand, the content of such a policy framework will depend on the particular situation prevailing in each country and will vary over time, yet may be expected to be stable for a few years as the subject matter is government policies. 21. In view of the similarity of the situations prevailing throughout the African continent, this Green Paper may be considered as a first attempt to build a general policy framework for the telecommunication sector in the following specific areas: - a new legal and regulatory framework governing telecommunications; - the restructuring of operations and the redefinition of State control; - the future development of telecommunication networks and services; - regional cooperation. 22. Without wishing to anticipate any conclusions that may be reached by more detailed studies than this Paper, it may be doubted, where African countries are concerned, whether dismantling the telecommunications monopoly altogether can in the medium term constitute an effective solution, especially in view of the small size of the markets involved. The real issue seems to be more efficient management of the monopoly, especially in the case of the basic telephone network, while allowing the specific services required by business to be suitably supplied. Organization of the Green Paper 23. Chapter II gives an overview of the existing situation - in the world in general and in Africa in particular - concerning the telecommunication sector and related areas. 24. Chapter III provides the history and current pattern of legal concepts, instruments and institutional options with focus on both regional and country level requirements. Chapter IV discusses the basic principles of a regulatory framework and offers guidelines for its implementation. Annexes 3 to 8 contain background material for the design of such a regulatory framework. 25. Chapter V tackles the question of the restructuring of operations, on the assumption that the basic telephone service would remain a monopoly. Whether the monopoly is public, private or a mixture of both is irrelevant. All that matters is for the government to ensure that the monopoly achieves the required long-term objectives. 26. Chapter VI deals with the critical economic, financial and tariff issues. The ultimate aim of the endeavour is to satisfy the needs of the African people at the lowest cost, on the basis of an efficient, integrated network, which will enable and facilitate the integration of African economies. Chapter VII outlines the direction and main characteristics of future network developments, from a technical point of view. 27. As a result of the way in which it is being elaborated, the African Green Paper can provide an opportunity for regional cooperation, for a fresh start and for tangible action. Chapter VIII offers suggestions for improving regional and international cooperation and making it more effective. RECOMMENDATION 1.1 - Development of a policy framework In connection with the analysis of the efforts made and results obtained in respect of the development of telecommunication networks and services in Africa, and bearing in mind the international telecommunication environment, the Green Paper recommends: (i) that priority be given to the development of a sectoral policy framework explicitly setting out coherent objectives for the development of telecommunications. All parties concerned must be associated with this effort; (ii) that the government assume principal responsibility for the formulation of this sectoral policy, and that in spite of the particularities of each country, due account be taken in this respect of the world trend, that is, of the fact that: the State's responsibility consists more and more in solving legal and regulatory problems rather than network management problems; the objective efforts to restructure network operators is the recognition, in practice, of the commercial nature of telecommunication services; the private sector is becoming a partner in the management and development of telecommunications, and the merits of introducing a certain degree of competition, under appropriate forms and in the appropriate market segments, have been recognized. RECOMMENDATION 1.2 - Implementation of the Green Paper It is recommended that the Green Paper be used as an efficient tool in the development of regional cooperation and that, to this end, pragmatism and clarity should form the basis for any implementation strategy. _______________ CHAPTER II. - EXISTING SITUATION (a) Global trends 28. A new "architecture of civilization", possessing new scales of values and appropriate economic, technical and legal structures, is coming into being. This new situation is affecting the various regions of the world in different ways, depending on their levels of development and their perception of the future; but we are all faced with similar challenges in trying to meet the long-term objective of creating the "global village" which, as a result of the new technologies, particularly communication techniques, will become a reality in the near future. 29. In the gross national product (GNP) of both developed and developing countries, cross-border flows (data, economic, financial, etc.), have been playing an increasingly important part. Annual direct investment flows rose fourfold over a recent period of five years, according to the IMF. These tendencies reflect the globalization of economic activities, and affect both the production and the distribution of products and services, while making countries increasingly interdependent in all sectors of activity. 30. There has been a widespread move towards liberalization of economic activities, opening avenues for private initiatives and enhanced competition. Some areas traditionally reserved for state operations have attracted private risk capital, even in the social sphere in some special cases, with the aim of making companies more productive and more competitive. This implies reconsidering the role of the State, which henceforth should centre on good governance and basic regulatory functions. 31. As a corollary to the globalization and competitive dynamics of the economy, any country wishing to thrive in this new environment must organize itself properly or else take the risk of plunging the majority of its population into poverty. The major regional groupings, which have become models and sources of inspiration for other countries, have concentrated or been restructured around the United States, Europe and Japan. Some commercial rivalry remains within each economic group, but rather in the form of cooperative competitiveness aimed at achieving a more advantageous position in relation to other groups; the scope and the weapons of world competition have become such that no national company on its own can last out in this new environment. Search for an appropriate institutional framework 32. There are major international institutions (such as the IBRD, IMF, ILO, UNIDO, FAO, GATT or ITU) which attempt to solve the problems that fall within their scope. Mankind's resources, both physical and non-physical, renewable and non-renewable, and the whole of the biosphere are increasingly affected by international factors. This encourages countries either to restructure existing frameworks or to find new frameworks to facilitate the passage of world flows for the greater good of all. One example of adaptation is that provided by the General Agreement on Tariffs and Trade (GATT) which has been increasingly extending its scope by including new services in sectoral annexes to the general framework agreement. In this respect, the annex on telecommunication services, though only recently drafted, is one of the most detailed and provides a good illustration of the role unanimously attributed to telecommunications in this global process (see item 4 of Annex 1). Information and communication technologies 33. New information and communication technologies and related services have been actively determining the form and extent of the globalization process. Information has become a kind of "raw material", whose added value, in all transactions, has been increasingly rivaling that of conventional physical raw materials. By making available information in all its forms, without specific time or place constraints, information and communication technologies in fact determine the policies adopted for the production, storage and distribution of products, and even the location of industrial plant. In addition, by the nature of the services that are offered, information users are affected in their way of living and even in their way of thinking. Information is therefore an extremely strategic commodity, and the extent to which it is used and/or controlled will decide each country's or group of countries' place in the world, which it is also tending to render increasingly "interconnected". 34. In response to this challenge, the developed countries, individually, but even more collectively, have been introducing a global strategy for the development and use of information and communication technologies. On a domestic level, laws have been drafted to protect the private lives of individuals against any possible misuse of these technologies, which are disseminated by telecommunications. 35. Many developing countries have not yet achieved a fully global appreciation of information technologies, and in particular of their strategic impact on the international community's future activities. Quite a few are making considerable individual efforts based on their respective situations, to find the best way to meet the enormous challenge of developing their telecommunication networks in the new international environment. The need for restructuring 36. The rapid technological changes which have been occurring in the last 20 years have had the most noticeable effects in the area of telecommunications. The combination of telecommunications, computing and recently audiovisual techniques has given rise to a new range of services, which have now turned telecommunications into a driving force of the world economy. By facilitating the exchange of products and services for other sectors of activity on a national and an international level, while creating its own products and services, some of which are strategic, telecommunications has now become a hub of human activities. Any telecommunications development and management policy must take the following factors into consideration: (1) Restructuring of the production sector With the arrival of new players in the telecommunications sector, and the increasingly high cost of research and development (the key to present and future success), production units are being constituted (through mergers, buyouts, transfers, etc.) of a critical size large enough to face international competition, which leaves the "small fry" no chance of surviving. (2) Emergence of private networks Both nationally and internationally, there has been a proliferation of private telecommunication networks, set up by and for companies, particularly in the service industries, whose diverse and urgent requirements cannot be economically met by traditional suppliers. Some of these networks have an international bearing, often belonging to groups of companies in different sectors but with strategic interests in common. 37. Until recently, the International Telecommunication Union (ITU) was the only international forum where countries met to prepare the technical and operating standards on which the interconnection of national networks depended through their observance by the parties involved. They even had to be applied by outsiders, which otherwise were unable to market their products. As things stand at present, the ITU has not lost its leading role in this respect, though it must be recognised that the role of regional standardization structures has been strengthened by the increasingly rapid introduction of new services, the fading distinction between the latter and existing services, and the need to create or reinforce homogeneous economic areas while protecting them from external competition. Standardization constitutes one of the strategic goals in the process of economic globalization, to the extent that, quite apart from the technical aspects, standards reflect unavowed political objectives. 38. The regulatory evolution is a complex matter. The effects on the users of the first waves of deregulation of the 1980s have necessitated a policy review in this respect. It is becoming increasingly difficult to distinguish between the sectors that need regulating, as new technologies are mastered and introduced. Within any given sector, the diversity of services and the complexity of implementation attract new players, whose basic activity is not always directly related to telecommunications. For instance, the appearance of cable networks and new generations of satellites have given rise to new possibilities of interaction, so that these areas can be considered as belonging just as well to the media as to telecommunications. 39. There is a universally recognized need to separate the technical and commercial operation of a network from its regulation. Once the regulation system has been understood to represent legal means of introducing competition, dynamism and efficiency, each country tends to apply it with a view to safeguarding its own interests while trying to acquire the means of competing with others on their own markets. There has been a worldwide tendency to liberalize the supply of terminals. The process of liberalization in the telecommunication sector has in most countries affected only certain services to the exclusion of networks (infrastructure), which remain a public asset. Governments can then offer such service segments to private and/or public suppliers, or enter into joint ventures with them, e.g. via their national operator. The regulatory arrangements will determine the resulting market structure for the services concerned, e.g. territorial or functional monopoly, duopoly, restricted or free competition. 40. The supply of equipment and its subsequent installation is carried out by private companies. The operation of the networks and provision of associated services is carried out mostly by public monopolies. The procurement process generally involves several suppliers, the extent of which depends on the source of financing. Several sources of financing are available, notably bilateral, multilateral and private financing arrangements. All of these have their inherent advantages and disadvantages. 41. With the expansive development of new information and communication technology, which are based chiefly on know-how and brain power, human resources are becoming a critical factor. In a general climate of rising unemployment, the telecommunications sector stands out as an exception though at the cost of a continuous effort of retraining both employees and managers. The latter have become entrepreneurs, even when they operate within a public telecommunication network and services context. As a result of the multiple disciplines involved and the management tasks and tools, widely determined by technology, all the players concerned are obliged to rethink their human resources policies, including staff motivation. (b) The situation in Africa 42. At least some of the aspects of the situation described above apply to Africa. A number of specific characteristics, however, have to be taken into account to take advantage of this new global situation. The economy 43. Most of the African countries are experiencing sluggish economic performance. Some of the main reasons for poor performance are: - drought and other unfavourable climatic conditions; - massive debt service charges; - declining or volatile demand for traditional exports; - slump in the oil market (for oil exporters); - political problems (i.e. civil strife and armed conflict). During the 1980s, real GDP for African countries grew at an average of 2.6% per year, marginally above the rate of population growth of 2.4% per annum during the same period. Over the previous decade, GDP had grown at 3.8% per year. Economic growth is projected to strengthen during the 1990s, but very little improvement is expected in per Capita GDP due to high population growth. 44. The average rate of inflation for African countries was about 17% during the 1980s compared to 14% during the 1970s. However, the rate of inflation is declining in most of the African countries which are implementing structural adjustment programmes and the trend is expected to continue during the 1990s. 45. The debt problem for African countries is indicated by the rising ratio of debt service to exports during the 1980s. The debt ratio of African countries, especially low-income sub-Saharan Africa, is projected to continue rising during the 1990s. During the 1980s the debt volume almost doubled compared to the 1970s to US$ 257 billion by 1989, more than three times African annual export earnings. 46. Although there are some positive indicators in terms of economic growth and declining rates of inflation during the 1990s, a large portion of the national income of the majority of African countries will be utilized for debt servicing during the same period. In addition to the declining terms of trade for exports of less developed countries, which are mainly primary commodities, compared to manufactured goods such as telecommunications equipment, limited funds will be available for the required massive investments in telecommunications. 47. In most countries the institutional framework is often a pale reflection of what existed earlier in the colonizing or controlling countries, in other words poorly adapted to the local socio-economic context. Under the direction of the IMF/IBRD, some countries are building a new institutional environment complying with the conditions set out by the two institutions, within the framework of structural adjustment programmes. Even if the interested parties agree to introduce a social dimension in the programmes, it must be admitted that in the light of all the outstanding problems the measures amount to no more than a palliative, however indispensable they may seem when introduced. The democratic transition 48. In varying degrees, certain African countries are in the process of democratic transition to encourage the enhancement of individual freedoms and the respect of human rights. The voluntarist approaches of the countries in question are in line with the new international ethic which seeks to enhance man's condition everywhere. Demography 49. Current forecasts indicate overpopulation of the Third World alongside a depopulation of industrialized countries. From 1965 to 1985, the tendency towards lower birth rates spread throughout the world, with the exception of inter-tropical Africa. Elsewhere a definite decrease is noted, even in South America where the rate was already moderate to begin with. 50. The population of Africa, which stood at 460 million in 1985, is due to reach 730 million around 2000, and over 900 million by 2010; these are very modest forecasts, based on the assumption that birth rates will decrease considerably. With a few rare exceptions (Rwanda and Burundi), we are still nowhere near some of the high population densities found in Asia, but a high population growth rate is nevertheless a considerable threat to the region's socio-economic development. Not only could it raise problems with regard to food supplies, it could cancel out most efforts undertaken in the region to improve education, health, and living standards. In addition, the low population densities of some countries considerably undermine the financial profitability of properly developing those countries' telecommunication networks. 51. The Mexico City Declaration on Population and Development (see item 17 of Annex 1) deliberately states that in order to be realistic, development policies, plans and programmes should take into account the inextricable links uniting population, resources, the environment and development. For several years now in Africa, considerable efforts have been made to increase public awareness of the problem (some countries have even introduced birth control programmes). 52. In spite of the considerable contribution made by the United Nations Fund for Population Activities, only the countries concerned can find solutions suited to their physical and cultural environment, while it is hoped that the requisite population control will not come about in a negative or involuntary manner, as a result of famine, war or sickness. Telecommunication networks and services 53. Generally speaking, transport and communication infrastructures are recognized by all political decision-makers as decisive factors for the development and integration of Africa. In that spirit, the United Nations Decade for Transport and Communications in Africa was launched in 1977 and a second decade proclaimed for the period 1991-2000. Telecommunications occupy a significant place in the resulting programmes, offering a better return on cost in comparison to the other communication infrastructures. 54. Yet, Africa has the least developed telecommunication network in the world, even though a major effort has been made in this area, compared with other sectors. The infrastructure capacity is insufficient and most infrastructure equipment comes from suppliers outside the region. Moreover, the equipment is produced according to standards and at a rate which takes no account of Africa's specific needs and environment. Most of the time, there is a great diversity of equipment within networks, which are themselves concentrated in urban areas. The rural areas, where the majority of the population lives, are rarely provided with telecommunications. New services are being half-heartedly introduced, even though here and there one might find some low-speed data transmission networks. Network and service quality are far behind prevailing standards and network operation is conducted by over-abundant and generally little motivated staff. 55. For their financing needs most countries have to resort to scarce hard currencies, while the income derived from network operation comes in local currencies. In some cases, the government arbitrarily transfers income away to other sectors of activity. This reflects the dominant role which governments still play in telecommunication network management. Even when management has some freedom to act, this freedom does not extend to all the decision-making areas required to introduce and rationally manage a telecommunication network. In countries where the authorities have granted telecommunications some autonomy, the operating results of networks have been more satisfactory. 56. Intra-African telecommunication traffic generally passes through transit centres situated outside the region. The PANAFTEL project itself has made only limited progress as far as the objective of interconnecting national networks is concerned. These still consist of equipment derived from technologies which are increasingly being abandoned by suppliers, who are turning their attention to digital equipment, looking ahead to the introduction of integrated services digital networks (ISDN), which are the only solution to providing the kind of services that the economies and users of developed countries require. 57. All of this points to the fact that Africa still does not have sufficient assets to find a suitable place in the new world configuration, as it is appearing on the horizon. And yet, this is not for lack of initiatives. For instance: - Every subregion has its own economic integration structure, such as ECOWAS in West Africa, the ECCAS of Central Africa, the SADC in Southern Africa or the Preferential Trade Area (PTA) in Eastern and Southern Africa. The Council for the Development of Economic and Social Research in Africa (CODESRIA) has been operating since 1975. This regional association has recently listed over 630 institutes in the region active in the areas of development training or research. Similarly, the decision gradually to integrate African economies with a view to setting up the African Economic Community by the year 2000 reflects the constant concern of African States to unite their efforts for the development of the continent (see Annex 3). - The development and integration of telecommunication networks have been given special attention. This has been shown and is still being shown both on an international level, with the ITU, and on a regional level, with the "Missing Link" report, the Arusha Declaration, the setting up of the Telecommunication Development Bureau (BDT), African telecommunication development conferences, the recent establishment of the RASCOM organization, a number of subregional organizations involved in telecommunications as their main or secondary activity, etc. At the regional level and through the initiative of African governments, the OAU, ITU and ECA, the Pan-African Telecommunication Union (PATU) was established in December 1977 to coordinate the development and operation of the regional telecommunications networks and services in a concerted and harmonious manner. 58. With the advent of the information era, challenges of another kind are appearing in the world of telecommunications which has now become the driving force of any change in society. Even though it still has not met the challenges of the century which is closing, Africa is now faced with a Cornelian type of dilemma: whether or not to belong to the emerging global economy. A lot will depend on the response to the challenges of telecommunication network development. Financing of telecommunication projects 59. Despite considerable efforts, countries spend less than 0.4% of their GDP on developing and extending their telecommunication networks - a paltry amount compared with other countries which have already satisfied their basic services requirements (telephone and telex). The sources of financing are varied but mainly comprise internal funds and bilateral assistance, in different forms and under varying terms. Financing requirements are enormous. As telecommunications are potentially highly profitable, they have inherent advantages which should attract floating capital. Yet, the scale of projects, their presentation in forms which do not meet leaders' or investors' requirements and the fact that the institutional framework of telecommunication services management does not favour the optimum generation and use of resources are some of the factors preventing access to sources of financing which might otherwise be available. Bill collection 60. Bill collection for services rendered provides a test of the performance level of telecommunication administrations. A joint UNDP/ITU study carried out in December 1991 in ten sub-Saharan African countries revealed an average telecommunication bill recovery rate of 60% with, in most cases, the State as the main debtor of the public telecommunication operator/administration. The same report showed a recovery rate of over 80% for relatively autonomous telecommunication administrations. In contrast, those telecommunication administrations still under heavy State supervision have the lowest recovery rates (under 60%). In some cases, unrecovered amounts over a three-year period represent 1.15 times the organization's turnover for a given financial year. The problem of telecommunication bill recovery is in fact closely linked to the more general problem of the institutional framework covering telecommunication network operations in individual countries. Network maintenance 61. Telecommunication network maintenance is of increasing concern to network managers, while the resources allocated for the purpose still fall short of actual requirements. Ten years ago, maintenance services hardly appeared in most telecommunication administrations' organization charts. Users were more concerned with service access regardless of service quality, whereas now they want both access to and quality of service in an environment which is technically more complex, where different technologies coexist in a single network and where new services are introduced to satisfy new demands. 62. One case study shows that owing to bad maintenance, a sub-Saharan African telecommunication administration was losing a yearly average of the equivalent of 51% of its turnover. This may be an extreme example, but it is symptomatic of the undesirable consequences of rough, inadequate maintenance, often underlying the broader problem of network operations. The widespread implementation of the national plan for the improvement of maintenance (NPIM) launched by the ITU and its concomitant development (where it does not already exist) along with the master plan for network development, will greatly improve the existing situation. The Declaration of Bangui was made in just this spirit, following the symposium organized in February/March 1990 at Bangui in the Central African Republic, within the framework of the PANAFTEL project "Rehabilitation and maintenance". Human resources 63. Of all the resources required to develop and operate networks, lack of highly qualified staff constitutes a great setback to telecommunication administrations. In addition to the frequent problem of over-staffing in most existing management structures (an average of 60 employees per 1000 main lines), the human resources problem comes down to staff management in the strict sense of the term. The overall mediocrity of telecommunication administrations' financial, economic and technical indicators reflects the quality of their human resources. If the organization responsible for developing and operating the network is relatively autonomous, it has more chances to improve the situation via selective recruitment management and skill training, etc. It would also be advisable to strengthen and expand regional efforts to provide human resource development centres such as the African Regional Advanced Telecommunications Institute (AFRALTI) in Nairobi and the Ecole Supérieure Multinationale des Télécommunications (ESMT) in Dakar. Such regional centres should provide both technical and management training. Regional and subregional cooperation 64. Regional, subregional and even international cooperation structures exist, and all have the same objective, namely the development and economical operation of the African telecommunication networks. All subregional economic organizations include a body responsible for coordinating telecommunications development in the subregions concerned. 65. The real problem with regard to cooperation is due to a lack of coordination of the activities undertaken by existing cooperation organizations, which results in a dissipation of resources in the beneficiary States. With the exception of those countries belonging to the SADC, subregional cooperation policy decisions are rarely implemented at the national level. Even the RASCOM project, which for over ten years constituted a practical demonstration of African States' willingness to cooperate and led to the establishment in May 1992 of the organization bearing the same name, had great difficulties entering the operational phase. The lack of financial capacity to implement agreed-upon policies and programmes is the single most important problem. 66. And yet only effective cooperation and coordinated development policies can help the region resolve its current problems, including the development of its telecommunications as a vital means of belonging to the international community of tomorrow. Existing operating structures 67. With only a few exceptions (two or three countries), telecommunication management structures are still more or less under State administrative and political control, while in some countries the State still issues instructions for everyday network management. 68. Even though all the decision-makers are in favour of restructuring the telecommunication sector, views vary on the legal status and capital structure of the new bodies required to operate the telecommunication network. Among politicians, the general view is that the State's monopoly over the network and basic services should be maintained and greater management independence given to one or more public operators; there is also a general tendency in the region towards liberalization of terminals and value added services. Nevertheless, under the pressure of events - including the structural adjustment programmes under way in most countries - telecommunication reforms depend on broader considerations related to liberalization of the national economy. 69. The lack of outside finance and the insufficient generation of income to cover operating costs have led some States to consider privatizing their networks without even knowing the current market value of their assets, which are in fact sold off at bargain prices. When the network management structure is fairly autonomous and allows for private-style management, sale of assets to private parties or the participation of new private partners would pose less problems since the operational indicators would better reflect performance and facilitate asset valuation. 70. In most cases, the separation of the regulatory body from the network operating body is seldom clear. This limits the scope of measures to liberalize specific services and supplies of equipment. Rural telecommunications 71. In industrial and commercial terms, Africa is mainly rural. Over 70% of its population lives in rural areas which hold most of the region's natural and mineral resources. The United Nations raised the alarm many years ago and urged the international community to take steps to accelerate social and economic progress in rural areas. In Africa, those steps were intended to comprise a wide range of harmonized, multisectoral measures to promote integrated rural development. 72. Despite the high cost of rural telecommunication lines (five to six times that of built-up areas), African telecommunication administrations have incorporated rural telecommunications in their network development policies. Their task was facilitated in 1981 by the pre-feasibility study on the "Appropriate Modern Telecommunications Technology for Integrated Rural Development", a study paid for by the Federal Republic of Germany as part of the programme of the first United Nations Transport and Communications Decade in Africa (in which programme the project "Survey of Rural Telecommunications Requirements" appeared as a priority activity for the Decade). 73. More recently, at the end of the RASCOM project feasibility study it was clearly stated that the RASCOM project's basic objective was to provide reliable means of communication to remote areas deprived of infrastructures such as transport or electricity. One of the project's objectives is to provide remote rural areas with telecommunication services. 74. The above shows clearly that the need to develop rural telecommunications is well recognized at all levels of decision-making. Furthermore, available technology already offers numerous options for subscriber access. The major problem remains financing as the direct profitability of projects is not immediately apparent. As to matters relating to structure, legislation, financing and the integrated development of rural telecommunications, the Buenos Aires Action Plan (BAAP) takes these concerns into account in the activities to implement the 12 priority programmes and in the activities of the two Study Groups established for that purpose (see Annexes 10 and 11). A platform for action 75. The new type of human society emerging is moving towards an increasing internationalization of activities. The main base of this society, namely its resources in capital and new technologies, especially information and communications, no longer belongs to any one group of countries and even less to one country alone. In order to access these resources and derive the best advantage from them, each of the interested parties restructures the technology and the regulations of its national telecommunication network, while ensuring, within the framework of international cooperation and competition, that its network can be interconnected to others with a view to setting up the future global telecommunication network. The institutional environment, standardization, the emergence of international networks controlled by companies for strategic purposes are outstanding problems calling for solutions in which all parties should cooperate. 76. In order to construct a reliable telecommunication network in this new environment, Africa should individually and collectively find a global, optimal solution to a series of independent problems. The objectives should be: - to increase the user connection capacity of national networks, through a judicious choice of technologies and equipment, in order to meet demand in both urban and rural areas within a reasonable time span; - to increase network availability and enhance quality of service through proper maintenance; - to ensure that telecommunication network operation generates sufficient financial resources to increase the self-financing share in telecommunication projects; - to structure the technology and regulations of national networks to facilitate their insertion in regional and world telecommunication networks, to whose standardization they should contribute actively and proportionately; - to consider telecommunications not only as a support for the socio-economic development of the country, but also as a commercial activity in its own right, conducted by private and public players within a regulated framework; such a framework must favour competition without detracting from the financial viability of the authority responsible for setting up an infrastructure, which must remain unimpaired; - to place a special emphasis on the development and management of human resources, in the knowledge that these are the best type of capital, without which it has not been and will not be possible to develop the region, regardless of the quality and nature of other types of resources available. - to promote regionally the following; coordinated development approaches enhanced network connectivity harmonized tariff and traffic accounting sharing of manpower development facilities maintenance research, development and manufacturing. 77. All these challenges must be met in an economic and social environment which is particularly ill-defined and full of uncertainties of all kinds. This should not constitute an obstacle, but rather an encouragement to act, associating all the interested parties in bringing together their collective capacity to ensure the development of a service, which though public is recognized to be commercial in nature. RECOMMENDATION 2 - Construction of a reliable telecommunication network In response to all of the above-mentioned challenges, the Green Paper recommends: (i) that the network be developed with due regard to its economic viability and using appropriate modern technologies; (ii) that efforts be made to ensure that the quality of service offered is constantly improved in order to meet customer expectations while at the same time reducing losses in operating income caused by poor quality of service; (iii) that the telecommunication sector be restructured with due regard for the national and international environment; (iv) that particular attention be paid to the development and management of human resources, the most valuable asset of public telecommunication operators; (v) that the spirit and scope of regional and international cooperation be strengthened and extended, taking care to avoid any duplication of work; (vi) that industrialization in the telecommunication sector be considered as one of the priority projects to be carried out on a subregional basis, and that the private sector be involved in such efforts. CHAPTER III. - LEGAL CONSIDERATIONS Introduction 78. For most of this century, the provision of telecommunications has been regarded as a "natural" monopoly regulated by governments. In the 1970s and 1980s, however, policy makers in an increasing number of countries have begun to question this assumption and have attempted to define: (a) which aspects (if any) of telecommunications should be provided by a monopoly; (b) what rules should govern those areas in which competition is to be permitted; (c) how to manage the relationship between the monopolist and competitive players. 79. When examining current trends in telecommunications policy, it is helpful to consider the concept of a "natural" monopoly and the mechanisms which define its boundary. A natural monopoly can be defined as an economic sector where, because of scale economies or critical mass effects, the supply of goods and services by a single organization is the most effective way of meeting customers' needs. The principal factor influencing the review of the natural monopoly would appear to be the radical change in the nature of telecommunications caused by the technology introduced over the last 15 to 20 years. 80. Until the 1970s, telecommunications technology was specific to and developed by that industry. Successive generations of technology improved efficiency and quality, but did not change the functions of the system in any material way. The technology introduced since 1970 has been based on microelectronics and has much in common with the basic technology of computing, consumer electronics and broadcasting. This convergence has the following effects on the telecommunications environment: (a) a wide range of new services has become possible; (b) these services embody features more usually associated with computing or broadcasting; (c) players outside the traditional telecommunications industry are technically capable of providing these new services; (d) the optimum distribution of function between network and terminals is not clear and will change with time. 81. In addition to these technologically-based reasons, the redefinition of the monopolistic domain was supported by certain criticisms of PTOs, i.e.: - exploiting their monopolistic position by providing inadequate service at excessive costs, thus ignoring important political, social and economic concerns; - preventing users to benefit from all the possibilities offered by the technological developments, due to the constraints imposed by monopoly. Despite the fact that the word "deregulation" is sometimes used to describe the phase of changing from a monopolistic to a competitive regime, what is necessary in practice is not "deregulation", but a change in regulatory philosophy. 82. The legal instruments implementing new regulatory arrangements in the countries where competition has been introduced (e.g. in the United States and Europe) contain quite specific definitions of rights and responsibilities of players and provide mechanisms for controlling their commercial behaviour over and above those which would result from market forces. A new regulatory framework must be adequate to manage the relationship between monopolists and new competitive players. Under one form of regulation, the new players may exploit anomalies in the former monopolist's price structure and target the more profitable segments of the market in a "cream skimming" operation. A different regulatory regime might allow a monopolist to subsidize activities in competitive areas from profits earned in its monopoly business and inhibit the entry of new players. In view of the complexity of such work, it is advisable that it be performed from the regional/subregional level to the national level. The development of a harmonized regulatory environment would contribute to the socio-economic integration of the countries concerned. The regional/subregional scenario 83. The aim of the regional/subregional approach will be to create an enabling environment in a binding form for the activities foreseen. The legislation in such a case would have to be in the form of treaties. Such treaties may be bilateral or multilateral. The treaties would have to address the following among other things: (1) The legislation will have to define market borders in a rather liberal sense to cater, for example, to free access for all players both at the borders of and within the market. Whatever restrictions which remain ought to affect all the players in the same manner - hence a free, transparent and non-discriminatory market. (2) The market however will not be seen to be harmonized in the sense foreseen in (1) above unless, among other things, there exists a "minimum set of rules" to be observed by all players. Legislation would therefore have to cater for harmonization of such rules and this it could do by establishing an appropriate body. In its work such a body could deal with matters of orderly transfer of technology, for example, and ensure that, where appropriate, within the acceptable context of international intellectual proprietary rights, not only "know how" but also "know why" is transferred. In the process the body could, where relevant, negotiate intellectual property licenses at collectively reasonable terms. It is suggested that this body could possibly exist as an organ of one of the existing regional institutions, at least in its formative stages. (3) Legislation will have to establish regional/subregional regulatory authorities to handle issues such as licensing, type approval of equipment, frequency management, procurement, and market access. The authority could be staffed more or less in the same manner as is proposed for the National Regulatory Authority (NRA) (see Annex 4). (4) There will have to be established judicial reference points or tribunals to adjudicate over rights and obligation of players in the market. It is conceded, however, that such a function could also be handled as one of the terms of reference of the regional/subregional regulatory authorities. The Treaties or Regional Agreements would be setting the rules of the game and manner of play within the market. The national scenario - The National Regulatory Authority (NRA) 84. The case for a fused regulatory-cum-operational entity in most African countries has been that telecommunications is not only a sensitive but also a strategic national matter. This argument does not, however, seem to suggest that if regulatory and operational functions were to be in two separate hands then telecommunications would be any less sensitive and strategic. It is inconceivable in a liberalized competitive market that the ultimate operator could at one and the same time be the ultimate regulator and still retain a requisite and sufficient degree of impartiality with respect to the other competitors. 85. The delinking of the regulatory functions from the purely operational one therefore becomes a priority at the national level for purposes of liberalization. The delinking could be done by an Act of Parliament or via any other legal act available. However, having effected the delinking by whatever legal means, it is strongly proposed that the new NRA be constituted by an Act of Parliament. This will be the foundation for the stability and autonomy that this entity needs to discharge its function with impartiality. 86. The structure and staffing of the NRA will depend on whether it is to be merely a technical supervisory body or whether it should have a judicial function. The preference should be that it has a judicial role in which case its staffing and structure would cater for engineers, accountants/auditors, tariff analysts and lawyers among others. As already mentioned, a possible model and write up is presented in Annex 4. 87. It can be argued that the NRA is a buffer or a de facto arbiter on the one hand between the State and the PTO and on the other hand between the service providers and consumers foreseen in the liberalized market while indeed in the third situation, it could be the mediator or arbiter in any matter involving any number of the four groups (i.e. government, PTO, service providers and consumers). It has for example a role to set standards and approve tariffs and in doing this it has an implicit role to ensure quality performance and protect the consumer from exploitation. The ultimate test for its effectiveness will not only be its autonomy but precisely its capability not only to act independently but also impartially. 88. The legislation incorporating it will ensure this autonomy and independence if it provides, inter alia, for the appointment of its chairman and members by a highly placed authority such as the head of State or Parliament or even by the head of State with the ratification by Parliament. Further, its chairman and members ought to have and enjoy security of tenure to the extent that they may only be removed on special and stipulated grounds and/or by a commission/tribunal constituted for that purpose or by Parliament. However, to the extent that it has judicial authority/functions and to restrain it from acting as a law unto itself, its decisions on all other questions other than questions of fact ought to be made appealable to a higher judicial authority such as a Court of Appeal. 89. Two cardinal issues should not be lost sight of: The road to the establishment of an NRA is, and indeed ought to be, evolutionary in that whereas in the one country it may start with a departmental reorganization to create a regulatory committee, in the other it may be by direct Act of Parliament to incorporate it. Both solutions are fine as long as the ultimate aim is to create an autonomous body as foreseen in the previous paragraph. Also the NRA should have the legal authority, enshrined in the act establishing it, to interact with similar entities outside national borders because it is through it that regional harmonization, indeed liberalization/cooperation, will be effected. 90. Finally the NRA should preferably be self-financing and have its own budget if it is to be truly independent. One option would be to finance it like the judicial system from government revenue. Or, the statute establishing the NRA would empower it to collect its own revenue for services rendered. The following could be some of the appropriate sources: - fees for granting of licenses for installation and operation of telecommunication services; - fees for carrying out type approval of subscriber terminal equipment in the public network; - levy charge/fees to all users of the spectrum for its (the NRA's) management of the spectrum; - inspection fees payable by suppliers of equipment; - fees on imported equipment; - fees chargeable on opinions given on agreements between various players in the market including the PTO; - fees on disputes brought before it. The alternatives to NRA 91. The following alternatives could be available as regulatory structures: (1) An independent individual supported by a team of experts/technicians 92. In order that he may enjoy the requisite independence devoid of unwelcome pressures and interference from any quarter, this individual ought to have and enjoy security of tenure in that he should be appointed for a certain or ascertainable period during which he may not be removed during good behaviour except for incapacity. Further, the individual ought to have and control his own budget, the financing of which may come from such sources as licensing and renewal of license fees, type approval fees etc. It is assumed here that this individual will be the licensing authority, however, where he is not, he should have the legal power to advise the licensing authority, via opinions, on licensing - such power should have the legal power to review or modify a license already issued where and when appropriate. 93. The one glaring advantage of this model is that it would be less costly than the autonomous NRA. However, an argument is to its disadvantage that far too much power could be concentrated in the hands of a single individual and that such power could be open to abuse. As a counter to such an argument it must be recalled that the individual only holds office during, inter alia, good behaviour and, in any case, the legal provisions establishing his office could and indeed should provide checks and balances including a provision for his impeachment where and when appropriate. (2) A government ministry 94. In this setup, a department or section within the ministry could be charged with the regulatory function. Notable disadvantage here is the risk of having too much government on the backs of the various players probably to the unfair advantage of the dominant or State-owned operator if any. The political advantage, however, is that it gives the government a direct control to the possible delight of the electorate and the political party. Perhaps this is acceptable in a situation where government has completely gone back to governance and has no market interest in the dominant operator. It may also be observed that in this model the government, through the department, directly retains the duty of accountability to the people and to the various players. (3) An agency under the ministry in charge of telecommunications, with a legal identity and financial autonomy 95. In this alternative, there is an institutional separation betwen the policy-making and regulatory functions. The aim of the agency would be to assist the government in the supervision and regulation of the telecommunication sector, following broad political guidelines laid down by the ministry in charge of the sector. The borderline between the jurisdiction of the ministry and the agency should be clearly defined, as should the limits of the regulatory powers of the agency. 96. The last word on this issue of regulation seems to be that whatever model of regulatory structure is opted for by a country, it would appear prudent that the eventual intention should be to eventually get government back to governance and to expose/open the telecommunication sector to, inter alia, fair competition, rural/subregional/regional accessibility and availability and commercial stance. The PTO's new legal structure 97. Having delinked the regulatory from the operational aspects, the PTO would now be left to handle operational matters and more particularly the establishment, operation and management of the national telecommunication network and its attendant structures. As in the case of the NRA, the cardinal legal aim here should be to establish a corporate entity distinct and separate from the government with the goals of: commercial viability, quality of service and good operational performance. This could be done by an Act of Parliament constituting the PTO into a public corporation. The act itself must provide for autonomy with just a modicum of government intervention for social and political purposes, especially at the initial stages. For the protection of the consumer and private service providers there will need to be provision in the act for matters such as quality performance indicators, compliance with tariffs, equitable terms of access and charges, etc. Other than by an Act of Parliament, the PTO could also be brought into existence through the Companies Act or any other law providing for the incorporation of such a commercial corporate body. It may be prudent that the act or law establishing the PTO has as one of its clauses a provision against takeover by a foreign entity. 98. Regarding privatization, the aim being to leave the PTO with only basic or strategic services, there will be a need to look beyond the borders of telecommunication statutes. The actual separation of services from strategic to non-strategic may be done otherwise than by legislation depending on the prevailing legal climate or environment. For example, this could be done by the mere issue of a Ministerial Instrument. However, the actual ownership and operation of the privatized areas will have to undergo some legislative operation. There will, for example, be a liberalization of the investment statutes to enable and attract foreign participants; income tax, corporate tax and repatriation of profit laws will have to be equitable both to the foreign investor and to the host participant. In this respect, the drawing up of specifications will, whenever privatisation takes place in the field of telecommunications, allow for priority financing rules to be established for the integrated development of rural telecommunications. In telecommunication areas, there will have to be regulation to remove the dominant and monopolistic position of the PTO. Also, there will have to be new rules and regulations to provide for matters such as interconnection and interoperability of the multiplicity of systems and equipment that must of necessity enter the liberalized field. Further legal issues 99. The legislative scenario will bring forth certain legal positions including liabilities as follows: (1) At the regional/subregional level the need for interoperability, interconnection/interface of systems/equipment will require harmonized and published standards. This in itself requires access into the "know-how" and possibly even "know-why" of such systems/equipment. The consequence of this is likely to be complex, and at times protracted contractual negotiations with the owners for provision of the "know-how/know-why" with or without license. (2) The need to comply with specifications will require the regions to negotiate "Agreements for Mutual Recognition of Type Approvals". (3) At the country level, there will be legal problems with the right of access to the public network. This underscores the need for an objective, transparent and non-discriminatory legislative regime. (4) With so many providers of goods and services and multiple equipment, there will be, for purposes of consumer protection especially, a need to determine where to place the blame for purposes of liability for failure to perform. Between operators this probably may be taken care of in their contracts. For the customer, however, a statute might well allow him to lay the blame on the 'first contact' provider of service who could then seek indemnity from his (service provider) collaborator. (5) The scenarios which involve foreign investors may bring with them the risk of undercapitalization where, under the guise of transfer of technology, the foreign investors import depreciated equipment into the country as part of their capital contribution. The agreements should cater for all the implements of trade including training and training parameters. (6) There is also the danger of a multiplicity of "Contracts in Restraint of Trade". These must never be enforced unless it is clearly shown that they do not perpetuate monopoly by being against fair trade and competition in an open market place. (7) The concept of "fair and equitable access within the market" has implicit in it the concept of "fair and equitable", indeed transparent, procurement laws and regulations. Whereas the national laws may not necessarily be found wanting in this area they will of necessity, however, require updating to meet the new changed procurement climate. The regional/subregional environment will have to develop "common procurement laws and regulations both for goods and services" to take into account the legal barriers which have to be pulled down to give way for a liberalized market place. Such laws/regulations whether at the national or regional level, will have to address matters such as public tendering, tender procedures, submission of tenders, acceptance of tenders, evaluation of tenders, negotiation with suppliers, among others. In its "Draft model law on procurement", the United Nations Commission on International Trade Law (UNCITRAL) has done an appreciable amount of research and work which can be used or even adopted in toto. 100. The changes contemplated in the new telecommunication environment are indeed radical both in law and fact, hence the need for legislation. Not only would it lend legislative sanction to the new order, but it would also provide statutory legitimacy to the plethora of contractual arrangements which would be the logical consequence of the changed environment. An example of a draft model law defining a regulatory framework for the telecommunications sector is presented in Annex 5. Procedures for the resolution of disputes 101. The problem of the resolution of disputes is multifaceted. The issues have to be looked at in the African context, the subregional context, and from the national angle. The interest of the individual role players, namely the subscribers vis-à-vis the services providers, PTOs vis-à-vis service providers, etc., have to be addressed at every level. Finally, examination is required of the principle of national sovereignty and the need for harmonization of the various divergent legal concepts/jurisdiction which will of necessity come into play, especially as regards disputes at regional or subregional level. 102. As the Green Paper seeks to consolidate Africa into one telecommunity, it is envisaged that the African States will 'tone down' and be more accommodating of each other in this regard. Disputes should find their resolution in provisions of bilateral and multilateral agreement governing the rights and obligations of the parties. Such agreements should have, inter alia, provisions for intra- or trans-territorial access to courts, recognition and enforcement of judicial decisions from outside the national jurisdiction, and recognition and enforcement of decisions resulting from alternative procedures for the resolution of disputes from outside national jurisdiction. The treaty establishing the African Economic Community provides, in its Article 18, for the Court of Justice to deal with the above issues. 103. There are other international treaties on which the various players within the African telecommunity could fall back for purposes of resolution of disputes. The ITU Constitution and Convention, with its associated instruments/regulations, is one such treaty for disputes of a technical nature. Secondly, as most African States are embracing the General Agreement on Trade in Services (GATS) of the GATT, the disputes, resolutions and provisions of these treaties could become a useful support. 104. For the purpose of facilitating the resolution of regional disputes, certain forums or organs will have to be set up. In this regard it is commendable that there already exists a Centre for Arbitration with a pool of arbitrators in Cairo. This could be augmented by setting up a few others across the continent. The Pan African Telecommunication Union (PATU) may wish to widen its Article 17 (Settlement of disputes) to cover issues other than merely "the interpretation or application of any provision of this Convention or its annexes". It is also gratifying that there already exist subregional organizations such as the Preferential Trade Area (PTA) and ECOWAS which have, inter alia, telecommunications in their mandate. Such entities should now be encouraged to move a step further to set up regulatory-cum- adjudicatory tribunals or boards to handle trans-border questions of a subregional nature. 105. The dispute resolution process at the national level will have to deal with the concept of national or equal treatment or non-discrimination, this corresponds to what is called most favoured nation status under the GATS. Equity needs to be secured in matters of procurement, compliance with licensing requirements and indeed treatment under every aspect of applicable law. This will be all the more important once a government has embraced the concept of "market access", both at and within the border. Investors are now likely to be attracted to a legal regime that enables them to conclude operating agreements with local firms in a transparent, non-discriminatory, and equitable market both commercially and legally. Host countries and/or regulators will need to undertake, either in bilateral agreements, or expressly in their national statutes, not to unreasonably invoke the sovereignty protection concept whenever they are involved in disputes with other market actors. 106. With the above principles in place, there would be several options for the resolution of disputes at the national level. One option would be for the parties to take their case to court. This entails, rather formal and stringent, indeed often time- and finance-consuming court procedures. However, as long as these are transparent and non-discriminatory, the interest of the claimants would be served. The independence of courts from executive control/interference must be beyond question. 107. The parties could also opt for the traditional arbitration process which may be stipulated in a national statute or be enshrined in a clause in a particular contractual agreement. In either case, it is important that the law of the country should protect the procedure without, at any stage, interfering with the arbitral process once commenced. For the resolution of disputes by arbitration, the parties should also have the option to resort to arbitration in accordance with the rules of other international bodies such as the International Chamber of Commerce (ICC) and the International Telecommunication Union (ITU). 108. Finally, there are the so-called Alternative Dispute Resolution Procedures (ADRP) now gaining currency especially in the United States and parts of Europe. These include Mediation and Mini Trial. The distinction between Arbitration and these two is that Arbitration is adjudicatory whereas these two are not. In MEDIATION, a neutral person facilitates a process whereby the protagonists themselves are given a chance to come to an understanding. The mediator has to be held in high esteem and confidence by the parties. In a MINI TRIAL, a procedure that commenced some15 years ago, the chief executives or representatives of the protagonists sit together and listen to a presentation of their "best case" by their lawyers at the end of which they retire and attempt to resolve the dispute themselves without lawyers. While the adjudicatory process tends to create an atmosphere of "I am right, you are wrong", the Mediation and Mini Trial procedures do facilitate consultation, enquiry and conciliation, often leading to peaceful coexistence between the protagonists. RECOMMENDATION 3.1 - Separation of functions It is recommended that the functions of regulation and operation of the network be separated before the necessary competitive régime is introduced. RECOMMENDATION 3.2 - Autonomy of the regulatory authority In order to ensure the autonomy and independence required by the body responsible for regulation, the Green Paper recommends that the body in question should be created under legislation which provides, inter alia, a mechanism for the appointment of its chairman and members. The need for autonomy and independence must be taken into account, even where there exists a structure other than the regulatory authority. RECOMMENDATION 3.3 - Harmonization of the different regulatory frameworks The Green Paper recommends the harmonization of the different national regulatory frameworks in order to facilitate the socio-economic integration of Africa, to which end the development of such frameworks should be governed by a minimum number of common principles. RECOMMENDATION 3.4 - Settlement of disputes Since the ultimate aim of the Green Paper is to assist in the creation of an African telecommunication community, it is recommended that a suitable framework be found for the settlement of any disputes which may arise among States, drawing inspiration from the provisions of Article 18 of the Treaty establishing the African Economic Community. _______________ CHAPTER IV. - THE REGULATORY FRAMEWORK 109. In this chapter the basic principles of a regulatory framework for telecommunications development in a competitive environment are discussed, and guidelines for the definition of a regulatory framework adequate to the African environment are given. Some decisions in favour of the creation of a harmonized regulatory environment need to be taken by appropriate bodies at regional/subregional levels.These decisions must be made binding for the countries concerned through appropriate legislative instruments/provisions committing the authorities responsible for regulatory aspects in these countries, also in respect of monitoring the correct application of the decisions taken. Prior action by individual countries in line with the proposals can be taken when there is a need for early sector reform. Actions to be taken at regional/subregional level 110. Besides the separation of regulatory from operational functions, the main issues for consideration by appropriate bodies at regional/subregional levels are: - the introduction of regulated competition in the telecommunication services domain; - the development of common principles to access network infrastructures under fair and equitable conditions; - the provision of terminals in a free market. 111. As already mentioned, telecommunication services are increasingly characterized by two trends: - technical progress, making a multitude of new services possible, which has led to the blurring of traditional boundary lines between traditional services and to the definition of new ones; - the network infrastructure can carry more and more services operated independently of network operation. Telecommunication services are, therefore, becoming more and more tradeable. Both facts have contributed to determine the changes in the regulatory framework in many countries in the world and must be considered in establishing a new regulatory framework adequate to the African environment. 112. A review of the current situation in the area of telecommunication services, performed from a regulatory point of view, is presented below. 113. The traditional "basic" telecommunication services are telephony and telex. These are supported by worldwide fully interconnected networks which are both widely understood and used.The basic principles of these two services have changed very little over the years, although both have benefited from an increasing level of technical sophistication, in both network equipment and terminal equipment. In most countries in the world these services are reserved for the exclusive provision by PTOs. 114. As technology has evolved, PTOs have introduced new services, some of which have become accepted as basic services in some countries, but not in others. Examples of these services include: packet switched data services; circuit switched data services; electronic mail; videotex. As a consequence of technological developments, it has been more and more difficult for PTOs to offer these services on an exclusive basis. 115. Taking advantage of the technological advances, it is possible to enhance the "basic services" by providing additional functions, either: - in the basic network by incorporating additional features, typically in the exchanges, or - in the customer terminal equipment. To a large degree both methods can provide equivalent features (for example, for telephony it is possible to provide a feature such as "short code dialling", either from the exchange software or incorporated within the terminal). Similarly, it is possible to incorporate a range of complementary features, some implemented from the network, some from the customer terminal equipment and some partly implemented in each.It becomes more and more difficult for the PTOs to have complete control of the implementation of functions, even within "basic" services. 116. A growing variety of "value-added" or "enhanced" services offer additional functions beyond the basic conveyance functions. However, it is difficult to strictly define value-added services in an era of evolving technology and with a rapidly growing number of services. Therefore, if a definition of value-added services is used in order to maintain boundary lines between those (basic) services that can be provided as an exclusive function of the PTOs and the (value-added) services which could be provided by any other operator then: - firstly, there would appear to be fundamental difficulties in classifying existing services since VASs services range from services where the "transport component" is low (e.g. 5 - 15%), such as for computer-bureau service offerings, to services where this component is high (e.g. 90%), such as for services concerned with the transmission of texts and graphics; - secondly, the regulatory powers will need to be continuously updated as technical capability evolves. This second aspect will leave value-added service providers in the position of not knowing in advance whether or not a new service that they may wish to introduce will be classified as a value-added service and whether that classification may change with time. This position could clearly hamper the introduction of new services. Reserved and competitive telecommunication services 117. The analysis shows the growing difficulty of PTOs to maintain the exclusivity on the provision of traditional and new services. In addition to these technically-based considerations, the benefits for countries derived from the introduction of competition rules in the sector is also suggested by the following socio-economic considerations: - increasing the feasibility of quick response to the changing pattern of future growth of demand; - the use of private financing, thus reducing the amount of scarce public funds required to be spent for these services; - opening the possibility of attracting foreign funds, thus economizing on the use of scarce hard currency reserves of the countries, making these savings available for other uses; - opening the possibility for private enterprises to invest in advanced technological features, taking their risks, but with the chance of economic advantages for all the country operators, while PTOs cannot risk the public money and must invest only in consolidated technologies. Recent developments virtually all over the world in recent years have shown a strong trend towards a narrower interpretation of those telecommunication services which must continue to be reserved exclusively to the PTOs and the growing number of those increasingly opening to competition. 118. In view of the foregoing, it is proposed that only the provision of the basic telecommunication services (such as telephone and telex services) be reserved for exclusive provision by PTOs. Both services are offered on an universal basis, i.e.: - covering the whole geographical area; and - provided on demand to all users, on reasonably the same terms, generally regardless of the user's location within the PTO's territory and the cost of the connection to the network. 119. As is well known, the revenue of the telephone service represents an important percentage of the total telecommunication revenues. The financial revenues of the PTOs - and thus their viability - will continue to be essentially determined by voice revenues. Competitive provision of non-voice services, including value-added services, with unrestricted share use or provision to third parties, is unlikely to have a substantial impact on the revenues of the PTOs and, therefore, on their ability to carry out the particular tasks assigned to them. 120. Telex service is converging rapidly with data and value-added services. Moreover, technological development is likely to make it more and more difficult to maintain a strict telex service monopoly. Personal computers are now available on the market which can operate data and telex services via both the telephone and telex networks. In any case, the revenue of this service represents a low percentage of the total telecommunication revenues. 121. PTOs should be permitted to compete in the open market to provide some of the other services included in the area of competitive services. To conclude a "free" or "open" market does not mean the complete absence of any constraints. Fair competition must take into account certain regulations and rules issued by the national authorities. Integrity of basic network infrastructure 122. Telecommunication network infrastructure means any form of installation or group of installations which ensure either the transmission - or transmission and routing - of telecommunication signals and the associated exchange of the control and operation information, between network termination points.The integrity of the basic network infrastructure must be maintained.This implies a continuing strong role for PTOs for the provision of network infrastructure and the need to safeguard their financial viability in order to renew telecommunication infrastructures and assure the necessary level of investment. 123. Given the PTOs' exclusive provision of voice telephony and telex (reserved services) and their competitive stance with private service providers in offering other services, an appropriate balance should be reached between: - the need for PTOs to have adequate revenues necessary for performing the important tasks assigned to them; - the benefits derived from the introduction of competition in the telecommunication services market. 124. While the basic services and the basic network infrastructure should remain under the responsibility of the PTOs, it would also be desirable to consider making provisions for private ownership of particular segments of the network, e.g. mobile telephones.This innovation would give greater opportunity for private entrepreneurship and financing to participate in the development of the telecommunication sector as a whole. Access to network infrastructures 125. It will be necessary to develop common principles at regional/subregional level, enabling the access to basic network infrastructures - operated by PTOs - by competitive service providers under fair and equitable conditions. As examples, the common principles included in the regulatory frameworks elaborated in Europe (the Open Network Provision (ONP) concept) and in the USA (the Open Network Architecture (ONA) concept) are briefly described. Additional information on ONP and ONA concepts and some indication on their application are given in Annexes 6 and 7. In view of the complexity of the process, African countries would benefit considerably in terms of the savings in effort, time, and expense by utilizing to the fullest extent possible such regulatory frameworks which are already in existence. The ONP concept 126. In EU countries, the ONP concept has been developed in the second half of the 1980s in order to lay down the guiding principles and the structural framework within which the suppliers of telecommunication services may have access to and use of the public network. The ONP approach may be summarized as follows: - The harmonized conditions for ONP must be based on objective criteria, be transparent and published in a suitable manner. They must not discriminate between nationals of a member State and other nationals and must guarantee equality of access. - The ONP conditions must develop and be established gradually. - Existing standardized technical interfaces must be used if possible. - Harmonized conditions of use which must apply to ONP tenders and which concern a number of parameters such as the provision time, contractual period, service quality, conditions for shared use, use by third parties, resale of capacity and interconnection of networks, must be defined. - Harmonized tariff principles based on a number of guidelines such as adjustment to costs, sufficiently wide publication and the application to all users without discrimination, must be defined. 127. The ONP concept focuses on transparency, objectivity, and non-discrimination in the three key areas which need to be tackled in order to ensure market opening: - technical interfaces, - usage and supply conditions, - tariff principles. In addition, these areas of opening are viewed within the framework of a number of essential requirements (for example, the need for network integrity). The ONA concept 128. The ONP concept was developed taking into account the Open Network Architecture concept defined in the United States.The ONA concept is a set of technical, economic and regulatory arrangements aimed at ensuring as much competition as possible in the fields of telecommunications, information provision and value-added services, and with the overriding target to avoid any misuse of dominant or monopoly market positions by existing telecommunication carriers. Under ONA, dominant carriers have to provide features to other enhanced services providers with the same availability and efficiency that they provide themselves in their offering of enhanced services.The ONA concept is not just a technical concept. Despite its name, it is not an architecture and is therefore unlike the Open Systems Interconnection (OSI) or the System Network Architecture (SNA) for example. 129. The most important similarity between ONP and ONA is that both concepts aim at creating the best possible conditions for innovative development of value-added services in a competitive environment. To achieve this objective, in both cases it will be necessary to agree on common principles which apply when PTOs make their network infrastructures available to service providers. Both in Europe and in the US, these common principles will comprise technical, regulatory and economic aspects. There are also a number of significant differences. These result from different aims of ONA and ONP, the different starting conditions and in particular the different regulatory environments. Liberalization-cum-regulation 130. Liberalization in the services area must be accompanied by the setting of rules to ensure fair and equitable access conditions to network infrastructures. 131. As regards the provision of terminal equipment, the current trend is towards progressive full opening of the market to competition. The technological evolution towards multifunctional computer-based terminals will make the current trend towards competitive provision more and more inevitable. However, the provision may still be reserved for PTOs for a number of items of terminal equipment, in particular the first telephone set. Actually, the change from the existing situation of sole supply by PTOs of certain terminal equipment (in particular the first telephone set) to a competitive environment will have to allow, in certain cases, for a sufficient but defined time period for PTOs to adapt to the new situation. 132. The opening to competition of terminal markets implies that certain rules and procedures be defined at regional/subregional level in order to verify that terminal equipment to be connected to the public telecommunication network satisfies the same requirements considered essential, such as user's safety, safety of PTOs' employees, electromagnetic compatibility, protection of the public telecommunication network from harm, effective use of radio-frequency spectrum, where appropriate, and interworking of terminal equipment via the public telecommunication network in justified cases. Other action to be taken at the regional/subregional/and national levels 133. The definition of a new regulatory framework requires that a number of other decisions be taken at regional/subregional level. The following list of topics is not exhaustive: - the establishment of a harmonizing regime of licensing, declaration and authorization which is transparent and non-discriminatory; - the definition of tariff principles; - the identification of those factors and mechanisms which are likely to stimulate investments in telecommunications; - the creation of consultative mechanisms by which the interests of all sector actors and users are taken into account in the definition of the rules and in the choice of main regulatory principles; - the introduction of a certain number of procedures which are necessary to implement an efficient regulatory policy, particularly with regard to frequency management and type approval of terminal equipment; - the creation of mechanisms for the harmonization of technical standards; - to promote the implementation and use, for inter-African communications, of pan-African telecommunication infrastructure; - the definition of procedures for the resolution of disputes. 134. The introduction of regulated competition in the telecommunication sector implies the strongest role of the government as far as the policy, legal and regulatory aspects are concerned. An essential element in this process is the establishment, in the African countries, of a high level, multiministerial Coordination Committee as agreed in Resolution ATDC-90/RES1 (Harare, 1990) (see Annex 2). This Coordination Committee, responsible for studying and proposing to the government appropriate national information and telecommunication policies covering the regulatory and operational aspects of the sector, seems to be the most appropriate national body for participating in the decision-making processes at regional/subregional level. The participation of representatives of the Coordination Committee in these processes will contribute to the creation of a harmonized multinational regulatory environment. 135. The items to be considered by the Coordination Committee in presenting the proposals to the government should include: - long-term policy; - ownership (public or private) of the basic telecommunication infrastructure; - the rights and obligations of the PTO (universal service obligations, including rural telecommunication development); - the rights and obligations of the service providers; - the management structure of public operating companies including financial management and staff policy; - the modalities for determining tariffs and rate structures; - the fiscal aspects; - the modalities for performing the regulatory functions; - a clear legal regime delimiting the roles of the various actors in the telecommunication sector. 136. The experiences gained at country levels will be of great interest for the discussions that will take place at regional/subregional level for the definition of common positions. Functions to be performed by the NRA 137. The NRA will be responsible for the implementation of the legal measures issued by the government following the recommendations proposed by the Coordination Committee which, in turn, will reflect the decisions taken at regional/subregional level. The NRA can also be requested by the appropriate governmental authorities to participate in the definition of these legal measures. 138. Beyond the general rules which apply to the whole of the services sector and which aim to meet certain needs of society (fiscal policy, protection of privacy, social policy, national security, etc.) there exists - at the national level - a significant number of regulations applicable to the supply and to the use of telecommunication services. These regulations are intended to ensure intercommunication between the domestic and international networks and to apply usage conditions to access to the telecommunication networks, in order to safeguard the financial viability of the PTOs. The relevant functions to be performed by NRA in this context, may include: - monitoring of the compliance with the rules governing the services offered by the PTO and others; - monitoring of the correct use of the network infrastructures; - tariff guidelines; - the granting of licenses, authorizations, etc. (see Annex 8); - the monitoring of compliance with standards and technical specifications; - the issuing of product approval certificates (terminal type approval etc.); - the frequency assignment. A transparent, open process could take many forms. The basic components would include: (1) a notice by the NRA of any pending decision (initiated either because the NRA proposes to take action or because another entity, such as a service provider, proposes that the NRA take action, such as granting a licence); (2) an opportunity for interested parties to comment on the proposal; (3) a written explanation by the NRA, preferably recorded in a serial publication such as a gazette that is widely circulated, of why it is taking the particular action. Similarly, all processes for acquiring a licence or seeking other action from the NRA should be recorded in NRA rules that are printed and widely circulated and accessible. This will assist in providing regulatory predictability, encourage private sector investment, and foster public trust in the regulatory process. An additional suggestion for enhancing public trust is to provide a mechanism for consumer complaints about service provision. Section 208 of the Communications Act of the Federal Communications Commission of the United States of America, as amended, is one example. In general, the NRA would act as a watchdog in all matters of public interest. A model organizational structure and staffing of an NRA is presented in Annex 4. _______________ RECOMMENDATION 4.1 - Provision of basic services The Green Paper recommends that public operators should be granted a monopoly on the operation and provision of basic telephone services. These services should be defined in such a way as to ensure the financial viability of the public operator, who will also have the possibility of offering other services on a competitive basis. RECOMMENDATION 4.2 - Introduction of competition The Green Paper recommends that the conditions for fair competition should be fulfilled in order to ensure that the customers derive all of the expected benefits. To this end, the opening of services to competition must be accompanied by the establishment of rules ensuring equitable access to network infrastructures. RECOMMENDATION 4.3 - Integrity of the basic network The Green Paper recommends that the basic infrastructure should be provided exclusively by the public operator. Conditions for the interconnection of the public infrastructure with those introduced by the private sector must be defined under the auspices of the regulatory authority and made known to all interested parties. _______________ CHAPTER V. - RESTRUCTURING OF NETWORK OPERATIONS AND SERVICES Introduction 139. The telecommunication sector in Africa is very much State-dominated. Until just recently, the legal setup consisted of either a ministerial department or a public enterprise with its own board of directors. However, the real degree of independence of the telecommunication authorities is not easy to figure out from the legal status of the organization. For instance, ministerial departments may have budgets or contracting procedures which are independent from the ministry of finance, while the personnel of some public enterprises are considered part of the civil service. Equally, the same legal entity can cover both telecommunication services and postal services. Less often international telecommunications are run by a completely separate entity. 140. The present analysis of the overall performance of the operational sector addresses the issues of the independence of the telecommunication entities from State control, the problem of the separation between postal and telecommunication services, the internal management of entities in charge of telecommunication services, the importance of strategic planning. Autonomy versus State control 141. The problem of the independent management of government agencies or entities arises in all sectors and, in the light of 20 or 30 years of experience, one is led to wonder whether better results could not be obtained by giving greater independence to the agencies, without however doing away with the State's pre-eminence and ultimate responsibility in the sectors concerned. 142. In telecommunications, this problem is even more acute owing to the startling changes, even over a very short period of time, in terms of technology and the emergence of new services. In view of the huge gap between the supply of services and potential demand, it appears clear that the State entity exercising the telecommunications monopoly must have the necessary flexibility, authority and competence to identify without delay all possibilities of improving the response to user needs. 143. This requirement is not being met at present and reforms are needed to foster change. The main responsibility for initiating such reforms should lie with the political authorities and administrators in the ministries. The first step to be taken should be a complete review of the part they play in the system of State control, with a view to making the public network more autonomous and more responsible. 144. In practice, government involvement in ordinary management decisions by the network operator should be reduced as far as possible. The role of the government should be limited, for example, to: - appointing only a small number of managers (e.g. the director-general and members of the Administrative Council or Board of Directors, in that kind of setup); appointments should be reasonably stable over time and should not be changed with every change of minister; - deciding telecommunication network development policy, though only in very general terms and working to a horizon of several years, in order to ensure enough flexibility for the entity's management, as regards the details of running the programme (technical standards, procurement and other expenditure); - clarifying and justifying relations with other ministries and entities (finance, planning, etc.) involved in the medium- and long-term development of the network, so as not to inhibit the initiatives of the network operator; - ensuring that the operator's internal budgeting procedures are satisfactory, based on the private sector's budget and accounting system and in general on its administrative management procedures, including the external auditing of the accounts; - ensuring that the internal funds generated by the operator's activity should be used in effect for network development, by authorizing adequate tariffs and a flexible tariff review procedure, and by authorizing the necessary powers to recover debts from all subscribers, including government bodies and local authorities; - leaving the operator reasonably free to fix salaries and other staff benefits in such a way as to attract and keep qualified staff; - ensuring that the management by the network operators is based on clear legal, regulatory or contractual terms. Separation of postal and telecommunication services 145. For historic reasons going back to the invention of the telegraph and the telephone at the end of the 19th century, telecommunication services have for a long time been coupled with postal services in a great many countries. The trend towards separating the two services, which began in Europe deserves consideration in the search for more efficient telecommunications, as envisaged in this Green Paper. The issue of the separation of the two services is still being hotly debated. Opponents of the idea refer to the danger that the postal offices, as structural loss-makers, might disappear altogether, while those in favour point to the need for separate management of activities that are very different in nature as far as production factors are concerned, being capital-intensive in telecommunications and labour-intensive in the postal sector. 146. It should be borne in mind, however, that the African postal services are altogether more fragile than their European counterparts. Not only are their operating losses relatively greater, but they are also more exposed to having their best potential customers creamed off by very active, conspicuous competitors in the form of private mail services and the commercial banks for payment transfers and saving accounts. 147. The authorities in charge of devising sectoral policies should take account of these special constraints. Moreover, the countries concerned should ensure that the two activities are restructured simultaneously, after careful preparation, in close consultation with all the parties concerned, especially the staff. 148. The following tasks, if properly carried out, can contribute significantly to the success of the transitional stage prior to actual separation, as well as to the viability of the newly- separated entities: - diagnosis of the strengths and weaknesses of the postal sector and of the telecommunication sector; - separation of accounts; - evaluation of fixed assets; - full inventory of staff qualifications and work stations; - evaluation of financial requirements, etc.; - linkages in operations, e.g. at local level and for technical reasons; - assessment of their respective public service functions for possible joint planning, e.g. for rural communication coverage and the creation of community teleservice centres. Management problems 149. Most of Africa's network operators and service providers lack sufficient autonomy for their leaders to be considered as genuinely responsible managers. Changes take time and, in the present context, it is for the actual leaders of telecommunication agencies to secure the best possible results by making optimum use of all their internal resources, particularly human resources. 150. Areas for improvement include: - the organizational structure, not suited to efficiently operating a telecommunication network or to the workload required for extending it. This situation is encountered frequently, and not only when postal and telecommunication services coexist within the same agency; - quality of service and productivity standards to be clearly established and circulated within the organization; - the delimitation of responsibilities and the system for delegating authority to be made precise in line with the size and complexity of the organization; - overcoming major shortcomings in internal control procedures at both the administrative and strictly financial levels; - making one unit specifically responsible for strategic planning and economic analysis; - the accounting system to be adapted to commercial management and used in the decision-making process and for measuring performance. Management needs to make practical use of information from the financial and accounting system and in particular take sufficient account of cost constraints in its routine work; - the billing and recovery system to be improved and therewith the agency's financial situation; - key functions for rapid and sustained network development as planning, technical studies and project coordination and supervision need more attention and may be excessively dear owing to recourse to foreign technical assistance; - the personnel training system is often limited to technical training and not properly geared to the requirements of the jobs to be occupied by trainees following their courses. In addition, training in administrative, financial and accounting management is often neglected. 151. Senior managers should therefore recast their organization's internal structure and management methods and systems with the clearly formulated objective of providing the most efficient telecommunication service at the lowest cost. If it is to be operational, that general formulation must of course be tailored and adapted to the political, economic and legal peculiarities of each country. Importance of strategic planning 152. An agency can best define its objectives and equip itself for achieving them in time through strategic planning. All too often telecommunication agency managers, probably as a result of their initial training, confuse strategic planning with the preparation of telecommunication network investment programmes. 153. Strategic planning should precede and encompass the selection of specific investment projects. If properly carried out, strategic planning should encourage the top management to raise and answer the following questions: - Where exactly are we? How have we gauged our progress and the past results that have enabled us to define our present position? - Where do we want to be next year, the year after that and in ten years' time? How will we know whether we have achieved our set target? - What do we need in order to get there? Where, when and how shall we get what we need? - What obstacles could prevent us from achieving our objective? How should we overcome them? 154. The answers to those questions will provide a guide for preparing multi-annual plans, programmes and annual budgets at both the agency and decentralized unit levels. Then again, vis-à-vis the external environment, strategic planning enables the agency's mission and general objectives, as well as its relationship to general socio-economic development, to be clarified with the public authorities. Detailed diagnosis of agency management 155. Depending on the particular circumstances of each country, it might be useful to supplement the fundamental strategic planning approach by more specific considerations relating to a particular management subsystem (finance, production, maintenance, etc.) so as to point up those subsystems in which shortcomings are greatest and make the necessary changes. 156. To that end an open-ended list of questions aimed at affecting an appropriate diagnosis should be drawn up for each subsystem. Such a diagnosis would be useful to both the authorities and the agency's management since it would enable medium- and long-term performance objectives to be fixed and ensure that the necessary action was followed up. The following management checklist is based largely on a paper presented at the Regional Seminar on Development and Management of Telecommunications in Asia and the Pacific, held at Bangkok, Thailand, in January 1982:1 (a) General organization and relations with the authorities Does the telecommunications operating entity have adequate autonomy, is it separated from the postal service, does it operate on a commercial basis, and is it given appropriate medium- and long-term sector objectives or guidelines relating to access to service, quality of service, finances, tariff policy, etc.? (b) The information system and human resource management Does the operating entity have an adequate management information system which facilitates effective and responsible control of current operations and financial affairs, and long-term planning and programming? Are the statistics collected on traffic, faults, equipment performance, management efficiency, etc., adequate? Are there management control or coordination problems among departments, divisions or units? Do adequate procedures exist for maintenance, testing and checking on the quality of work performed? Are there enough qualified professionals, managers, technicians and accounting officers? Are job descriptions adequate at all levels? Can the existing staff cope with the additional responsibilities for implementing an expansion programme and managing the expanded entity? Are staff salaries adequate to retain qualified staff? Are policies relating to staff advancement and promotion appropriate, are the accompanying rules and regulations sufficiently flexible, and are incentives for staff achievement built into the system? Are general staff levels excessive? What use is made of expatriates, of consultants? Are present arrangements satisfactory, suitable for an expanded workload? Is technical assistance needed in the short run? Does management make an adequate public relations effort to keep the public informed of major developments and to develop outside public support for the sector? (c) Planning Is economic analysis of the telecommunications development needs of both urban and rural areas carried out, and are the results of such analyses adequately conveyed to finance and planning ministry officials? Are the telecommunications development plans closely coordinated with governmental development plans and programmes in other sectors, and with private development? Do updated national numbering, charging, switching, signalling and transmission plans exist? Are they judged to be sound in light of the country's requirements and its technological and financial resources? Do regional development plans exist? Are there physical development plans for the capital city and major metropolitan areas? Are the service targets reasonable given current service levels and countrywide goals for access and quality of service? Do they reflect a proper balance in development of service and in service priorities? Is there adequate coordination between exchange equipment and external plant works? Are the costs of various works reasonable? Are civil works preparation a bottleneck? Have the major works been subject to economic comparison of alternatives (coaxial cables versus microwave for a major trunk bearer)? Is the discount rate appropriate? Does it reflect capital scarcity? Are there plant practices that specify the forward provisioning periods for the various classes of plant, e.g. main, secondary and tertiary distribution cable, junction cable, exchange equipment, multiplex equipment? Are the provisioning periods judged to be reasonable with regard to growth rates, availability of capital, prevailing plant costs and labour rates? (d) Accounting system Is the accounting system on a commercial basis, and if relevant, are telecommunication accounts kept separate from postal accounts? Is the commercial accounting system adequate to keep management informed and permit it to foresee trends and possible problems? Are there adequate internal financial controls (control of cash receipts and payments, inventories, plant requirements and sales of property and related materials, etc.)? Is the costing or cost control system adequate? What are the accounting practices being followed and are there any problems relating to depreciation, the transfer of plant investment from "under construction" to "in service", the handling of foreign exchange losses, bonuses, etc.? Are pension funding arrangements adequate? Are there adequate procedures for writing off bad debts? (e) Billing and collection Are billing arrangements satisfactory? What is the billing cycle and is the accounts receivable position satisfactory in terms of length of the billing cycle? Could billing be expedited through increased mechanization or computerization? What would this cost and what would it save in time and cash-on-hand? How are collections made? Are there disputed account problems and how can these be resolved? Are there satisfactory procedures for disconnections of nonpaying subscribers, including government? (f) Inventories and stores Is the inventory or stores control system satisfactory? Are inventory levels satisfactory? Is there an adequate system for timely replenishment of inventories, for checking whether turnover is reasonable in relation to the scale of operations, and for identifying and disposing of obsolete material? (g) Training [see also section below on human resource management] Have personnel development policies and practices been recently evaluated in the light of current and forecast requirements of the operating entity and of the sector? How do training programmes and facilities compare to needs? Has this topic been adequately examined by national or international agencies or experts (ITU, consulting firms)? What action might be initiated to deal with any personnel shortages likely to affect current or future development within the sector? (h) Audit Are present arrangements for external and internal audits satisfactory? Are the nature and extent of the audits appropriate? Is there any reason for questioning the independence of the external auditors, the adequacy of the qualifications and experience of the personnel conducting the audit, or the adequacy of the procedures followed? Do the audit reports contain all the financial statements and supplementary information needed for analyses and comparisons? Does the external auditor systematically advise management of weaknesses identified in the accounting system which should be improved? When used, is government audit adequate or should it be supplemented by other audit arrangements? What is a reasonable period for submission of audited financial statements? Are internal audits and inventories undertaken systematically? Are internal audit programmes adequate? To whom does the internal audit section report? (i) Tariff policy and financial plans Does the telecommunications operating entity generate sufficient resources from users of telecommunication services to cover operation and maintenance costs, debt and interest payments, and to generate a sufficient return on assets to attract needed capital, and to cover a reasonable proportion of the costs of future system expansion from internal cash generation? What is the expected percentage of internal cash generation over the next three to five years? Is it satisfactory? Is the amount of net internal cash generation influenced significantly by the capital structure and terms of debt financing (unusually low or high debt/equity ratios, easy or harsh debt repayment terms, use of supplier credits)? If the percentage of self-financing for capital requirements is below 35 or 40%, is it acceptable in view of the magnitude of the work programme, recent tariff action, expected tariff revisions, and/or expected level of internal cash generation after work programme completion when the full revenues from the work programme are realized? Are there special factors such as taxes, bonuses, dividends or other payments to government, or exceptional customs duties which are depressing the percentage of internal cash generation? In excess demand situations, is some form of price rationing used to encourage business and government priority access or usage? Is peak period call pricing (local or long-distance) or toll ticketing practised? Do long-distance charges increase too rapidly with distance? Is access cheaper in non-urban areas? Do tariffs for specific types of service reflect the cost of those types of service? Are any deviations from pricing according to the cost of service justified on grounds of promoting a more efficient or equitable usage of, or access to service? Are telecommunication tariffs used partly for general government taxation purposes, or to subsidize postal services, etc.? What are the present implications of this and what are the longer term goals? The special case of human resource management 157. Since the subsystem of human resources is a prime factor of success in the reform of enterprises, it is worth coming back to the subject and pointing out some of the shortcomings which we find in the majority of countries as a result of their common colonial heritage. In fact, the State enterprises are still run very much on the lines of the civil service, where the emphasis is placed more on bureaucratic procedures than on obtaining accountable results in terms of customer satisfaction. The changes needed to ensure the success of reforms imply a profound change of attitude, particularly in the areas of training, pay and performance management. 158. Training needs to be reconsidered to take account not only of the continual changes in technology, but also of the fact that attitudes and behaviour need to change, especially towards customers. Training must no longer be confined to the technical area only, but must also cover other aspects of the enterprise, such as management, design and the introduction of computing systems, service marketing, accountancy, etc. 159. The pay system with its related career management system, applied in telecommunication enterprises is often modelled on that of the civil service, extended to cover the very broad range of jobs in the sector. The system is no longer able, however, to cope with the special requirements of a rapidly changing telecommunication sector. Moreover, the present pay systems attach more importance to general academic training than to the real nature of the tasks required for the actual jobs performed. Some reorganization is therefore needed, not only in order to take better account of the specific characteristics of jobs in telecommunications, but also in order to attract and to retain qualified staff. Special attention should also be given to the matter of replacing imported expertise, which still plays a very significant part in maintenance work, planning and the implementation of network extension plans. 160. Lastly, telecommunication enterprises should attach more importance to the notion of performance, both on a personal plane and from a collective point of view, and should apply in the daily running of the enterprise a new emphasis on obtaining practical and accountable results in terms of customer satisfaction. With this aim in mind, a performance management system should be introduced, which would imply at all levels of the enterprise establishing responsibilities and objectives, a follow-up of completed tasks and regular evaluations. _______________ RECOMMENDATION 5.1 - Marketing of services Public operators should be granted a large degree of autonomy in order to ensure that they have the flexibility and authority needed to carry out both their public service function and that deriving from the commercial nature of telecommunication services. RECOMMENDATION 5.2 - Choice of managers Every effort should be made to ensure that criteria of competence and honesty prevail in the choice of managers for public agencies which, in return for the autonomy granted to them, must undertake to produce tangible results. RECOMMENDATION 5.3 - Improvement of the efficiency of services On the one hand, telecommunication services should preferably be managed separately from postal and financial services; on the other hand, the two entities should be simultaneously restructured in cases where they are not already separate. In any case, a certain amount of clarification and diagnosis will be necessary before the management of the two entities can effectively be separated. RECOMMENDATION 5.4 - Rationalization of management Network management and operation activities must be conducted within the framework of a strategic plan incorporating all relevant factors. RECOMMENDATION 5.5 - Optimum utilization of human resources The development and management of human resources must be given top priority. Maximum use must be made of the potential offered by endogenous human resources, having recourse to outside expertise only where absolutely necessary. _______________ CHAPTER VI. - ECONOMIC, FINANCIAL, AND TARIFF ISSUES Investment necessary to develop the basic network 161. Insufficient financial resources for telecommunication investment are one of the major reasons why the basic network in most African countries is not well developed. Where resources have been available, in most cases they have been used inefficiently. There is consensus that telecommunications is an important factor for economic development and therefore new policies should be designed that will tap resources from various sources in order to increase funding for telecommunication investment. New policies are also required to promote sound business principles and improve operational procedures with the ultimate purpose of increasing efficiency. Such policies can also attract private sources of investment because of the high profitability of telecommunication ventures and thus reduce the financial burden of providing public telecommunications from the government. Profitability of telecommunication investments 162. Telecommunication investments are very profitable if they are managed efficiently and under commercial principles. This has not been the case with public sector telecommunication services in a number of African countries. According to ITU indicator data (see item 1 of Annex 1), quite a few entities are profitable but have not been able to generate enough funds for further investment. 163. The underlying reason for not being profitable is the way in which entities are managed and controlled. Usually governments provide public telecommunications by establishing entities in the form of departments in the ministry, board or parastatal enterprise and interfere in day-to-day matters of management. They control sources of funding, price of services and personnel policies. These monopolistic entities also perform regulatory functions, issue licenses for private networks and allocate frequencies. In short, they perform policy and regulatory functions on behalf of governments. 164. Although lack of funding is one of the main problems, there is need for efficient utilization of available funds through changes in operational procedures and management. In some countries, such changes will require the adoption of new policies of which there are many options. The choice of policies for the purpose of increasing investment funds and efficient utilization of existing resources is a national matter and will depend on local conditions and priorities. Investment required to develop the basic network 165. The investment required to accelerate the development of telecommunications in Africa is enormous. ITU statistics indicate that there were about 2.4m main telephone lines in sub-Saharan Africa and about 5.3m links in North Africa in 1994. The average telephone penetration per 100 inhabitants was 0.5 for sub-Saharan Africa and 4.2 for North Africa compared with 59.9 in North America, 44.1 in Western Europe, about 15 in Central and Eastern Europe, 8.4 in Latin America and 4.8 in Asia. 166. If the African countries have to increase the current ratio of 1.67 telephone lines per 100 inhabitants to three per 100 inhabitants by the year 2000, a total investment of over US$ 26 billion would be required. For a density of two by the year 2000, the investment required would be at least US$ 9.6 billion, assuming a minimum cost of US$ 2000 per additional line. 167. The magnitude of funding required for the level of investment indicated above is beyond the capabilities of many African countries, given current levels of income. Even if they were to increase the percentage of income allocated to telecommunications from the current 3.2, the target cannot be met. The above indicates that radical policies have to be undertaken in order to tap investment funds from non-traditional sources. Sources of funding 168. African countries have obtained most of their funding for the expansion of the networks from external borrowing and aid. The African Development Bank (ADB) and the African Development Fund (ADF) have contributed significantly in providing loans at reasonable terms. A few of them which have undertaken reform measures have allowed telecommunication entities to adjust their tariffs above costs without government interference. This has resulted in the availability of internally generated funds for investment. Some of them still face the problem of converting local funds to foreign exchange which accounts for about 60 to 80% of the total investments. 169. Public telecommunication entities which do not perform well in terms of expansion due to unavailability of internally generated funds obtain funding through government budget allocation. In most cases all external borrowing, bilateral aid and grants are allocated through the central government which leads the donor to the perceived priority areas. The above environment has led to the telecommunication sector not receiving the attention it deserves due to different national priorities competing for scarce resources. Telecommunication investments and other national priorities 170. Many of the African countries are faced with the task of trying to meet the basic needs of society and at the same time implement projects which will accelerate economic development, including telecommunications. In the environment of scarce foreign exchange, most of the African countries have put their priority on national projects and programmes for water, food, shelter, health and education which are referred to as basic needs. In most cases the private sector was not allowed to participate and alternative sources of funding were not sought. 171. It is now widely accepted that without an adequate telecommunication infrastructure even the success of basic need projects will be constrained. Due to this fact and the realization that telecommunications are essential to development, a number of countries have increased the share of public funding, loans and grants for telecommunication investments but with mixed results. 172. In a few countries availability of local funds is no longer a major problem. However, investment has not increased as expected because of managerial and operational problems which cause inefficiency. In this case, an increase in the share of public funding or availability of internally generated funds has to be accompanied by other measures such as reducing government interference, improving management and operational capabilities, adopting commercial/business principles and so on. Some of these measures cannot be undertaken without changing the legal and policy framework in which the telecommunication entities operate. 173. In other cases, the share of public funding for telecommunications will always be limited by pressures from the government which diverts funds to other competing claims. Sufficient funds for telecommunication investments in this case will not be available unless other innovative measures are sought. Some of the measures which are likely to generate additional funds are, for example, issuing bonds, establishing schemes through which funding can be generated from subscribers, establishing joint ventures with foreign investors, establishing Build Operate and Transfer (BOT) schemes, providing incentives for the private sector to participate and other measures which are mentioned below. 174. As indicated during the formulation of UNTACDA II, the measures to be taken to increase investment require the decision of each country and will depend on specific conditions and priorities. However, there is need for a common approach to monitor and evaluate the implementation of the resolutions already passed at different venues. Also there is need for cooperation in the African Region to exchange information on country decisions, implementation status and exchange in technical skills. Recommended action 175. At the coordination level of the UNTACDA II Programme, the African Development Bank has been nominated as the coordinator of the Resource Mobilization Committee (RMC). In this regard, its role not only covers traditional financing of telecommunication projects in the region, but also of providing a forum for harnessing funding by bilateral and multilateral aid agencies of the UNTACDA Programme. Action required at the national level 176. In order to seek funding for telecommunication projects, development plans have to be prepared at the national level for the long, medium and short term in line with the overall national plan for socio-economic development. Consideration of the objectives in UNTACDA II (1991-2000) which calls for telecommunication interlinkages in the African Region in order to accelerate socio-economic development, should be included. Where national resources are inadequate, bi- and multilateral assistance should be sought to implement the plans. Countries which already have such plans will only need to update them. 177. New methods of generating additional funds for investment should be introduced at the national level. Possibilities which have been tried successfully in a number of countries are equity participation and issuing domestic bonds especially to State financial institutions, unit trusts, insurance companies and subscribers themselves. Funding can also be generated by establishing joint ventures with foreign investors, establishing BOT schemes, providing incentives for the private sector to participate and other measures mentioned in various studies and discussed at several regional conferences. A complete list of potential financial sources and instruments is provided in Annex 9. 178. Investment areas in which the private sector is allowed to participate should be clearly defined and a conducive environment be created to attract their capital. Some of the measures may require explicit statements from the government on investment policy, including guarantees and incentives to investors. Also the liberalized areas for private participation such as purchase and installation of terminal equipment should be defined at national level in order to tap resources from many sources and at the same time reduce foreign exchange requirements of the operating entities and the government. 179. Strategies for increasing operational autonomy and efficiency should be undertaken by countries which are not already involved in institutional restructuring and where telecommunication entities are unable to manage their business commercially. Public telecommunication entities should be given more autonomy in return for performance improvement through management contracts with specified performance targets. 180. This is one of the options which has been undertaken by a number of countries in the African Region with the assistance of financial institutions such as the World Bank. The signing of Memoranda of Understanding (MOUs) between governments and operating entities with specified performance targets is proving to be a useful tool for putting pressure on management to perform well in return for increased autonomy. 181. Measures required to overcome institutional constraints and increase efficiency will enable operating entities to be profitable and increase availability of internally generated funds for further investment. In some countries such measures have to be implemented gradually because of their policy and legal implications. A timetable or action plan to introduce the changes would be necessary in order to monitor the progress. 182. At national level, governments should also instruct all ministries and other implementors of major projects to include telecommunication requirements at initial stages of project design. This will be an additional source of funding which will also be beneficial to the project after completion. Action required at the subregional level 183. Subregional working groups on investment financing should be established where they do not exist. These groups will harmonize the country strategies with the purpose of identifying the common approaches at regional level. The groups should also harmonize the action plans for implementing decisions taken at country and subregional levels, monitor the progress and prepare status information. It is important to establish a system of monitoring the implementation of decisions made at country level and the resolutions passed at various forums including Resolution ATDC-90/RES2 on Financing the Development of Telecommunications in Africa passed at the ATDC in Harare (1990). The Resolution calls for the separation of postal and telecommunication operations and such other measures mentioned earlier. Action required at the regional level 184. In order to have a common regional approach in solving problems related to telecommunications and also in order to harmonize the different country choices, there are actions which have to be coordinated at the level of the African Region. 185. Regional organizations such as PATU should use their coordinating capabilities to collect information on the experiences of different countries and regions, the strategic options available and assist African countries to develop a harmonized policy approach at regional level. In this regard, the ITU/BDT can also assist and speed up the preparation of the African Telecommunication Policy Study which has been agreed upon by the World Bank, the EC, DANIDA, SIDA, other donors and the ITU. 186. The OAU should create a forum at regional level for consultation on issues concerning increasing investments in telecommunications. Such consultations will cover issues related to operational improvement, harmonization of planning and policy, and updating implementation of UNTACDA II and the OAU Protocol on Transport and Communications for the African Economic Community (see Annex 3). Tariff issues 187. Tariff problems in the African Region include the following: - lack of reliable cost accounting systems as a basis for determining accurate cost data for tariff assessment; - inadequate tariffs which cannot generate enough revenue to sustain the viability of operating entities; - poor quality of services resulting from low call completion rates, and hence lower revenues; - lack of foreign exchange required for settlement of accounts due to imbalances of traffic; - tariff erosion in real terms due to inflation and devaluation; - lack of adequately trained staff in tariff issues; - high international tariffs which prevent full utilization of regional links and thus regional development; - lack of tariff harmonization at regional level, and disparities in accounting rates at regional and subregional levels; - problems of accounting rates between developed and developing countries. 188. Tariff setting has for a long time been a major problem area and in spite of the efforts by the TAF Group it has not been possible to develop viable tariffs due to inaccurate input cost data. African countries use different principles and methodology in determining collection charges. International accounting rates are usually determined through negotiations at national or subregional level, but there is no consensus in the African Region as a whole regarding tariff principles and procedures for inter-administrative settlement of accounts. 189. The existence of various subregional groups in Southern, Central and West Africa has helped in the commissioning of various studies which have identified specific problems and recommended solutions at subregional level. The disadvantage of small tariff groups is that Africa has different tariff structures representing interest groups. The TAF group has also conducted studies on tariffs leading to several recommendations. Tariff principles 190. Tariff principles for determining international accounting rates and collection charges are specified in the Telecommunication Standardization Sector (ITU-T - the ex-CCITT) recommendations. The ITU has conducted several studies over a long period of time and produced recommendations in various documents. 191. The new accounting rate principles recently issued by ITU-T Study Group III states that: - accounting rates should be cost-oriented and relevant cost trends should be taken into account, - the principles of non-discrimination should be applied by each administration, - administrations should work to achieve cost-orientated accounting rates in an expeditious manner and on a scheduled basis within a period of one to 5 years, - information on accounting rates for the international automatic telephone service should be made public to ITU Members. The above principles are aimed at stimulating demand for international telephone services and increasing efficiency in the utilization of the international network. 192. In line with the ITU's recommendations, most African administrations agree that tariffs should follow cost trends. In practice it is justified that tariffs should be sufficient to generate revenue to meet operational expenses, network expansion, social services, government tax, debt servicing, regional economic growth, settlement of the telecommunication balance of payments and customer satisfaction. 193. Rate fixing according to ITU-T recommendations and in meeting the above-mentioned objectives has not been successful and some administrations have higher tariffs without justified explanation while others have fixed their tariffs below cost. There are various opinions on tariff principles and on why application of ITU-T principles has not been successful. Viewpoints on tariff principles 194. The ITU-T recommendations for determining accounting rates are applied by many African countries but collection charges differ widely from country to country since such charges are a national matter. 195. The ITU report on assistance to the Least Developed Countries (LDCs) entitled: "The review of tariff situations in LDCs and the need for a new approach" recommends that the old approach of dealing with tariff issues as a separate entity has not been successful. The report recommends for an integrated approach including all interrelated elements of management. In this regard, the report puts emphasis on integrating tariff with marketing management systems and improving the accounting systems, which are the source of cost data, by establishing an Analytical Account System. This recommendation requires serious consideration by administrations since it deals with the practical problem of applying tariff principles with inadequate and unreliable data. However, there is some argument that accounting rates are too general and should not be used to determine subscriber tariffs due to differing conditions in each country and subregion. 196. Those in favour of the above arguments have the view that tariff principles cannot be the same for each country because priorities differ depending on revenue requirement of each particular administration, development goals and demand of services. Because of such arguments and beliefs, several African subregional groups are conducting their own subregional studies and have determined their own tariffs suitable to their national and subregional development goals. 197. Due to differing African telecommunication tariff structures several problems have arisen. Many of these problems and recommendations have been identified in studies conducted by the ITU, PATU, and subregional groups such as SATA (the Southern African Telecommunications Administrations) and Tariff Study Groups. Some of these problems are discussed below. 198. Because of the requirement to meet social and developmental goals, some of the African administrations have set their tariffs so low that they cannot generate enough revenue to meet operating costs, invest in network expansion and at the same time meet social obligations and fulfil the mandate of extending services to the rural areas. Also, some African administrations have set their tariffs so high as to deter the development of new services which are important for national development. Others are so high that they may be detrimental to regional trade and development. There is a need to harmonize the requirement to generate enough revenue and the above-mentioned social and developmental objectives in an orderly manner, for all regions of Africa. Utilization of the PANAFTEL network 199. Excessive tariffs applied by some of the administrations in the African Region discourage subscribers from making international calls. Within Africa there are telecommunication infrastructures which have been constructed with the purpose of carrying intra-African traffic. Heavy investments such as the PANAFTEL network will be underutilized if the tariffs are not determined with the intention of promoting traffic. Since 1983, the TAF group has made a series of proposals aimed at establishing standard rates for Africa on the basis of ITU-T Recommendations. In spite of reductions in the various charge elements, the tariff problem is still one of the main reasons why the PANAFTEL network has been used to a limited extent only. 200. Technology, deregulation and other factors are encouraging different players in the telecommunication sector throughout the world to reduce their rates. It is recommended that with ITU assistance and the participation of the regional and subregional organizations concerned, a new questionnaire - better adapted to the African situation - should be drawn up on telecommunication service costs. In setting tariff standards for communications over the PANAFTEL network, the results obtained from the questionnaire should be analysed according to the following principles: - making transit via the PANAFTEL network competitive as regards tariffs and quality, - improving coherence between tariffs and costs, striking a balance to ensure the proper development of national telecommunication networks, - adapting to the region's new routing plan with a view to reducing the number of transits - switched or not - for intra-African calls, - integrating in national tariff structures those that are applicable to crossborder traffic not routed through the transit centres of the countries concerned. 201. There is a general consensus among African nations that there is a need to promote intra-African trade in order to stimulate economic development. For this purpose it is necessary to have a reliable telecommunications infrastructure and a tariff structure which encourages traders to make international calls. Tariffs aimed at promoting trade have been negotiated and established in a few subregional groups such as SATA but implementation differs from country to country. There is a need to harmonize these tariffs with proposals made by the TAF group and other subregional groups. Settlement of accounts 202. One of the overriding problems in international settlement of accounts is that many African administrations do not have enough foreign exchange to settle balance of payments when outgoing calls exceed incoming calls. Some of the administrations with a negative balance are accumulating debts with foreign transit centres and other African administrations. 203. In regard to this problem, studies have been conducted at subregional levels and new approaches such as 'sender keeps all' accounting and the introduction of a multilateral clearing system are being implemented in the Preferential Trade Areas (PTAs). Subregional organizations such as ECOWAS, CAPTAC, ARTC (the Annual Regional Telecommunication Conference), the SATCC (the Southern Africa Transport and Communications Commission) and SATA should conduct studies and hold regular working group meetings for the purpose of promoting the utilization of existing clearing houses. Where clearing houses are not well established, efforts should be made to establish them. Sender Keeps All Accounting (SKA) 204. The SATA tariff study of 1989 describes the SKA arrangement as follows: "Under Sender Keeps All (SKA) accounting for international traffic, the two terminal administrations in a relation make no settlement, but simply retain the subscriber revenues for the interchanged calls ... SKA accounting is very convenient and economical for those relations where the traffic is currently balanced, and where no change in traffic pattern is foreseen for the future. It is also an option for relations where one administration has difficulty in ticketing all its outgoing calls, or in meeting its foreign exchange obligations to another SADC administration." The above arrangement has been adopted by all SADC PTOs in relations among themselves and by some PTA PTOs. The PTA multilateral clearing facility 205. The Preferential Trade Area of Eastern and Southern African States has introduced a multilateral clearing system whereby settlement of trade in goods and services is made through a clearing house. The Central Bank of Zimbabwe was initially selected to act as the clearing house. Under this arrangement, only net balances are paid in convertible currencies as it is intended to reduce the requirement of foreign exchange to pay for trade in goods and services. The multilateral clearing facility is recommended for other economic subgroups in Africa. Action required at the national level 206. At the national level operating entities should conduct studies of the cost of providing services. Study results should be used to determine accounting rates and collection charges. In any case, tariffs should be sufficient to generate enough revenue for operation and expansion of the network. Although subsidies should generally be discouraged, particular social, economic and financial conditions may require setting tariffs at a level at which they can subsidize rural telecommunications and other social obligations. In this case, tariff structures may be designed so that non-profitable rural services are subsidized by high volume services, without in any way discouraging their development. 207. Ultimately, the determination of tariffs should remain a national matter and should support national policy on social and economic development. 208. In order to stimulate African regional trade and development and in line with the objectives of UNTACDA II, national tariffs should be kept at a level where they will encourage traffic through regional links such as the PANAFTEL network. Where possible, promotional cheap rates should be applied in order to increase utilization of such networks. 209. Every endeavour should be made to adhere to agreed routing plans including the use of regional transit centres. In order to reduce to the minimum the amount of traffic via non-African centres, competitive transit remuneration plans should be implemented. 210. In countries where tariff rates are constantly falling in real terms, operating entities should adopt a formula for increasing tariffs periodically which should be based on the rate of inflation and devaluation. A provision for efficiency improvement can be built into the formula. This method can also be useful for timely execution of tariff increases where such adjustments have to pass through lengthy bureaucratic procedures. Care should be taken to avoid disparity in collection rate levels. Action required at the subregional and regional levels 211. There are many tariff studies and agreements being conducted by subregional groups. These should without doubt be encouraged to continue, but it would be beneficial also to exchange information among administrations and subregional groups in the African Region. PATU, which has already assumed an active part in this study, should increasingly take up the coordinating role in this aspect. 212. The problem of unavailability of foreign exchange required to settle the in-balance of outpayments can be reduced by introducing multilateral clearing houses for settlement of accounts at the subregional level. The subregional economic groups that have not introduced this arrangement should do so. Subregional economic groups also should establish Sender Keeps All accounting (SKA). Where agreement cannot be reached at the subregional level, negotiations should be conducted at the national level in order to establish SKA arrangements with regard to its application, and care should be taken to ensure that SKA does not mask deficiencies that might exist in the network, such as poor quality of service, etc. 213. Countries which are currently transiting through Europe and North America and thus paying out much foreign exchange due to increased outpayments can reduce the problem by transiting within the African Region. Arrangements and projects with the objective of transiting within Africa should be initiated at the subregional and regional levels. Subregional groups should increase the number of courses conducted for the purpose of understanding tariff issues, especially in tariff design and negotiations. Countries should therefore support regional transit centres and projects such as the RASCOM, PANAFTEL, and such like. 214. Regional organizations, such as PATU and ECA, should monitor tariff problems, discussions and agreements which are made at national and subregional level with the purpose of finding ways of harmonizing a common approach at regional level. The organization should also establish systematic ways of monitoring the implementation of objectives in UNTACDA II, the OAU protocol on transport and communications and the resolutions passed at different regional forums. Also a forum should be created at regional level to discuss tariff problems and recommend for solutions. The ITU/BDT should continue with assisting in providing logistic support. _______________ RECOMMENDATION 6 - Economic, financial and tariff issues The African Green Paper recommends: at the national level (i) that the necessary conditions be created at the structural and regulatory levels with a view to attracting the required capital and increasing the self-financing component of investment projects; (ii) that the telecommunication network be developed according to a plan forming part of the country's overall socio-economic programme; (iii) that an innovative approach be adopted in seeking sources of project financing. To this end, ways and means should be found, inter alia, of ensuring the involvement of the private sector; (iv) that efforts be made to urge ministries other than the one in charge of telecommunications to include a "telecommunication component" in the major development projects for which they are responsible; (v) that economic studies be undertaken to determine the actual cost of services and facilities offered, a prerequisite for the establishment of equitable tariffs and shares; (vi) that reliable statistics be kept on different intra-regional traffic flows; at the subregional and regional levels (i) that consideration be given to the creation of working groups on the financing of joint projects; (ii) that a regional approach be adopted to solve problems of common concern and that efforts be made, at the same time, to harmonize certain national options; (iii) that subregional and regional organizations be given a greater role in solving problems connected with the settlement of accounts and the determination of shares. _______________ CHAPTER VII. - TELECOMMUNICATION NETWORK DEVELOPMENT Development policy 215. In most of the developed countries at present engaged in reviewing their telecommunication policy, the existing infrastructure has a size, diversity and quality of service which meets the needs of very many users; to those countries, adapting to the new telecommunication environment chiefly means defining the new 'rules of the game' among the various players in order to ensure the optimum growth of the network and its associated services. 216. In Africa, particularly south of the Sahara, not only are the basic telephone and telex services inferior to real needs, even in the present economic climate, but the quality of the support network and associated services is far below international standards; and that situation is compounded by the new international environment factors. Short-, medium- and long-term master plans for developing the network are simply no longer sufficient to cope with the situation because they provide technical and financial planning guidelines covering different periods. What is needed in the present context is a development policy for developing the telecommunication sector and related fields. 217. Such a policy would incorporate all internal and external factors that are likely to influence the telecommunication network's technical, economic, financial and development policy options. In this way the agency responsible for developing and operating the network would be less vulnerable to environmental change. A development policy of this type should be drawn up by the authorities that have the required competence and open-mindedness; indeed, it would seem that the national high-level multi-ministerial coordination committee called for in 1990 by the ATDC in its Resolution No. 1 is tailor-made for that purpose. A separate regulatory organ would codify - in regulatory form - the development policy objectives which would subsequently be implemented within the telecommunication sector by the main players involved. 218. In the process of reflecting on ways and means for rationally extending, consolidating and operating the telecommunications network, it should be remembered that the social thinker and reputed futurologist, Alvin Toffler, once said while at one time telecommunications was regarded as a consequence of economic development, that belief was now dead; telecommunications had in fact become a precondition rather than a consequence. The need for balanced development of the national telecommunication network 219. Available statistics on telecommunications in Africa reveal that: - quantitative and qualitative needs are far from having been met despite the availability of equipment in some cases; - rural areas are practically excluded from the benefit of telecommunication services whatever criteria are applied, e.g. penetration or accessibility rates; - there are highly disparate levels of development among the subregions and the countries of any given subregion. In most cases the level of telecommunications network development is well below the real economic potential of each country. 220. Accordingly, the minimum quantitative development objectives set as part of the Second Transport and Communications Decade for Africa are realistic. They vary according to country, countries being classified in four groups, from the point of view of their levels of development at the end of the first Decade. While each country has its own particular strategies, material and human resources and timetable for achieving the objectives, the telecommunications network itself must be regarded as a coherent whole having two components, one urban, the other rural. 221. The telecommunication networks of some countries are still without an appropriate architecture. In the case of international traffic at least, the networks of one category of countries are regarded from the technical operations standpoint as an offshoot of a parent exchange usually located outside the African Region. In another category the network has a star configuration, with a single exchange handling all major functions including subscriber connection, national transit and the routing of international traffic. Besides lacking the flexibility needed for expanding the network economically, both types of network structure make any interconnection policy a costly business. The countries concerned are therefore recommended to work out and implement a switched network plan with hierarchical levels, even if the present situation is warranted in the transitional phase by the prevailing economic circumstances. Introduction of new technologies and associated services 222. Although most telecommunication networks are of the analogue type, a fair start has been made to digitize telephone exchanges. According to ECA information, the coverage rate approaches 29 per cent. 223. Other than in exceptional situations justified by sound economic analysis, it is recommended that countries discontinue purchasing analogue equipment for expansion purposes. Instead, countries should formulate coherent digitalization plans and avoid a piecemeal approach to digitalization. 224. There are several switched telephone network digitization scenarios and the ITU has conducted valuable studies on the subject. Each country should adopt a scenario that best suits its situation, but based on sound economic analysis and fundamental plans. 225. Each country should formulate a digitalization plan with a set of realistic targets for achievement of complete network digitalization and subsequent establishment of integrated services digital network (ISDN). 226. Economic studies should be carried out in order to determine the optimum pace of digitalization, taking into account the following factors: - none of the countries concerned in the region produces equipment; it is obtained from manufacturers who have already halted the production of analogue equipment, since such equipment is still under production only in a few developing countries which have their own specific standards; - the effective introduction and operation of an analogue network presupposes the availability of human resources with the appropriate qualifications; these qualifications differ from those needed for performing similar tasks in a digital network and thus render it more efficient to train those rare resources available for the future ISDN; - telecommunications are discussed in all regional and international forums against a background of standardization and restructuring based on the application of present and future digital technologies. African representatives attending such type of events, from which a great deal can be learned, can only derive full benefit from them if they are routinely involved in the subjects discussed; - missing the digitization train now would mean refusing to confront the current and medium-term need for new services, with its inherent implications (the proliferation of private networks, loss of revenue, etc.); it would also mean risking in due course being disconnected from a world network built around national ISDNs, a world already at the embryonic stage in some countries; - lastly, given the present technical obstacles, the optimum solution for interconnecting Africa's telecommunication networks as the cornerstone of economic integration lies in the concerted digitization of national networks. 227. The number of new services which fall into that category as understood at present is very small, and the lack of any study of real and affordable demand for services born of the 1980 generation makes constructing networks for new services risky. Where the problem exists, administrations should be able to solve it through relatively liberal regulation, particularly as concerns the leasing of circuits from the public operator. Interconnection of public and private networks 228. Some countries have many private telecommunication networks because the public network is unable to meet the needs of the promoters concerned. Such networks are generally for the internal use of the promoter and are radio based. Terminal equipment comprising automatic switching exchanges (PABXs) is usually unsophisticated in comparison to the new operating facilities afforded by digital exchanges. 229. In order to develop the network for the benefit of users of all categories, without discrimination, it is suggested that the installation of shared-resource radio or wire networks that can be used by groups of users having similar needs should be encouraged. Their construction could be co-financed by the public operator and interested business users on mutually advantageous terms. 230. The interconnection of private and public networks must be fostered even if that involves national leased circuits. The technical, tariff and utilization conditions governing such facilities offered to a given user group are a matter for regulation in each country. 231. It may be essential to create independent networks in certain situations, inter alia, through the use of plants built around very small aperture terminal (VSAT) antennas. Such networks should not be connected to the public telecommunications network, but if exceptions are required, the integrity of the public network itself must be safeguarded. Rural telephony 232. The international community is generally anxious to improve living conditions in rural areas, as shown by the recommendations on the subject, some by the United Nations. Telecommunications as the "infrastructure of infrastructures" play a leading role in any policy aimed at improving living standards in rural areas. Even before the economic crisis became a constant factor of planning, some African States had already included integrated rural development in their socio-economic development plans. Even in the current situation, although they are by no means adequate, efforts are nonetheless being made to provide rural areas with minimal telecommunication services. 233. Be that as it may, and in spite of present difficulties, the extension of rural telecommunications should be pursued or undertaken, as appropriate. Rural areas are reservoirs of human and material resources and as such cannot be left out of policies and strategies for the region's lasting development. 234. The main obstacle facing the establishment of rural telecommunication infrastructures is the mobilization of the necessary financial resources, even though relevant studies have shown that while investment in rural telecommunications may not produce direct financial returns, it is quite definitely beneficial in overall socio-economic terms. Further, despite decreases in the cost of equipment due to technological developments, the cost of rural telephone lines remains higher than that of lines in built-up areas where telecommunication services are nevertheless still insufficient. Apart from the possible pre-financing by certain types of users in rural areas, the inclusion of the telecommunications component in any project for such areas might receive a positive response from donors if the project forms part of a coherent development programme. Similarly, rationalizing requirements within a subregion can lead to economies of scale, and if related projects are implemented simultaneously, this may well provide access to sources of financing on softer terms. 235. The penetration rate of telecommunication services in rural areas may be improved if governments and public network operators establish clearly the distinction between the operator's public duties on the one hand and his business responsibilities on the other. Governments should subsidize the operational losses by way of incentives like tax exemptions or direct contributions for the rural telephony. Technical options 236. Rural areas are served by homing exchanges in a variety of possible configurations which depend on a number of specific local factors. In an environment in which demand cannot be controlled easily since no statistics are available, thorough planning is necessary so as to make the right technical choices thereby allowing future requirements to be met at low cost. In addition to overhead lines, which are widely used at present in rural areas and which are extremely vulnerable to bad weather, modern technology offers a wide range of radio systems, including satellite systems allowing the use of small antennas to serve rural areas. In the near future, personal and cellular radiotelephony communication systems will provide alternative technical options for rural areas. 237. Whatever the circumstances, technical choices should involve the optimum use of resources and take various factors into account, including: (1) the system's flexibility; (2) its maintenance requirements; (3) its compatibility with the existing public network, in order to provide users with a universal service; and (4) that the equipment purchased should integrate perfectly into the tariff pattern of the area concerned. Installations maintenance 238. Telecommunication installations maintenance is even more problematic in rural areas than in the built-up areas. And since maintenance of the latter is poor, even though it monopolizes whatever meagre resources are available, the scale of the problems encountered in rural areas is readily understood: on the one hand there is no qualified workforce available, and on the other there is little to support the establishment of a permanent team of technicians. 239. It is suggested that a central team responsible for rural telephony be set up within the organization operating the telecommunication network. Initially, and following suitable training, the team would work jointly with the supplier to install the equipment. Subsequently, the team would install the equipment under the technical supervision of the supplier, and later still would assume full responsibility for installation and maintenance operations. Modern equipment is well suited to this approach, which would also reduce costs. Communications charging 240. Services in rural areas should not be charged on a cost basis. At most, since subscribers in such areas are some distance away from their homing exchanges, they may be considered merely part of the charge zone furthest away from the homing exchange zone. Accompanying measures 241. Accompanying measures either should precede or follow major decisions if national telecommunication networks are to be economically and harmoniously developed. Network operation 242. Technical and commercial network operation must be of as much concern to the decision-making authorities as the construction of new infrastructural work. This should be allowed for in both the management structure and the project planning, study and implementation phases; in particular, network extension programmes should also cover the improvement and upgrading of that part of the infrastructure in which new equipment is to be placed. With regard to maintenance of the existing network, national plans for the improvement of maintenance drawn up with ITU assistance still provide relevant guidelines that can be constantly updated. Charging for products 243. Working out the structure and level of tariffs for telecommunication products offered to users is often regarded as a minor problem and, at best, operators seek from the political authorities greater room for manoeuvre in determining their tariffs for services provided. Yet charging must reflect an optimum combination of such varied factors as product costs, commercial and financial policy, incentives to national industries facing international competition, the public service mission which still belongs to telecommunications, the need for financial viability on the part of the public network operator(s) and competition within the sector. All these factors make charging primarily a national matter. 244. In framing national policy on charging for telecommunication products, however, it is necessary to observe international standards on the subject but also to make allowance for the global down trend which is threatening the financial viability of small network operators whose revenue is already being hit by phenomena such as: - the bypassing of certain relations by international traffic; - the call-back system used when the same service costs less at the correspondent's end. It should be noted that some major operators have over a four-year period reduced their international tariffs by 18-22 per cent; - the green numbers used by some companies to offer free telephone calls to their correspondents abroad. 245. Notwithstanding the foregoing, it is suggested that a think-tank on charging for telecommunication products be set up in each country to collect the technical details for deciding on charging structures and levels, bearing in mind that distance from the parent exchange should not penalize users in rural areas. Then again, the regulations governing tariff setting and the associated administrative rules should be flexible enough to allow the different service providers, including the public operator, to keep pace with the environment. Network development structure and management 246. It should be pointed out that some activities of fundamental importance to harmonious, balanced and economical network development are very often carried out by the organization in a random, haphazard way. For example, most countries have no management information system for collecting, storing and updating the data on their network's technical and commercial management. The network's structure should cater for these elements. Furthermore, whichever management structure is adopted, each country should have a telecommunication "work unit" that is not overly involved in everyday network management and that is capable of carrying out the technical studies, autonomously or with outside expertise, as needed. A workframe of this kind would also provide a useful bridge for technology transfer. Integration of development policies 247. The telecommunications network is a tool for developing other socio-economic sectors, and cannot develop in isolation; it should be planned as an integrated part of each country's overall development strategy, without constituting an obstacle to project implementation. In this integration process, those responsible for telecommunications should take the initiative of establishing dialogue which, if demand is taken appropriately into account, should also involve potential service users. 248. In line with the above, when other types of infrastructure are established, steps should be taken to facilitate the inclusion of a telecommunications "package" in the services provided; it will be up to the interested parties to determine the financing and subsequent operation of the "package". 249. In some cases, individual countries have independent networks (shared resources networks, VSAT networks, etc.) built by individual groups of users, sometimes without authorization from the relevant authority. This kind of situation jeopardizes the integrity of the national telecommunications network and also results in considerable income losses for the public operator(s). Similarly, the telecommunications infrastructure of a particular area of a country may be the result of private initiative, under State license. Whatever the circumstances, there should be technical standards governing the installation and operation of these networks in order to maintain and/or safeguard the integrity of the national telecommunications network. Interconnection of national network with a particular type of global network 250. Interconnection of the national public network with the global network is subject to technical and operating norms drawn up by the ITU. Nevertheless, the new environment of new services means that most national networks can not provide their customers, especially their professional clients, with such services. Professional clients will therefore look for other solutions from the providers of such services, which are value added and provided through "global networks" set up by businesses that belong to different sectors of activity but wish to share certain information resources. 251. This is a new situation which is not fully covered by current legislation, though it may lead to de facto legislation if the necessary steps are not taken in time. Hence the suggestion that this category of requirement might be catered to by providing leased circuits, perhaps even switched and point-to-point ones. This would be an interim solution pending standardization or at least harmonization at the international level. 252. Future world telecommunication networks based on non-geostationary satellites represent a similar challenge which must be taken up. Even if the operational configuration of such networks is not yet known, the RASCOM solution should be taken into account in any approach intended to take advantage of the benefits of satellite networks. The regional level 253. Over 22 years ago, the governments decided that it was necessary to set up a pan-African telecommunications network. Considerable and varied efforts were made towards that objective. The results obtained vary from one subregion to another, and while not insignificant, they have not met expectations. The "MONROVIA SOLUTION", aimed at setting up seven regional transit centres for Africa, did not really materialize. This was due to a number of reasons. There were real technical obstacles, but the major reason was lack of political will and commitment. 254. The main technical obstacle is that in individual subregions the different national network development plans, including basic plans such as signalling plans, have not been harmonized. The fact that some countries have no national expertise in the field is another factor. Intra-African traffic is very low compared with international traffic which, for each country, is directly related to trade flow. 255. The interconnection of national telecommunication networks is now seen in the context of the future African common market which, given the present unfavourable environment and the various unsuccessful attempts to improve it, represents a sort of "SPARE WHEEL" for the region, especially for sub-Sahara. A pan-African telecommunications network is an important element in the creation of this African economic area and the specific measures required should be adopted without delay. 256. In the near future, most national network operators will be, de jure or de facto, public operators whose autonomy will vary depending on the country in which they operate. They will be required to produce results set forth in a plan, contract or similar document. The objective of implementing the PANAFTEL network must be written into any contract established between an administration and its public operator(s). However, and notwithstanding the economic factor, this objective should not be seen as a sine qua non for setting up direct inter-State telecommunication links. 257. In order to set up such links where they do not already exist, a regional routing plan should be established urgently. The plan should be based on regional transit zones and on existing, subregional routing plans, updated if necessary. For the implementation of the regional routing plan, it is suggested that, where this is not already the case, agreement is reached on digitization for the international part of each involved network. The RASCOM network, in its final phase with its dedicated satellites, could constitute a useful overall structure for implementing such a plan. 258. This plan together with the national network development plan may at first seem ambitious in view of the financial resources available and the degree of solvency of the States, both nationally and internationally. But once internal obstacles are removed, especially structural obstacles, telecommunications will substantially increase the sector's self-financing capacity and, if suitably managed, will create a favourable climate with regard to eligibility for externally financed projects. Setting up a common infrastructure/common support system 259. One of the options for setting up a pan-African telecommunications infrastructure lies in the implementation of the RASCOM project, in its final version. Initially, the only space resources of this recently-created organization will be shared transponders. Difficulties must not be allowed to hamper the introduction of an African satellite communications network. Naturally, the implementation of the PANAFTEL network should go ahead as planned. The main purpose of RASCOM shall be the design, development, construction, procurement, establishment, operation and maintenance of the space segment of the Regional African telecommunications satellite system. In this context, RASCOM has as its prime objective the provision, on a commercial basis, of the space segment required for national and international public telecommunication services and, in accordance with the appropriate modalities and conditions for the requirements of specialised telecommunication services. Service interconnectivity 260. Given the present development of national networks and related services, services interconnectivity on a pan-African scale is a long-term objective. There must be regional intercompatibility and interworking of the services provided by public network operators if services are to be provided freely in an African economic area; these factors therefore affect the extent to which the region's national economies can be integrated. 261. Services interconnectivity presupposes the definition and adoption of common service and interconnecting standards for the network's infrastructures. Meanwhile, an agreed or at least a common approach should be adopted for the introduction and use of certain new services for which individual countries have already made choices, for example: 262. As a result of improved technology, the digital cellular radio telephone, which is currently being developed worldwide, will soon replace the analogue mobile telephone. Harmonization here will involve reaching agreement on a cellular network architecture which will enable any user of the service visiting the region to use his own portable set. 263. Following the proliferation of cellular technologies and equipments, satellite-based or land-based, the countries in the region should seriously study the best way to introduce them in their networks taking into consideration the indispensable need for compatibility between the networks of the various countries notably that of roaming. Harmonization of network development norms/standards 264. A pan-African telecommunications infrastructure of real benefit to the continent's integrated development can only be built on the basis of equipment and services norms/standards that are accepted by all parties. These common standards are a precondition for the setting up of an equipment manufacturing industry within the telecommunication sector; this will make the region a homogeneous market whose needs can be taken into account at the manufacturing stage by present and potential equipment suppliers. 265. The standardization process is nevertheless long and complicated, involving considerable human and material resources. It also takes time to establish telecommunication standards at the international level, and this increases the determination of regional standardization organizations to work closely with the ITU which has just adopted the structural measures required for it to continue to play its leading role. 266. In view of the above, the establishment of a regional standardization structure is not a matter of urgency in the medium term. However, each country should have a body responsible for drawing up the technical specifications of equipment to be purchased. Such specifications should be based on international norms and initially should be harmonized at the regional level without an organization specifically established for the purpose. Industrialization policy 267. It would be unrealistic to imagine an integrated, balanced African telecommunications network without the necessary tools to go with it, i.e. manufacturing units for equipment suited to the region's environment and development rhythm. As "The Missing Link" stresses, "where information flows so does commerce". There is no doubt as to the importance of telecommunications for the future African economic community and the need to take whatever action is required, particularly action to obtain at least partial control over equipment supplies. Industrialization of the telecommunication sector is subject to specific constraints related to the development and specifications of the equipment to be manufactured which has to be designed so as to fit in smoothly as an integral part of a working telecommunications network. 268. Industrialization of the telecommunication sector should be a process whose first phase aims at setting up by the year 2010 two or three assembly plants for the whole region, in the following fields: - terminal equipment, including telephone sets; - telephone and electric cables manufactured by common production facilities inorder to reach a critical volume so as ensure a proper return on investment; - digital switching equipment, providing there is sufficient demand. The objective set by the second UN Transport and Communications Decade in Africa is to increase current telephone facilities by 4.2 million lines; however, even though this figure is realistic when viewed in light of the first Decade's results, it is below actual requirements and could be increased if a regional assembly unit existed. 269. This kind of industrialization can only come from private sector initiative; and it is vital that States should create a legal and fiscal framework favourable to such an undertaking. The question could even be discussed with the region's main creditors, who could then consider how much interest such a project might attract and, consequently, to what extent to which it could be included in solutions aimed at solving the private debt problem. The establishment of RASCOM will create new opportunities in industrial development and manufacturing of earth station equipment. _______________ RECOMMENDATION 7.1 - Development of the network The Green Paper recommends that a plan for the economical digitization of the telecommunication network should be drawn up within a reasonable time limit, bearing in mind the imperative need to interconnect networks at the subregional and regional levels. The implementation scenario for such a plan will depend on the particular configuration of each network. RECOMMENDATION 7.2 - Offer of services in rural areas The Green Paper recommends that efforts to increase the penetration rate of telecommunication services in rural areas should be continued using modern techniques, including radio systems and the various technical possibilities offered by telecommunication satellites. RECOMMENDATION 7.3 - Economical maintenance of the network The Green Paper recommends that programmes for network extension and renewal should provide for the repair of existing installations while ensuring that future equipment can be properly maintained. RECOMMENDATION 7.4 - Service interconnectivity Prior to the introduction of new services, States should agree on the technical standards to be adopted in order to facilitate, in the long term, the interconnectivity of services in the region. It is particularly important, at this point, to adopt compatible architectures and norms with respect to digital cellular telephony, so that eventually all users moving within the region will be able to use the same type of portable telephone set. RECOMMENDATION 7.5 - Industrialization The Green Paper recommends that the studies currently under way with a view to providing Africa with a telecommunication industry, a prerequisite for minimizing the influence of external factors on network development policy, should be continued. In this connection, States should create the kind of legal and regulatory environment which would arouse private sector interest in such an undertaking. RECOMMENDATION 7.6 - Determination of tariff levels and structures It is suggested that a study group should be set up at the national level to examine the question of tariffs for telecommunication products and to provide all the technical elements required to determine tariff structures and levels. _______________ CHAPTER VIII. - REGIONAL AND INTERNATIONAL COOPERATION 270. More than in any other sector, cooperation in the telecommunication sector is both an obligation and a need irrespective of the level of development of the parties concerned. As the representative of the Economic Commission for Africa (ECA) rightly stated at the World Telecommunication Development Conference held from 27 to 30 May 1985 at Arusha, Tanzania, it is essential for the countries of the African Region to realize the similarity of their objectives and the complementarity of their needs, to combine their resources in order to obtain better results and, collectively, to take maximum advantage of the region's resources. Cooperation structures and frameworks exist at both the regional and international levels and the problem is rather one of managing those structures rationally. It should be stressed, however, that regardless of circumstances, cooperation will only benefit the region if it comes as a back-up to local and regional initiatives, failing which it will provide merely a varnish that is vulnerable to the first bad weather. Organizing regional cooperation in a simpler and more efficient manner 271. Africa has a multitude of organizations concerned exclusively or partially with the telecommunication sector (AMU, ECCAS, UDEAC, WAEC, ECOWAS, SATCC, PTA, OAU, ECA, PATU, CAPTAC, UAPT, etc.). Some countries thus contribute directly or indirectly to at least a dozen such bodies but, regrettably, they do not seem to draw the full benefits that such profusion suggests. In practice many of these bodies suffer from major shortcomings as to the precise definition of their mission and the means at their disposal. 272. Clearly it would be advantageous to reduce the number of telecommunication development organizations in which a country is expected to play an active part. An idea might be to counter the trend towards creating bodies with permanent headquarters and staff, and even consider closing some which are chronically deprived of financial, material and human resources. The African countries should take into account and follow closely recent developments within the International Telecommunication Union (including the institutionalization of a four-yearly cycle of regional telecommunication development conferences and the creation of a regional office for Africa) and take full advantage of those instruments to which they contribute financially and intellectually. 273. Consideration should also be given to solutions which are more flexible than bodies with permanent headquarters, such as subregional conferences, and to purpose-built and time-limited committees to which adequate operating resources could be provided on an ad hoc basis. Despite the disproportions between the results obtained and the means applied, intraregional cooperation is a necessity for all; in particular it remains the only mechanism likely to create a homogeneous area of an economically attractive size for the imported or locally manufactured telecommunications equipment market. Issues to be tackled within the framework of regional cooperation 274. The limited size of national markets and the shortage of all types of resources should encourage African countries to seek ways of pooling skills and technological facilities in different fields. Since the needs to be met in this way are both numerous and varied, priorities should be defined in concert, preferably at the subregional level, if only between two neighbouring countries. The following activities are mentioned by way of example: - the preparation of model laws, regulations, contracts and service agreements to accompany the restructuring effort in progress; - the granting of franchises and licenses and the conclusion of joint ventures with private companies on a subregional basis; - elaboration of a mandatory legal instrument relating to the decisions taken by governments with a view to interconnecting networks ahead of the future African economic community; - setting up of a mechanism for exchanging all manner of information relating to the planning, implementation and operation of national networks and to fields in which each country has resources that can be made available to others; - introduction at the regional level of a technical research unit responsible inter alia for technically paving the way for regional equipment manufacturing and assembly units and providing the focal point for the transfer of technology (know-why and know-how); - creating and running joint manpower development facilities and programmes; - planning of certain portions of the network on a subregional basis and joint negotiation of the necessary financing, particularly, cross-border links; - tariff development and harmonization; - the common purchase of certain equipment with a view to securing price reductions, sharing the cost of procurement services and certain related costs such as training in operation and maintenance, and above all to obtaining, through volume, equipment that is better geared to the special needs of the countries; - purchase and use of digital synchronization equipment; - creation and startup of subregional maintenance centres; - adoption of modern telecommunication network management systems that are compatible or even common (human resources, marketing, technical specifications, traffic routing, computerization system, etc.) with a view to facilitating performance comparisons and, through emulation, to encouraging a permanent drive for improved productivity within each country; - codification of regional expert recruitment and employment conditions within the region and as part of operations for which the beneficiary country has no skills of its own. 275. Cooperation should also make appropriate technical tools available to States engaged in international negotiations concerning telecommunications and related fields, e.g. the GATT negotiations and those of the African, Caribbean and Pacific countries (ACP) with the European Union. Moreover, given the phenomenon of globalized telecommunication service supplies at a time when industrialized countries' operators are seeking to build alliances to meet the needs of agencies operating on the international market, cooperation between African countries would enable them to present a common front to the major world operators. If properly thought out and implemented, regional cooperation in the telecommunication sector could well lead to some integration of the more highly performing national networks and thus foreshadow the economic and political integration to which the peoples of Africa aspire. International cooperation 276. The African Region, particularly the part lying south of the Sahara, has attracted much international attention but its often passive role has meant that its own priorities sometimes have been overlooked. This explains somewhat the poor results achieved to date. Opportunities abound in the telecommunications field but for want of suitable institutional leadership at the national and regional levels, plus political commitment and will, the countries, individually and collectively, are in danger of paying a high price in future for their lack of effective participation in building a new world shaped by telecommunications, a world in which cooperation will be as important as competitivity. Every country of the region is a member of at least six organizations in which telecommunications are either the main or a related activity. This multiplicity of structures for cooperation and even aid to telecommunications development admittedly bears witness to the importance of the sector, but it leads to a waste of energy and means whenever action taken here or there with the same aim and for the same beneficiary is not coordinated. 277. If it is to take proper advantage of international cooperation in the telecommunication sector, Africa must: - readapt its national, subregional and regional cooperation instruments; - in cooperation with the international agencies (the IBRD, IMF, ITU, ECA, UNDP, etc.) to devise and codify a mechanism for coordinating their different inputs to telecommunications development in Africa, having regard to the role of the ITU as the United Nations specialized agency for the sector; - create at the national, subregional and regional levels an environment favourable to the transfer of the different flows which foster cooperation, yet without losing its own identity; - follow the example of countries which have similar conditions but have done better in the telecommunications field. Least developed countries in the region 278. The least developed countries (LDCs) form a group classified by the United Nations as meeting a set of criteria adopted by the Development Planning Committee of the Economic and Social Council. When the list was first drawn up in 1971 there were 19 LDCs; by 1995 they numbered 48, 33 of which are in the African Continent. Some LDCs have telecommunication networks that are better developed and managed than those of certain non-LDC countries of the region. 279. At present and given the urgent challenges for all concerned, it would not be wise to undertake specific action on behalf of the LDCs within the framework of intraregional cooperation. On the other hand, Africa must bring its full weight to bear internationally so as to ensure the implementation of programmes on behalf of the LDCs, such as that prepared at the United Nations conference held in Paris in September 1990. Similarly, efforts should be made to ensure that all the measures taken by the ITU decision-making authorities on behalf of the LDCs are implemented, for unless energetic measures are taken the number of LDCs in Africa will go on increasing (see item 1 of Annex 1). _______________ RECOMMENDATION 8.1 - Efficient cooperation The Green Paper recommends that a thorough examination should be conducted of the mandates and operating structures of the subregional and regional organizations in the telecommunication sector, eliminating, where appropriate, any duplication of work and, if necessary, reducing the number of such organizations. RECOMMENDATION 8.2 - Deriving maximum benefit from cooperation The Green Paper recommends that a strategy should be drawn up for cooperation with the other international organizations involved in the development of telecommunications in Africa, ensuring that all action undertaken is directed towards the same objective and carried out at optimum cost. RECOMMENDATION 8.3 - Use of endogenous human resources The Green Paper recommends that cooperation among developing countries be stepped up in this domain and that periodic evaluations be conducted of such cooperation with a view to improving its cost-effectiveness. _______________ 1 Organizational structure for telecommunications, Telecommunication Journal, Vol. 49, VIII/1982, pp. 481-487. iii iv - - African Green Paper -November 1995 African Green Paper - November 1995 - 26 - African Green Paper - November 1995