ITU case study on Internet diffusion in Ethiopia

The Federal Democratic Republic of Ethiopia is one of the oldest countries in Africa. In 2001, the country had some 343 000 fixed lines in service, and teledensity reached 0.54 per cent. The following is a summary based on the field research and case study (see www.itu.int/osg/spu/casestudies ) carried out by ITU and the Commonwealth Telecommunications Organisation in March 2002.

ETC — still a monopoly

In the wake of market reforms to develop a more efficient and reliable telecommunication service, the Government of Ethiopia created the Ethiopian Telecommunications Agency as an independent national regulatory authority in 1996. Yet, all telecommunication services (fixed, mobile and Internet) are still under the monopoly of the incumbent operator, the Ethiopian Telecommunications Corporation (ETC).

The Government’s plans are still on course to partially privatize ETC to allow the participation of a strategic investor. This should bring new funding and new management techniques and skills to ETC.

Poor infrastructure, limited services and unsatisfied demand

With a national switching capacity of 550 000 lines, of which only 61 per cent are in use, the growing demand for telecommunication services is not being met: the fixed-line waiting list stood at 153 000 in February 2002, or an average waiting time of around eight years.

Mobile services are not faring well either, despite growing demand — the waiting list is over 40 000 and there are no plans to allow another operator onto the market in the near future. Ethiopia has some 28 000 mobile subscribers. New subscriptions were suspended in 2001, two years after the launch of the service, when the maximum capacity of the system was attained. Only basic voice tele-communications are provided (with no international roaming), and are relatively affordable. A mobile-to-mobile call costs ETB 0.75 (around one third of a US cent) a minute. But this is failing to generate revenue to expand the network.

Internet policy

Ethiopia had full Internet access in 1997, when ETC started providing Internet services using a 256 kbit/s international satellite link. Today, a 2-Mbit/s symmetric international link is provided by France Telecom. The number of Internet subscribers reached 6000 in 2001, for a total of 30 000 estimated Internet users, the large majority of whom are located in the capital city, Addis Ababa. The average cost of Internet dial-up services is heavily influenced by the high subscription fees charged by ETC. A basic private subscription with 8 hours of access costs USD 19, and USD 4 for each extra hour. Telephone charges however, are not particularly burdensome, with the standard local tariff applied throughout the country.

Conclusion

Aside from Ethiopia’s low level of economic development, Internet diffusion has been constrained by ETC’s monopoly and the lack of a clear policy on value-added services such as Web design, site hosting or cybercafés. The institution of a regulatory authority and the plan to partially privatize ETC are important steps towards an open market. However, care should be taken to avoid a simple shift from a public monopoly to a private one, which can become even more difficult to control — especially if backed by a large foreign partner.

The licensing of new mobile operators, Internet service providers, cybercafés and call centres would provide impetus for the provision of much-needed value-added services. This would go some way towards demonstrating the market benefits of liberalization, and the improvements this will bring for users.