Liberalization of the telecommunications sector is progressing across Africa. One of the most important benefits of this trend is that it will make value-added services, particularly Internet access, more affordable and reliable for telecommunications users in the continent.

The Internet need not be a useful tool only for industrial societies. The poor in many African countries, struggling to meet basic needs, often remain poor not only because they are denied access to physical and human capital, but also because they lack the information necessary to best convert that capital into wealth. By opening wide the door to a huge store of global knowledge, the Internet offers untapped possibilities to address the blight of information poverty. This Toolkit is inspired by the African experience where access to the World Wide Web is helping doctors to save patients, schools to educate children, and communities to create businesses that will lift them out of destitution.

Today there is growing exposure to the Internet in Africa. Over the last three years, the number of Internet host sites, excluding the developed market of South Africa, has risen twenty-fold. However, there are still many hurdles to a comprehensive coverage of African nations. Issues that require urgent deliberation include pricing structures, monopoly controls and licensing charges. Often these are a result of state policies restricted by a short-term view of the economy and its future, or by concerns over the immediate effect of the Internet on telephone company revenues.

This Toolkit closely examines these issues. It finds that, in the long term, the Internet cannot be looked upon as a threat to telecommunications companies. It is true that it is one of a range of technological advances that are forcing changes in the the operation of telecommunications systems, but it also presents opportunities for new sources of revenues and new ways to meet the demands of society. The Internet has become a tool for development, with its ability to facilitate the delivery of social services, disaster mitigation, and poverty relief. The Toolkit also finds that the move toward liberalization is likely to have a beneficial effect on Internet roll out, just as it has on basic service provision.

---

Introduction

As the old telecommunications regime crumbles around the world and a new one emerges, Africa has an unprecedented opportunity to vastly improve its information technology and communication infrastructure. African nations, however, must act quickly to gain access and contribute to the world's knowledge base, communicate with global neighbors, and fully participate in the development of a global information society.

The Internet represents a technology that encapsulates much of the promise of this information revolution. This toolkit aims to assist African policy and decision makers to better understand how the Internet is different, its costs and benefits, and policy issues that surround this new technology.

Despite the low level of telecommunications development in the African continent, the Internet has expanded relatively rapidly over the past few years. Private, nonprofit, and public sector Internet service providers have sprung up to help exploit the opportunities presented by this new technology. At the time this report was written, 42 of the 54 nations in Africa had live public access to the Internet in the capital city, while eight had countrywide local dial-up access. These were Burkina Faso, Malawi, Mali, Mauritius, Morocco, Senegal, Chad, and Zimbabwe. Competition (where allowed) can be fierce, and the price for "all you can eat" web access dropped below US$30 I month for some countries in the region. In Mozambique, one of the least developed nations of the continent, it is possible to make a telephone call over the Internet today. Largely because of the efforts of private operators, the number of host sites in African countries has increased from 290 in five countries in 1995 to 6,510 in 32 countries in 1998. These figures exclude South Africa, which alone has 129,000 sites. However, the Internet has been growing so rapidly worldwide (at a rate of 12 percent a month), that Africa's share of host sites has been falling over the last year. Africa's share of Internet host sites worldwide was a mere 0.025 percent in 1997, and fell to 0.022 percent by the beginning of 1998. Excluding South Africa, the entire continent with its population of well over 650 million has about as many Internet sites as Croatia with its population of five million.Twenty-two countries across the world, with populations of over one million, have no Internet host sites at all. Of these, 16 are African: Zaire, Chad, Somalia, Sierra Leone, Sudan, Rwanda, Malawi, Mauritania, Mali, Lesotho, Guinea, Gambia, Eritrea, Congo, the Central African Republic, and Burundi. In fact, outside South Africa, only one out of every 5000 Africans have access to the Internet.

Infrastructure and development

Further growth of the Internet in Africa is closely tied to the quality and availability of telecommunications infrastructure in this vast continent. A major component in this process is the liberalization of the sector and private sector investment. In sub-Saharan Africa, change is already underway; 25 countries have begun reform programs in telecommunications. However, how much these reforms will immediately impact the growth of the Internet is yet to be gauged.

The Internet places large demands on infrastructure with its requirements of high quality and high speed connections. Service providers need cheap and reliable access to international communications lines to link with the web, as well as equally reliable local access for their customers. This need for high bandwidth infrastructure creates serious pressures on the less developed telecommunications networks of the world. This is certainly true of most African nations, which have only two percent of the world's telephones to offer to 12 percent of the world's population.

While there are very advanced networks in some African countries like Rwanda and Botswana, others, like Madagascar and Uganda have unreliable analog systems. The proportion of digital lines on the continent is 56 percent as compared to a global low income average of 90 percent. Advanced technologies such as ISDN, mobile telephony and leased lines are still not fully developed in most African countries. Despite this, Africa has a great opportunity to leapfrog such constraints by using cheaper technology such as wireless local loop, low earth orbiting satellites, and the ability to send data over the electricity grid.

Cost structure and development

Another, no less serious, challenge to the development of the Internet in Africa is the existing cost structure for access to the network. At the moment telephone charges represent an insignificant cost for those who have local access to an ISP used only for electronic mail. For any user accessing the World Wide Web, and for email users accessing the Internet from outside a local dialling area, telephone charges become very significant. For instance, the percentage of costs for local Internet access that go toward telephone charges and ISP charges is 58 percent of the total user cost. For a user who accesses an ISP from outside a local calling area, telephone and ISP charges skyrocket to 86 percent of total user cost. Furthermore, Internet Service Providers (ISPs) pay a large percentage of their costs for connectivity: 48 percent of ISP costs are accounted for by Internet backbone connection and international leased line costs.

While the Internet is threatened by inefficient telecommunications infrastructure, unreformed African telecommunication companies in turn feel threatened by the impact that the Internet might have on their revenue stream.

In fact, while the Internet is likely to divert traffic from high revenue-generating international voice communications and adversely affect the profits of African telephone companies over the short term, the relative impact of the Internet on revenue is not significant. In markets that have not yet seen any reform, and where there is greater dependence on overpriced international call charges, the Internet is likely to be utilized to bypass these costs. However, the Internet is only one of a number of forces that will have an impact on telecommunications companies in the region. There are many others,such as international pressures on regulating accounting rates charges, and the growing presence of callback technology. Even countries with advanced Internet provision are probably experiencing only about one percent of revenue reduction directly resulting from email substitution. U.S. accounting rates settlement payments to African countries are significantly larger - 2.4 percent of Mozambique's revenues, for instance, or 14.3 percent of Ghana's. Furthermore, while in the longer term, Internet telephony probably represents the larger Internet-based threat to telecommunications company revenue, at the moment the level of capacity in most African countries is insufficient to support this technology.

To be genuinely competitive in the global marketplace, African telecommunications companies need to rapidly integrate the changes that are reshaping telecommunications across the world, and transforming it into a commodity business. By embracing Internet technology and expanding the number of users who can access the network, these companies have a considerable amount more to gain in the long run. At the same time, the growth of the Internet offers new opportunities for businesses and communities on the continent.

The Internet is good business

Models presented in this toolkit suggest that expansion of the Internet in Africa can provide opportunities for significant reduction in the communications cost of a wide range of African telecommunications users. These savings would come almost exclusively from international calls. There are two reasons for this conclusion. First, at the moment, 80 to 90 percent of email are sent to and received from outside of the continent. Second, international calls from and to the continent attract revenues far in excess of the costs of completing the call.

Ironically, given the pressures on rate rebalancing which are unconnected with the Internet, it is likely that emailing will become relatively less attractive as a substitute for voice or fax as international call costs drop and local call costs increase. At the moment, however, Internet access is a profitable investment, purely from the point of view of direct savings on communications for companies that do a lot of international business. Talking to the United Kingdom for about an hour each business day over the period of a year would cost a Mozambican businessman approximately US$38,250. Faxing that same information would cost US$7,650. All of the yearly costs of a regional Internet connection - a computer, a modem, and Internet access - used for international email alone as a substitute for fax traffic, would together amount to US$1,328. The yearly savings over fax use would thus be US$6,322.

Policy conclusions

The Internet is likely to continue to revolutionize the means in which people communicate and access information. Because the Internet represents such a powerful new communication tool, the environment in which it operates must be regulated differently from traditional information and communication media. The toolkit stresses three general principles: the importance of not trying to fit the Internet into existing regulatory structures, the power of competition on Internet growth, and the necessity of allowing the Internet to flourish without the burden of unnecessary regulation. The models and data presented in the toolkit suggest a number of policy conclusions. To expand access and use of the Internet in Africa, it is necessary to provide the following:

• Low cost and reliable access to international bandwidth.

• Low cost and reliable local bandwidth connectivity.

• Countrywide reliable local cost access to ISPs.

• Low cost access to network equipment.

• Widespread public access to networked computers.

• An educated and trained user and provider base.

• Support for the development of national and African Internet content.

The policies that may help to meet these needs are:

• Liberalization of the telecommunications network.

• Liberalization of Internet service provision.

• Lowering of tariffs on computer and telecommunications equipment.

• General tariff rebalancing with possible support for local cost ISP access.

• Support for community access to the Internet.

• Support for training in the use of the Internet.

• Support for local content development.

• An Africa-wide backbone.

The Internet represents a new opportunity for increased knowledge and information for development. In the long term, it will significantly alter the structure of telecommunications. In the short term, the main policy conclusions from this toolkit are not very different from those of studies that concentrate on telecommunications in general. The Internet is heavily dependent on an efficient telecommunications sector, which is usually market-based. The Internet is itself another pressure acting toward the market option of further competition and liberalization. However, while the market forces will expand access to a section of the population, there will still remain a role for government to reach the poorest.

---

The Toolkit is part of a collaborative effort on expanding Internet access in Africa that began in 1995 with the creation of the Africa Internet Forum (AIF). This is a group of donors, users and other interested organizations including the UNDP, UNITAR, USAID, CIDA, NASA, the Carnegie Corporation and the African Networking Initiative - which itself includes groups such as the IDRC, ITU, ECA and UNESCO.

The Toolkit is intended to be used in policy dialogues and country assessments, broadly to facilitate the involvement of the private sector in Internet provision, and specifically to help policy makers shape their attitudes toward this exciting and expanding sector of the telecommunications business.