Balancing Act (London)

27 June 2014

Africa's Untold Universal Service Agency Story - Reaching the Parts Others Don't Reach

analysis

London — Issue no 712 27th June 2014

In the main, Africa's Universal Service Agencies have not covered themselves in glory. Although money has been collected from operators it has largely sat in the bank gathering interest.

This week at the Intel Africa Broadband and USF Leaders Forum in Cape Town we caught up with two of these agencies that are getting things done: Nthabiseng Pule, Executive Secretary of Lesotho's Universal Service Agency and Philip Prempeh, Business Development Manager, Ghana Investment Fund for Electronic Communications (GIFEC).

Even in countries like Kenya that have expended large amounts of energy and resources on putting in place broadband infrastructure, the roll-out to those citizens who are not in the addressable market seems to be missing. Kenya is only just about to launch its universal service agency.

Even when they have been operational, Universal Service Agencies have seemed to lack the clout to make things happen quickly. One agency at the Intel Summit said it had difficulty co-ordinating its efforts with the rural electrification body. Without electricity and roads, the costs of remote roll-out are so much higher.

But there are a handful of African Universal Service Agencies that seem to have got about their task with energy and are spending their annual budget effectively. We've chosen two of these - Lesotho and Ghana - to illustrate what can be done.

Lesotho's Universal Service Agency gets its income from a 1% levy on operators and a minimum 25% of the revenues that its parent body - Lesotho Communications Authority - raises. It spends 100% of the US$1.1-1.2 million it raises in this way. Started in 2009, its programme of work has thus far focused on mobile network coverage expansion, setting up an IXP and the registry for the national .ls domain.

Since 2009, it has rolled out 20 base stations in remote rural areas where neither of the two existing mobile operators wanted to go. These projects have benefited at least 63,400 people in some 320 villages in the rural areas of the country. In 2013/2014, its 61 projects benefitted 5,476 people.

These are mountainous places without roads or electricity. So to facilitate the process the agency spends between 20-25% of its budget on road and electricity infrastructure. The latter is mainly solar panels but they prefer to do grid connections. Solar panels are all too often stolen by residents.

80% of these base stations are now profitable on an OPEX basis after the capital investment has been made:"Some are better than others. The programme is mainly voice but some have 3G connnections." It has profiled more villages for coverage and anticipates that some of these will also be profitable on an OPEX basis.

In 2013/14, the agency added an emphasis on broadband Internet and has 13 projects to connect schools in a project carried out with the ITU costing US$855,000, completed in partnership with the two mobile operators. This same year Pule says that:" The Fund faced the challenge of there being a higher demand for service in un-served areas than there were funds for projects. As a result, six projects for mobile network expansion had to be deferred to 2014/15".

Ghana's Universal Service Agency (GIFEC) was established in 2004 but did not get its legal framework until 2008 when the Communications Act was passed. It collects 1% of the net revenues from the telcos, giving it US$67 million a year to spend. It has 4 programme areas: Cyberlabs; basic telephony access; ICT for livelihoods and an ICT awareness programme.

There are a total of 10 projects under all these programmes. The Cyber Labs include city information centres, 440 schools, 30 libraries and interestingly 12 prisons, with the service aimed at inmates.

The basic telephone programme rolls out mobile voice coverage to very remote areas. It uses three independent service providers - K-Net, Mer Telecom and Rom Telecom - and the base stations put in place can be used by all operators. There are almost 40 BTS in the remote areas of Western Ghana and Volta. They provide both voice and data, the latter being a free service. Only 2 out of the 20 are not making money on an OPEX basis after the CAPEX subsidy.

The agency is currently debating its next long-term plan and the discussion is currently between the idea of setting up an independent rural network that can be used to connect all areas of this kind and outsourcing. As Prempeh noted:"As most mobile companies are selling their towers, we may have to look for a tower company to arrange it."

The challenge of satellite costs (which are typically 60% of a remote base station's OPEX) are on the radar:"These base stations can only be done by satellite. We want the regulator to give an undertaking on quality of service. Satellite costs are coming down and are now about half of the original quotes we had."

Two things stand out from these examples. Firstly, agencies need to tackle the roads and electricity part of the project. Secondly, many of the mobile phone coverage projects sit in the area between addressable markets and non-market areas. Many are profitable after the CAPEX has been written off through subsidy.

The challenge for Governments and regulators in many African countries is to get in place an effective body to address these Universal Service issues. And perhaps the time has come to absolve the mobile operators of their original licence obligations to go to these areas and to allow independent operators (as in Ghana) to do the infrastructure provision.

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