~ Archive for EASSy ~

OPEN ACCESS EASSy

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In late 2004, I was admitted to the Digital Vision Program @ Stanford University and around the same time invited by the WorldBank through its Information for Development Programme (infoDev @ www.infodev.org) to join other colleagues to conduct a study “Leveraging New Technologies and Open Access Models: Options for Improving Backbone Access in Developing Countries (with a Focus on Sub-Saharan Africa)” . The study was done under the auspices of Spintrack AB @ http://www.infodev.org/en/Document.10.as….

Recent experiences in a number of countries with “open access” models for the financing and ownership of backbone telecommunications infrastructure offer interesting insights into how new technologies, including the migration to Internet Protocol (IP) based networks, make possible new technical and business models for financing this infrastructure buildout. Africa can learn from these experiences and adapt. In this paper, I look at Open Access in relation to the East African Submarine System, known by the acronymn EASSy (see http:// www.eassy.org). In the wake of the fallout in moving this project forward, I build grounds for commonality, charting the path for re-engagement by the various constituencies.

Open Access in the context of communication (Open Communication) means that anyone, on equal conditions with a transparent relation between cost and pricing, can get access to and share communication resources on one level to provide value added services on another level in a layered communication system architecture.

The concept of Open Access to communication resources is central in the ongoing transformation of the communication market from a “vertically integrated” market with a few operators owning and operating everything between the physical medium and the end-user, to an “open horizontal market” with an abundance of actors operating on different levels and providing value added services on top of each other. Put plainly, anyone can connect to anyone in a technology-neutral framework that encourages innovative, low-cost delivery to users. It encourages market entry from smaller, local companies and seeks to ensure that no one entity can take a position of dominant market power. It requires transparency to ensure fair-trading within and between the layers based on clear, comparative information on market prices and services. It seeks to build on the characteristics of the IP network to allow devolved local solutions rather than centralized ones.

Open Access is also about broad approach to policy and regulatory issues that starts from the question: what do we want to bring about outside of purely industry sector concerns? It places an emphasis on: empowering citizens; encouraging local innovation; spurring economic growth and investment; and getting the best from public and private sector contributions. It is not simply about making micro-adjustments to the technical rules of the policy and regulatory framework but seeking to produce fundamental changes in the outcomes that can be delivered through it.

The study published in August 2005, came at an opportune time, in that it helped to inform and shape the international debate and planning for the EASSy project now in the final planning stages. infoDev then provided follow-up support for this dialogue and planning process both by supporting the coordinating role of the NEPAD e-Africa Commission relative to the EASSy project, and by supporting dialogue and joint planning among civil society groups, and other key stakeholders, seeking to promote open access approaches within Africa.

This ensured acceptance of open access by the government, incumbent PTTs, Operators, ISPs, educational institutions, private investors and more generally by civil society. However at the signing of the EASSy protocol, which is the political framework for the build-out, there has been a division among the various constituencies on how Open Access is enshrined in the protocol.

EASSy in adhering to Open Access must align with the structure and principles below;

Within the structural framework, the cable must differentiate “Infrastructure” from “Services” where Infrastructure is seen more in the “Ownership” realm whiles Service is seen in “Access to capacity”.
A set of principle would hold for the ownership of the cable and those principles would be different from those for access to capacity.

The most distinguishing feature of the Open Access approach is that, ownership of the infrastructure DOES NOT GUARANTEE any access (discriminatory or not) to capacity on the value chain for the provision of service to the market.

Infrastructure ownership principles for the cable include;
The ownership of the EASSy cable must be in a public private partnership involving Governments, PTTs, ISPs, Educational Institutions, Civil Society and Consumers.
A fair distribution of these constituencies from the member countries in an equal sub-regional distribution leading up to the Board of Directors of the enterprise.
One set of rules must be established to identify the various shareholders from the various countries in the different constituencies
For the purposes of this exercise a Special Purpose Vehicle (SPV) must be a legal entity with an African wide structure, which must must be majority African owned in order to trade in the various countries.
The SPV must have a public interest combined with a private sector approach in it’s business model in order to ensure a “regulated return on investment” to ensure cheap and affordable bandwidth to the end-user.

Value Chain access to capacity for Service delivery principles for the cable are;
The SPV must sell capacity to all entities who meet the legal and regulatory requirements in each country directly and without discrimination.
Service Providers shall be offered Transport Infrastructure Layer access to different capacities depending on their requirements.
End Users shall be free to choose any local Service Provider connected to the Regional Network.
The SPV shall not compete with Service Providers (its customers) by offering services at the Services Layer directly to End Users.
All countries must create a regulatory structure that recognizes the SPV.
The SPV shall be formed, owned and operated in such a way as to facilitate competition and to foster innovation at the Services Layer, and where practical and commercially viable at all levels, with a view to maximizing usage of the network and benefits to the End Users.

This sets out a framework for Open Access as it applies to the EASSy cable. .

NB: These principles are drawn from the Open Access study conducted by Anders Comstedt, Eric Osiakwan and Russell Southwood for InfoDEV @ the WorldBank – http://www.infodev.org/en/Project.80.htm…

Avoiding an EASSy debt for Africa

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On the 29th of August 2006, seven (7) Southern and Eastern African countries signed the Inter-Governmental Protocol of the Inter-Government Authority (IGA) of the East and Southern African Submarine System (EASSy) which is the governmental framework through the New Partnership for Africa’s Development (NEPAD) within which the cable is going to be owned, built and operated.

The protocol, which is the outcome of an African led consultative process, mandates that the EASSy cable has an African majority ownership. The current proposal for the cable is a combination of debt and equity financing of 70% against 30% for the total cost of three hundred million dollars ($300,000,000). The question must be asked why do we want to saddle Africa with another debt if the business proposition of the cable is viable?

The NEPAD E-Africa Commission, which is facilitating this process with the government’s mandate to have an African majority ownership of the cable based on an Open Access structure, must consider my proposal not to accrue debt for this project because much of the money can be raised through equity and stocks on the continent.

The EASSy Special Purpose Vehicle (SPV) must be owned in a public private partnership with the participation of governments, private sector, educational institutions, network operators, civil society and the consumer.

The EASSy SPV should be listed on the various country stock exchanges so that it works within the stock exchange discipline, which allows it stocks to be traded without burdening the company to make huge profits to pay it shareholders. This approach meets the current “regulated return on investment” clause in the protocol in that the company would not be bent on paying it’s investors huge profits so would price capacity at cost however the investors can trade their stocks in the company on the stock exchanges to make profit based on the performance of the company.

Governments and public institutions must be able to invest public funds, pension funds etc into the EASSy SPV. The stock market would serve as a platform to trade these shares later or an exist strategy to recoup the investment.

For the “indigenous” private enterprises the proposal is to lower the financial uptake for equity from the current one ($1,000,000) to two ($2,000,000) million dollars to between hundreds of thousand of dollars and one million dollars ($1,000,000). This must include not only Eastern and Southern Africa private enterprise.
Educational institutions who consume a lot bandwidth must also be allowed to invest like the UbuntuNet Alliance which has about three million dollars ($3,000,000) for the purposes of participation in the EASSy SPV.

Civil Society and Consumers must be allow to purchase shares or bonds of the EASSy cable on the stock market – hence my proposal is for the various governments to guarantee the Initial Public Offering (IPO) of the EASSy SPV on the various country stock exchanges.

The trading of stocks of the EASSy SPV on the exchanges would seek to rapidly expand the participation of the African people and create the African ownership, which is the flagship of NEPAD.

The process would also generate long-term activities on the exchanges and create a trading post for a critical regional infrastructure company, which would ensure effective and efficient management of the enterprise.

This would also have an impact on the stock markets in that trading of an “unusual” entity would create innovation, ensure that our financial sector is able to re-engineer to scale with development interest – that private interest is at par with development goals to create a win-win situation.

The stock market serves as the platform for trading the stocks of the EASSy SPV so that should the company be doing well then the investors can make money by trading their shares; otherwise the stock market is a good exit strategy for those who want to dispose off their shares if the company does do well in their opinion.

Why should we saddle Africa with an EASSy debt when the viability of the project can guarantee raising equity for it implementation ensuring that an African led process, is African financed without debt?

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