W Africa to lead way in legalising VOIP

Johannesburg, 29 Jul 2004

Although voice over IP (VOIP) has been illegal in most African nations, the authors of a new report suggest that a new breed of telecoms regulators, most likely arising in West Africa, will soon open up its use.

In the report published by UK-based consulting firm Balancing Act, the state of the Internet in 22 West African countries was studied in detail.

The region the report focuses on has particularly large VOIP grey markets and the incumbent operators in two of the larger markets - Nigeria and Ghana - have put numbers on its size.

Rein Zwolsman, CEO of Nigeria`s Nitel, claims that before his company put in place cuts in international calling rates, 90% of international calls were made via the grey market.

"In 2003, the value of the grey market in Ghana was somewhere between $15 million and $25 million a year, although these are ballpark figures. It depends on the rates you apply and the volumes," says Oystein Bjorge, CEO of Ghana Telecom.

In other African countries, the grey market is estimated to be somewhere between 10% and 20% of the overall market.

Russell Southwood, one of the authors of the report, believes the large difference between the prices charged by the incumbent monopolies and the far cheaper cost at which they buy that call on the international market has stimulated the grey market.

"Grey markets in international VOIP calling have grown up almost everywhere in Africa, because operators in this market - such as ISPs and cyber-cafes - can offer the calls more cheaply and still make a profit."

He says liberalisation has already come to seven out of the 22 countries in West Africa covered in the report and the majority will follow in the next three years.

"Without the need to protect the incumbent telephone company, VOIP can be seen as a technology for gaining competitive advantage in liberalised national and international markets," says Southwood.

Holding SA back

It is such protective legislation that is holding SA back, according to both the International Telecommunications Users Group (INTUG) and its local affiliate, the Communications Users Association of SA (CUASA).

"One of the easiest ways to bring telecoms to a broad base of people is through IP telephony, but SA has strict laws surrounding VOIP, so legislation is denying the people an opportunity to gain access to communications," says Ewan Sutherland, executive director of INTUG.

"The only obvious reason for the current regulation of VOIP is as a means of protecting Telkom, but with Telkom`s profits the way they are, I really don`t think they need any protection from government."

CUASA has long made the point that the restrictions on VOIP are holding the country back and the Telecommunications Act is long overdue for on update.

"We have said this same thing so often that we`re almost getting tired of constantly repeating ourselves," says CUASA spokesman, Ray Webber.

"We definitely need a more open approach to technology if we don`t want to find ourselves losing out to other African nations."

He says that at present, all that is holding back the unlimited provision of VOIP services in SA is the public announcement of a date, at the discretion of the minister of communications, from which VOIP will be legal.

Legal boost

The Balancing Act report gives several reasons as to why West Africa is more likely to be legalised quickly.

Several of the incumbent telcos have already made 'under-the-counter` deals to allow companies to operate, such as Mali`s Sotelma, which has signed VOIP agreements with four local companies, effectively making them retail VOIP sellers, using Sotelma for their bandwidth at an agreed rate.

The CEO of the Nigerian Communications Commission, Ernest Ndukwe, has also adopted a progressive stance on the issue, saying it is not about trying to make a technology illegal, as regulation should be "technology-neutral".

"If people want to offer services (VOIP or otherwise) then they must obtain a licence, and if they want to offer international VOIP calling, then they will have to connect to the backbone of Nitel or the second operator, Globacom," says Ndukwe.

For these reasons, Balancing Act has concluded that VOIP will be legalised first on the African mainland (it is already legal in Mauritius) in West Africa and when it is, both the Internet and telecom industries will change considerably in its wake.