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Pest and Porter's Five Forces Analysis of Barclays Bank

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INTERNATIONAL TELECOMMUNICATION UNION TELECOMMUNICATION DEVELOPMENT BUREAU AFRICA REGIONAL P REPARATORY M EETING FOR THE WORLD TELECOMMUNICATION DEVELOPMENT CONFERENCE (WTDC-02)

Yaoundé (Cameroon), 29-31 May 2001

Document 4-E 4 May 2001 Original: French

REPUBLIC OF CAMEROON TELECOMMUNICATION SECTOR REFORM: CAMEROON'S EXPERIENCE

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CONTENTS Page Introduction............................................................................................................................ A I II 1 2 3 III 1 2 IV V VI 1 2 3 VII 1 2 3 4 B Observations ........................................................................................................... Background ............................................................................................................ A liberal legal framework ...................................................................................... Concessions ............................................................................................................ Authorizations ........................................................................................................ Declarations ........................................................................................................... A revised institut ional framework.......................................................................... The telecommunication administration.................................................................. The Telecommunication Regulatory Agency........................................................ Human resources.................................................................................................... International cooperation ....................................................................................... The current state of the telecommunication industry............................................. Fixed telephony...................................................................................................... The Internet............................................................................................................ Mobile telephony ................................................................................................... The problems .......................................................................................................... Slow adaptation to the new environment ............................................................... Human resources.................................................................................................... Universal service.................................................................................................... Price control........................................................................................................... The outlook ............................................................................................................ 3 3 3 4 4 4 4 5 5 5 6 6 7 7 8 8 8 8 9 9 10 10 11

Conclusion .............................................................................................................................

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Introduction The process of restructuring the telecommunication sector truly got under way in Cameroon in June 1995, when the authorities decided thoroughly to reform network industry sectors such as water, electricity and telecommunications with a view to creating a favourable environment in which to develop their infrastructure and services and thus to satisfy increasingly exigent demand. The process took the form of liberalization, State withdrawal from the sectors concerned and the establishment of a market structure enabling Cameroon to remain in step with the especially rapid global developments in the telecommunication sector; indeed, in spite of the investments made, the coverage rate and quality of service offered had remained largely inadequate. The process was carried out not only by defining the conditions and mechanisms liable to guarantee the sector's opening to private initiative, but also by enacting regulations and taking measures intended to enable the sector to play the decisive role incumbent on it in Cameroon's economic development. Telecommunication sector reform in Cameroon is not limited to the establishment of new regulations and legislation, to the revision of the institutional framework and the establishment of an interconnection regime or to the introduction of competition. It should also comprise bringing behaviour in line with the times. One of our chief concerns is therefore also effective application of the regulations with a view to fulfilling the universal service obligation, ensuring consumer protection and providing for effective and appropriate regulation of true competition. The acquisition of the required know-how is the biggest challenge we face. The institutional players on Cameroon's telecommunications scene are, as in many other African countries, of the opinion that any society that delays in jumping on the NTIC train will remain mired in a state of underdevelopment.

A I

Observations Background

Before 1990, as in most African countries, telecommunication services were managed by a national publicly-owned monopoly. The administration in charge of telecommunications set the rules, ensured they were applied and was itself an operator. The results did not always live up to expectations. In June 1990, the President of the Republic signed the order on the programme to privatize public and semi-public enterprises. The telecommunication sector was added to the programme in June 1995. In July 1998, law 98/014 governing telecommunications in Cameroon (the Telecommunications Act) was promulgated. It established the Telecommunication Regulatory Agency and attributed sector responsibilities to a variety of players: the operation of telecommunication networks to operators, regulatory matters, i.e. application of the rules and supervision of operators, to a regulatory body, the definition of sector policy and the enactment of market regulations to the telecommunication administration. In September of the same year, two public enterprises, CAMTEL for the fixed telephone service and CAMTEL MOBILE for the mobile telephone service, were set up to take over the telecommunication activities of the Ministry of Post and Telecommunications and of the public enterprise INTELCAM, which was in charge of operating and developing international telecommunication installations. The Telecommunication Regulatory Agency was set up at the

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same time. Immediately after, the sale of a mobile telephone licence and the process of privatizing CAMTEL and CAMTEL MOBILE got under way. In June 1999, a mobile telephone licence was granted to a private enterprise. The privatization of CAMTEL MOBILE was completed in February 2000. The privatization of CAMTEL is not yet complete. A third mobile telephone licence is to be issued. In less than two years, the sector has undergone sweeping change. Suffice it to mention one indicator: in January 2000 there was one mobile telephone operator with about 5 000 subscribers; on 31 March 2001 there were two operators with over 140 000 subscribers. This rapid and in-depth transformation is taking place within a constantly improving legal framework.

II

A liberal legal framework

The development of new technologies and liberalization have permitted access to new telecommunication services which, depending on their specific natures, require appropriate regulation. The Telecommunications Act sets forth a new regulatory framework, opening the telecommunication sector to competition. The framework, which distinguishes between public and private networks, provides for three legal arrangements: concessions, authorizations and declarations.

1

Concessions

The State can grant one or several public or private corporate bodies all or part of its rights to establish and/or operate telecommunication networks. The concession is subject to strict compliance with the requirements set forth in a list of terms and conditions. This arrangement allows the State not only to keep a watchful eye on the harmonious development of modern telecommunication infrastructure, but also and above all to heighten its control over the development and supply of the basic services and facilities us ually demanded by the majority of users.

2

Authorizations

The arrangement of prior authorization applies to the establishment and/or operation of telecommunication networks by physical persons or corporate bodies with a view to providing the public with a basic telecommunication service, a value-added service, a bearer service or any other service by using one or several radio frequencies. A list of terms and conditions containing the requirements to be met is attached to the licence issued to the bearer of a prior authorization. The authorization is issued for a fixed period and can be withdrawn under certain circumstances.

3

Declarations

Declarations apply to the establishment of private internal networks, low-range and low-capacity private independent networks (that are not radio networks), low-range and low-capacity radio installations (to be determined by the Administration), and the provision to the public of telecommunication services other than those subject to the arrangements of concession and authorization. Telecommunication terminal equipment is either freely provided or subject to type-approval.

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Certain provisions of the Telecommunications Act are detailed in decrees and implementing legislation. We shall not examine all of them here; indeed, some of them are still being drafted. The reform in Cameroon established the separation between the regulatory and operating functions. It works in favour of operators being entities controlled by private capital. The general framework for competition is governed by legislation on competition. The legal framework is supplemented by institutions.

III 1

A revised institutional framework The telecommunication administration

Spectrum management and the legislation and regulations relating to telecommunications are the exclusive domain of the State. The telecommunication administration has been invested, on behalf of the government, with general jurisdiction over the sector. It sets the general regulatory framework. It therefore establishes and implements telecommunication sector policy, whose aim must be to safeguard the missions of public service, to promote harmonious network development throughout the national territory and effective private sector participation in the sector's wealth and employment-generating activities, and to ensure compliance by all operators with the applicable treaties, laws and regulations. In addition, the administration supervises the telecommunication sector, oversees public telecommunication enterprises, represents the State at international telecommunication-related organizations and events, and manages the radio spectrum on behalf of the State. The Telecommunication Regulatory Agency, which technically answers to the telecommunication administration, is the specialized body in charge of facilitating actual application of the regulations issued.

2

The Telecommunication Regulatory Agency

The organization of the Telecommunication Regulatory Agency established by the Telecommunications Act is set forth in decree No. 98/197 of 8 September 1998. The Agency has three main duties: – to ensure the regulations are implemented; – to guarantee respect for the regulations and the exercise of competition; – to settle certain disputes between operators. The Agency's regulatory authority is subject to performance of the following activities: – definition of the principles governing tariffs for services; – examination of requests for authorization and declaration and of type-approval files for terminal equipment to be connected to public networks; – establishment of principles for calculating interconnection costs; – establishment and management of numbering plans; – management of the frequencies attributed to telecommunications; – submission to the government of proposals aimed at developing and modernizing the sector; – opinions on draft legislative and regulatory texts concerning telecommunications;

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control and penalties for infractions.

The Agency is specifically competent to settle disputes concerning interconnection, access to a public network, numbering, cases of harmful interference, and sharing of infrastructure. The Telecommunications Act provides the Agency with a quasi-judicial body and an arbitration procedure can be set in motion should one or the other of the parties be opposed. The parties remain free to bring their case before the competent court.

IV

Human resources

Human resources are the key to management and progress, for they have knowledge, that rarest of economic commodities in the 21st century. The current transition from a monopoly environment to that of controlled competition has given rise to new demands in terms of basic knowledge and know- how in telecommunication regulation. Telecommunication leaders and staff in Cameroon were still dealing with the transition from analogue to digital when circuit switching was suddenly replaced by packet switching. This recent change has reshaped the concept and definition of telecommunication networks and services. Everything must therefore be done to make sure the human resources acquire the skills they need for their own development and that of companies, which create wealth for the well-being of peoples. The Ecole Nationale Supérieure des Postes et Télécommunications, an independent facility run by the Ministry of Post and Telecommunications, provides basic instruction in telecommunications and ICT to technicians (technical and operating staff), supervising technicians (operating technicians and supervisors) and senior technical managers (works engineers and operating inspectors). It plans to organize standing professional certification for the staff of public and private enterprises and of the public administrations in charge of telecommunications and ICT.

V

International cooperation

Cameroon has always been present and active in regional and international telecommunication organizations. It is a member of the Administrative Councils of both the African Telecommunication Union (ATU) and the International Telecommunication Union (ITU). It has had very few bilateral exchanges of experience and information with other African countries. The ineffectiveness of regional (ATU) and subregional organizations (CAPTAC) has precluded the launch at subregional level of cooperation activities aimed at developing telecommunications in Cameroon. At the international level, ITU has not been closely involved in telecommunication sector reform. In the past eight years, it has provided some technical assistance but otherwise almost no support for telecommunication development projects in Cameroon, possibly because the Area Office in Yaoundé is not functioning. The capacities of the Area Office in Yaoundé should be reinforced. Its main duties should be: – To disseminate ITU documents and information in the area. For this, it should have the means required to provide the documentation centres of the main players in each of the area's countries with the documents and books needed to acquire knowledge in telecommunications and ICT, for most of the sector's African managers will have to teach themselves. In this respect, hard as opposed to electronic copies remain invaluable in Africa.

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To organize training workshops and seminars for the exchange of information on topics of current interest in telecommunications : IP telephony, IMT-2000, tariffs on IP networks, interconnection, etc. To observe telecommunication sector reform: analyses, evaluations and suggestions. Periodic reports should be established by the Area Office, which acts as a reform observatory for the area concerned.

VI

The current state of the telecommunication industry

The world is shrinking as a result of modern means of telecommunication, and competition is gaining a growing foothold. Telecommunications are changing people's daily lives, and Cameroon is determined to keep up. The telecommunication market in Cameroon can be presented as follows: Field Fixed telephony Mobile telephony Internet access providers Internet service providers (ISP) Private installers Traffic termination Paging Trunked systems Space segment access providers Number of operators 1 2 1 49 21 1 1 1 1 MTN CAMTEL Institutional operators CAMTEL SCM, MTN CAMTEL CAMTEL, CENADI

1

Fixed telephony

CAMTEL operates a telephone network made up of trunk infrastructure and transmission links connecting 37 of the country's main towns with automatic exchanges, of over 120 cable networks, about 80 of which are rural networks connecting subscribers to concentrators, and of 45 telephone exchanges, 28 of which use crossbar technology. The transmission links are either analogue or digital (PDH). The network's present capacity is 140 000 subscriber lines, about 98 000 of which are connected to digital exchanges. The total number of subscribers is estimated at about 93 000, for an overall saturation rate of approximately 67%. CAMTEL is also responsible for maintaining radio and television transport links. CAMTEL is currently being privatized; 51% of the company's capital will be held by the private sector. A provisional adjudicator has been appointed. Thanks to privatization, which is imminent, the network can be modernized and the total number of fixed telephone lines increased by about 175 000 in four years.

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2

The Internet

CAMTEL is the only authorized access provider. It presently offers access to 29 Internet service providers. It also provides Internet services via its CAMNET network: 5 000 subscribers have access via the switched telephone network. The CAMNET network consists of two nodes installed in Douala and Yaoundé respectively and of several access points in other towns. Effective implementation of the Telecommunications Act of 14 July 1998 will allow all other access providers to enter the market and will facilitate access by a greater number of Cameroonians to Internet services at a lower cost.

3

Mobile telephony

The mobile telephony market is currently shared by two private operators: SCM and MTN. The MTN network covers Yaoundé, Douala, Edéa, Bafoussam and the towns along the main roads between them, and Buéa, Limbé and Bamenda. On 31 March 2001, the company had about 50 000 subscribers (postpaid and prepaid). SCM's network covers Yaoundé, Douala, Bafoussam and the towns along the main roads between them, and Garoua, Kribi, Meyo-Messala, Foumban, Foumbot, Limbé and Buéa. The operator's point of presence is in Douala. On 31 March 2001, SCM had about 100 000 subscribers (postpaid and prepaid). For both networks the interconnection point to the fixed telephone network is in Douala, at one of CAMTEL's two national transit centres (the other being in Yaoundé).

VII 1

The problems Slow adaptation to the new environment

Until the end of the 1970s, the telephone and telex services provided by the telecommunication administration met user expectations, although they were not always sufficient or adequate. The market was relatively stable. The same administrative entity was in charge of operating and regulating telecommunications. Technological changes, which in the 1980s led to the digitization of telephone networks and to rapid growth in satellite telecommunications in particular and wireless systems in general, opened new perspectives and gave rise to new services and new user needs. Companies and professionals wanted modern, in some cases tailor- made, services, and were no longer satisfied with those offered by a poorly performing administration that was slow to adapt and innovate. That situation lasted into the 1990s. It was in that context that the Telecommunications Act was drafted. It changed everything: numerous private operators offered innovative telecommunication services to companies and professionals. The advent of the Internet did not simplify things, as the users of standard telephone services sought to take advantage of this new service. The growing demand for standard and new services drove supply: service providers set up without autho rization. The Telecommunication Regulatory Agency became operational at the same as certain network operators and/or telecommunication service providers. It had to provide a swift response to the requests and demands of the new environment and solve the problems already emerging. Did it have the necessary resources? Was it properly prepared?

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At the outset, the Agency had only the Telecommunications Act and the decree establishing the interconnection regime to fall back on. No other implementing legislation was ready. In addition, fixed telephone services were provided by a public enterprise that had subordinate regulatory authority in certain fields, namely the establishment of satellite infrastructure/links. To adapt rapidly to the new environment that emerged following the adoption of the Telecommunications Act, the Agency would have had to have at hand not only certain main implementing texts, but also and above all experienced senior managers. This would have enabled the numerous service providers to set up in compliance with the law and the Agency better to shoulder its responsibilities. Even the State company, an operator like any other, should have signed an agreement with the State.

2

Human resources

When the institutions in charge of issuing rules and applying them become operational, the people in charge of drafting infralegislative norms, of establishing and implementing sector policy, of implementing regulations, of monitoring compliance with the regulations and the exercise of competition and of settling disputes between operators, must be experienced managers with sound skills. If that condition is not met, those institutions will find the process of adapting to the new environment and responding swiftly to operators' demands and requests long and difficult. Such managers are not always easy to find, and the risk is that the operators will step into the breach and start to regulate the telecommunication sector in Africa themselves. In this respect, outside assistance in the form of training for men and women is indispensable to help developing countries not only get the regulatory institutions off to a better start, but also and above all to improve existing regulations and to implement an interconnection regime that shapes competition in the sector.

3

Universal service

The universal service obligation consists in the provision of international, national and local telephone services between fixed points and of telefax, telex and telegraph services throughout the national territory. It also consists in routing telephone calls to and from subscriber points, the free routing of emergency calls and the provision of an information service and a subscriber directory. The obligations and conditions for the provision of universal telecommunication services are set forth in the terms and conditions of public network operators. The costs of meeting the universal service obligation are covered by all public network operators and by all public telephone service providers under the terms and conditions set forth in the respective agreements and specifications. It is still very difficult to have access to fixed telephone services in Cameroon, and this will remain the case for some time to come in rural areas because of the lack of special telecommunication development funds and the reluctance of private operators to invest in unprofitable areas. Mobile telephone networks do not yet cover the entire national territory. The price of telephone and Internet access services remains high. The Telecommunications Act does not mention Internet access or the level of prices for services provided under the universal service obligation. The legislative provisions mentioned above are not clear enough to allow for the regulation and implementation of basic telecommunication services throughout the national territory. Some institutional and regulatory adaptation will no doubt be required.

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4

Price control

The Telecommunication Regulatory Agency defines the principles governing tariffs for the services provided. It can be asked, whoeve r, whether the services under a monopoly (for example, the fixed telephone service) and those in competition (such as mobile telephony and Internet access) are treated the same. Preventing free market give-and-take from setting prices by artificially promo ting price increases or decreases is a prohibited anti-competition practice. In fact, an agency that guarantees healthy and fair competition in the telecommunication sector must control prices.

B

The outlook

Although liberalization is indispensable in the present global context, it is not an end in itself. Its only value lies in its benefit to citizens and consumers. No matter where they live, citizens must benefit from the advantages of the new information technologies. Any kind of exclusion is to be avoided. For this reason, attention must be drawn to: – the need to make the institutional and regulatory adjustments required to implement the universal service obligation; – the need to redefine the content of universal service so as to include Internet access and to take account of price parameters ; – the essential role of the public authorities in promoting the development of a local telecommunication industry (products, services); political objectives should include the defence of African economic interests, i.e. the creation of successful African companies; – the need to take account of the convergence between the telecommunication and audiovisual sectors ; – the need for greater African coherency in

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