Monopolistic tendencies killing Uganda’s telecom market, says anti-monopoly group

Dr. Omife I. Omife, AAM’s Continental Advisory Director,

Dr. Omife I. Omife, AAM’s Continental Advisory Director (PHOTO/Courtesy)

The Alliance Against Monopoly (AAM), a Pan-African anti-monopoly group has called upon regulators and lawmakers to nip in the bud, the “ugly monster of monopolies and duopolies that are slowly but surely choking the country’s ICT sector, stifling innovation and reversing the gains of the past two decades”.

Commenting about the recently released Uganda National IT Survey 2022 Report – a study by The National Information Technology Authority Uganda (NITA-U), that showed that the cost of access, was the single-largest inhibitor of internet connectivity for a majority of Ugandan businesses, households and individuals, Dr. Omife I. Omife, AAM’s Continental Advisory Director, said that it was incumbent upon legislators and regulators to move in fast and cut the monopolistic hydra, whose tentacles continue to block innovation and competition.

According to the NITA-U Report, household-level internet access is still severely limited, with 94% having no access at all across the country- with a wider urban-rural divide. 37% of households without access cited the cost of access being too high, while 48% cited the cost of the equipment being out of reach. Amongst businesses, while the study showed that 55% had internet access, only one in every three businesses had a business website. Of the 44.7% of businesses that said they did not have access to the internet, the high cost of internet service was cited as the top-most reason (63.6%), followed by the high cost of internet equipment (58%).

“The cost of internet access remains a major challenge and this calls for collaborative action across both government and the private sector,” the NITA-U study concluded.

The NITA-U study also comes on the heels of another study, The Surfshark 2022 Digital Quality of Life Index that showed that Uganda is home to the second-most expensive internet in the world, after Ivory Coast. Uganda was

ranked 116th out of 117 nations surveyed. SurfShark, a Netherlands-based software company said on average, Ugandans must work an average of two weeks to afford the cheapest fixed broadband Internet bundle. The company, also said that countries with the most expensive internet also tended to be the least stable with Uganda being ranked 110th out of 117 countries in internet stability.

“The 4th Industrial Revolution is here and has been here for a decade. This technological revolution that is fundamentally altering the way we live, work, relate and do business with each has connectivity to the internet as its core. The countries that invest significantly in affordable, stable and quality internet access for its population especially the youths, educational institutions and its businesses will be strategically positioned to outpace their peers and emerge as the next powerhouses,” said Dr. Omife I. Omife, adding: “Unfortunately for Uganda, this opportunity could be squandered or may be slowed down by an emerging profit-first monopoly by a few players, who are making it difficult for businesses, schools and households to have access to life-changing affordable internet”.

“The internet, like other vital resources and infrastructure such as water, energy, healthcare, education and transport must be delicately protected, from the excesses of capitalism,” added Omife.

Dr. Omife said that it was incumbent upon the legislators and regulators to take a keen interest in the regulation of the communications sector- both the consumer-facing telecom operators and the below-the-line communications infrastructure providers both of whom greatly contribute to the end-user cost and experience.

“Over the last decade, market mergers in Uganda and the region have created a potentially dangerous ‘cartel’, made up of one dominant tower provider with 90% control of the market and two telecom providers with about 95% of market share. These wield so much power over the market, bordering on regulatory capture, that it has become difficult for any new players to penetrate the market and provide the much-needed innovation and competitive pricing,” Omife argues.

He also specifically called on legislators and regulators to scrutinise the deleterious merger plan between American Tower Corporation (ATC) and Eaton Towers being considered by the COMESA Competition Commission saying that the plan which grants ATC Uganda 90% control of the tower market, which he said is “killer grits of monopoly that will be detrimental to the overall interest of Uganda”.

“We would like to urge parliament and relevant agencies of government not to discard the numerous reports of infractions and breach of contracts by industry players as to do so will militate against the economic development of Uganda. Many people do not know, but tower services and their cost is a critical influencers of end-user tariffs as they could constitute as high as 60% of the operating costs of especially startup and challengers MNOs, which have been in the past key drivers of competitive pricing by the larger telecoms. The monopoly that we are creating in ATC Uganda will in many ways destroy the market and create distortions that work against economic development and slow down Uganda’s growth,” he concluded.

Referring to recent court cases and complaints to the regulators in Uganda Uganda and the Comesa Competition Commission, Omife says there are documented cases of abusive and monopolistic cartel-like behaviours such as where the telcos providers are colluding to lock out other players in the business on either end.

“In one case, a tower provider and a telecom provider consented to a Right of First Refusal arrangement in which the telecom would not allow other tower builders to build towers for that telecom unless the tower company has been offered the opportunity first. Reciprocally, the tower companies are allowing the telecoms generous anchor-tenant benefits and pricing while ‘punishing’ other tenants on the same towers with crippling tariffs, which make it difficult for other non-anchor Mobile Network Operators to compete. It is not therefore by accident that most of the new MNOs in Uganda have all closed shop within the first three years of operation, while these too-big-to-handle players are reporting hundreds of billions in profit. Are we, therefore, surprised that Uganda is home to the world’s most second expensive internet?” observes Dr. Omife.

Dr. Omife, also goes on to applaud the Uganda Communications Commission, who recently, nullified these Rights of First Refusal, after a complaint by one of the aggrieved tower companies, but said, the regulators needed to be more proactive, rather than waiting for complaints from aggrieved parties.

“The truth is that these monopolies have become so powerful that most times even the aggrieved parties are afraid to complain or go to court for fear of retribution. Secondly, it could take 5 to 10 years for a court case to be resolved, and during this time, the complaining parties will have been squeezed out of the market, which is why it is important for legislators to regularly and proactively scan the market landscape to weed out the anti-competitive and monopolistic behaviours that are often cleverly disguised as anchor-tenant

contracts, sale-and-leaseback and or build-to-suit tenants clauses or disparate pricing for ancillary services like power, binding long term contracts with difficult termination clauses etc,” AAM’s Dr. Omife further says.

“To avoid regulatory capture, it is also important that mechanisms be put in place to check and audit the regulatory landscape as well as a provision for a quick conflict resolution mechanism to address any market complaints,” Dr. Omife concluded.

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