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Monday, 23 July 2007

Proceeding with care...

The pressure for liberalisation of the gateway is gathering momentum. Now Computer Society Society (CSZ) has weighed in. But this issue needs careful handling because people may be getting ahead of themselves:

There have been a series of calls for the government to reduce the international gateway license from 12 million U.S. dollars and allow the private sector to apply for their own gateway. Currently, private mobile operators have to reroute their international calls through state-owned Zamtel, which has exclusive rights to the Mwembeshi Earth Station and charges usage fees. The issue of liberalizing the international gateway has been subject of discussion of late and there are arguments that it promotes anti-competitive practices by Zamtel.

For the record I am against the idea of lowering the gateway licence charge to allow a second gateway to emerge before other important steps are taken such as regulatory capacity enhancement and commercialisation. Zamtel in its current state is not ready to face stiff competition - and could just die away at extreme cost to tax payers (like the mines did). What myself and others are calling for is a careful four step sequential approach to liberalisation:

Step 1: Government needs to enhance the regulatory capacity of Communications Authority of Zambia

Step 2: We restructure Zamtel so that it becomes a company just like any - non of this “code” commercialisation. Proper restructuring.

Step 3: We institute a meaningful universal access policy. Government needs to allow free entry into the international segment to new providers that currently are not present in the market, and let the market determine the number of providers.

Step 4: We change the ownership models of Zamtel e.g. consider breaking it up in two (Zamtel Int and Zamtel Domestic) and Government can retain the domestic entity or go for the PPP. Yakima has proposed that Zamtel Int can effectively be a firm in which all the industry players can all have stake through an incremental model that keeps in check unnecessary gold plating but provides sufficient incentives for additional gateway capacity investment.


  1. I have to disagree a little bit. For me, competition is the goal not privatization.

    I guess I'm not a dreaded neo-liberal... ;)

    What does the $12 million tax pay for? Nothing. It's just there to help Zamtel.

    And who can afford $12 million, Zambian startups or the Kuwaities who own Celtel?

    And then they say, "You don't need your own phone lines, you can just use Zamtel." That is not "proceeding with care", that's something that dropped out of an elephant's bottom.

    I've read the previous links. I think block resale would be a big mistake. In fact if you look at Zambia's current ITC policy, resale is protected. Resale encourages competition and gives people more access. It creates efficiencies in the market place, even. :)

  2. "I have to disagree a little bit. For me, competition is the goal not privatization

    I guess I'm not a dreaded neo-liberal... ;)"

    Just a little :)

    My goal is actually ensuring that consumers gain a better outcome overall. Competition is possibly a necessary but not sufficient condition to deliver that. My reason for this are three fold:

    First, Government continued ownership of Zamtel (post step 3) may lead to greater burden on tax payers. Especially if Zamtel runs into trouble and asks for a Government bail out (post commercialisation). World over Government ownerships tends to weaken the incentives for companies to behave properly.

    Secondly, continued Government ownership creats a conflict of interest in the market. Government ownership may well mean that CAZ are not able to do their job. We would be asking the Government Regulator to regulate the market in which it Government has some interest. This is why the current state is laughable. CAZ are basically Government, trying to regulate another aspect of Government (Zamtel). Regulators are only useful privatised industries. If you reject privatisation of Zamtel you may as well abolish the CAZ.

    Finally, continued Government ownership may distort competition even after liberalisation of the gateway. This would most likely happen because by virtual of being Government owned, Zamtel may well be able to secure better credit than private sector firms. It would be able to borrow cheaper because it has Government as the "guarantor". This is unfair to other firms.

    For these reasons I would favour a determined but carefully managed approach towards privatisation or a model in which the private sector retains the majority stake. We must not worry about being given tags such as "neo-liberal" as long there's clarity of thought to our reasoning. I have always described by myself as centralist authoritarian, preferring the good of society over individuals, but with greater trust in the actions of individuals to deliver solutions than Government. So I believe the market knows better, but society is more than the market!! [see the post Political Compass - ]


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