UNIVERSITY OF SOUTHAMPTON, 2014

LAW SCHOOL

TELECOM SECTOR REFORM FOR ESSENTIAL FACILITATES IN WEST AFRICA: A

CASE STUDY OF THE CABLE CONSORTIUM OF LIBERIA (CCL)

CANDIDATE NUMBER

25268961

A DISSERTATION SUBMITTED IN PARTIAL FULFILMENT OFTHE

REQUIREMENTS FOR LLM (INFORMATION TECHNOLOGY AND

TELECOMMUNIATIONS LAW) BY DISTANCE LEARNING

WORD COUNT

14,659

THIS DISSERTATION IS ALL MY OWN WORK.

REFERENCE TO, QUOTATION FROM, AND

DISCUSSION OF THE WORK OF ANY OTHER PERSON

HAS BEEN CORRECTLY ACKNOWLEDGED WITHIN THE WORK

1

Declaration of Authors Rights

The copyright of this dissertation belongs to the author under the terms of the United

Kingdom Copyright Act as qualified by University of Southampton Regulations. Due

acknowledgment must always be made of the use of any materials contained in, or derived

from, this dissertation.

2

Acknowledgments

And unto man he said, Behold, the fear of the Lord, that is wisdom; and to depart from

evil is understanding. Job 28:28

Sincere thanks and appreciation are due Madam Angelique Weeks, Chairperson of the

Liberia Telecommunications Authority (LTA) and the Board of Commissioners of the LTA

for the scholarship provided to earn this degree. I am indeed grateful!

Special thanks also go to Professor Ian J. Lloyd, Program Director and Project Supervisor,

Professor David Mellor, Lecturer, and all the other Faculty members of the Department with

whom I interacted and provided guidance along this academic voyage. Your collective

patience, wisdom and efforts were appreciated and have been worthwhile.

This work is dedicated to my late parents, Moses and Nora Howard, who taught me that, to

whom much is given much, is expected!

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Table of Contents

Acknowledgments ................................................................................................................................... 2

Chapter 1: Purpose and Progress of Telecom Sector Reform ................................................................. 5

1.0 Introduction ................................................................................................................................... 5

1.1 Purpose of Telecommunications Sector Reform ................................................................................. 7

Chapter 2: Literature Review ................................................................................................................ 12

2.0 Introduction ................................................................................................................................. 12

2.1 The Role of Telecommunications Sector Reform ............................................................................. 14

2.2 The Doctrine of Essential Facilities .................................................................................................. 20

2.3 Counter Essential Facilities Arguments ........................................................................................ 24

Chapter 3: Telecommunications Sector Reform in West Africa........................................................... 28

3.0 Introduction ....................................................................................................................................... 28

3.1 Regional Telecommunications Development ................................................................................... 29

3.2 Telecom Sector Reform within ECOWAS ....................................................................................... 32

3.2.1 World Bank Support ............................................................................................................ 33

3.2.2 ITU Support ......................................................................................................................... 36

4.0 Case Study of the Cable Consortium of Liberia (CCL) .................................................................. 41

4.1 Introduction ....................................................................................................................................... 41

4.2 Liberias Telecom Sector Reform ..................................................................................................... 43

4.3 The Cable Consortium of Liberia (CCL) .......................................................................................... 50

4.4 Remedies for CCLs Dominance ...................................................................................................... 53

4.5 Analysis ............................................................................................................................................. 55

5.0 Chapter 5: Conclusion ..................................................................................................................... 57

5.1 Summary ........................................................................................................................................... 57

5.2 Recommendations ............................................................................................................................. 58

Table of Figures

Figure 1: 2013 Regional Internet penetration rates ................................................................................. 6

Figure 2: Growth in mobile-cellular subscriptions ................................................................................. 7

Figure 3: Regulating Fixed-lines........................................................................................................... 19

Figure 4: Incentive regulation and growth in mobile services .............................................................. 19

Figure 5: Concept of Essential Facilities .............................................................................................. 21

Figure 6: Economic Community of West African States...................................................................... 28

Figure 7: West Africa's Undersea Cables ............................................................................................. 32

Figure 8: Map of Liberia ....................................................................................................................... 41

Figure 9: Liberia's fixed and mobile growth rates ................................................................................ 43

Figure 10: Decline in Liberia's fixed-line infrastructure ....................................................................... 45

Figure 11: Market Analysis process...................................................................................................... 52

List of Tables

Table 1: Privatization revenues per sector .............................................................................................. 6

4

Table 2: . Privatization revenues by sector, 1990-98 ............................................................................ 10

Table 3: Regional Integration and Membership Arrangements in West Africa ................................... 29

Table 4: Telecom performance indicators for ECOWAS & Mauritania .............................................. 31

Table 5: Status of ECOWAS Regulatory Instruments 2002/2003 ........................................................ 36

Table 6: Demographic and economic indicators for Liberia ................................................................ 42

Table 7: World Bank telecom technical assistance program to the NTGL ........................................... 44

Table 8: Liberia's GSM networks ......................................................................................................... 47

Table 9: LTA 2008 Interconnection price caps .................................................................................... 48

Table 10: Value-chain of related markets relevant to the CCL ............................................................ 53

Table 11: Proposed remedies for CCLs dominance ............................................................................ 54 Table 12: Equivalent price per E1 per month (US$) based on capacity commitment .......................... 54

Table 13: WARCIP Liberia Project M&E Results ............................................................................... 56

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Chapter 1: Purpose and Progress of Telecom Sector Reform

1.0 Introduction

The growth in the telecommunications/ICT sector over the last decade has been phenomenal,

with amazing statistics for 2014:

Almost 7 billion mobile-cellular subscriptions world-wide with 3/4 of all

subscriptions from the developing world;

96% global mobile-cellular penetration rates expected - 90% from developing

countries and 69% for Africa;

2.3 billion mobile-broadband subscriptions with 55% from developing countries;

32% global mobile-broadband penetration expected, double the penetration rate of

2011 and four times as high as 2009;

3 billion people, almost 40% of the worlds population, using the Internet with 2/3 of

users from the developing world;

20% of Africas population online by end of 2014, up from 10% in 2010; and,

44% of global households with Internet access and 31% of households in developing

countries connected.1

In 2014 the volume of international traffic reflecting Internet, voice, and data in Liberia grew

to 2.93 Kb/s per person, Internet penetration rate is 3.72%, and access to telephone service,

both fixed and cellular, 58.83%.2 Developing countries that implemented

ICT/telecommunications sector reforms between 1990 and 2001 attracted more investments

in telecommunications than in any other sector; totaling $331 billion of private investment.3

6

Table 1: Privatization revenues per sector

Figure 1: 2013 Regional Internet penetration rates

Source: ITU

In 2005, global penetration for fixed mobile-cellular subscriptions was 33.9%, penetration for

active mobile-broadband subscriptions were unavailable, global fixed (wired)-broadband

subscriptions were 3%, households with Internet access 18.4% and only 15.8% of individuals

globally used the Internet.4 In 2001, Liberias fixed-line penetration was 0.1%, mobile-

cellular subscriptions 5%, with no fixed or mobile-broadband subscriptions and no household

Internet access.5

7

Figure 2: Growth in mobile-cellular subscriptions

The remarkably success of ICTs in Africa over the past decade has been driven by sector

reform; especially in the mobile market segment, resulting in improved availability, quality

and reduced cost of connectivity. Continent wide policy changes triggered reforms in the

telecommunications sector and how investments are financed; making telecommunications

unique among infrastructure sectors in Africa. The shift from politically driven decision-

making to rules-based technocratic methods has increased investor confidence and allowed

the development of competition, greatly increasing the performance of Africas ICT sector.6

1.1 Purpose of Telecommunications Sector Reform

Globally, telecommunications has transformed from a public utility industry immersed in

natural monopoly rights to a strategic investment required for competitive advantages at the

national, regional and firm levels.7 Recognition of information as an economic commodity

needed as a factor of production has been a key factor driving this transformation.

Information is increasingly an economic commodity combined with the globalization of

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capital flows and trade. Resulting economic activities have generated greater consumer

demand for diverse, higher quality and cheaper communications and information services.8

Rapid advances in telecommunications technology have changed cost structures of the sector

and related industries by reducing the cost of information transmission and processing;

making the provision of a wider range of communications facilities and services possible at

greatly reduced costs.9

Telecommunications services are widely consumed and regarded as essential public social

requirements for the effective performance of the economy. They constitute a significant

percentage of the gross domestic product (GDP), are critical intermediary inputs for other

economic sectors, and are major determinants of the production cost and competiveness of

national economies. Accordingly, the presence of limited utility operators raises immediate

concerns about monopoly inefficiencies, abuse of market power and restrictions of freedom

of choice.10

The transformation of the telecommunications, computer and audio-visual industries by

digital technology heightened global concerns and created the information society. The

ability of nations to access, process and produce information efficiently became a necessity

for remaining competitive.11

Access to global markets and customers became a vital

requirement to remain at the forefront of the global information society and open network

access a prerequisite for successful development and continued competiveness.12

Economic stimulation and the need to attract investment in telecommunications infrastructure

catalysed governments to pursue telecommunications liberalization.13

Monopolistic and

monolithic telecom markets required transformation to introduce and safeguard some

9

measure of competition. The entrenched competitive positions of incumbent monopolies

necessitated urgent steps to prevent the perpetuation of public monopolies in the private

sector.14

The following issues required attention:

Identifying services/facilities, for economic or political reasons, to remain monopoly

based;

Determining rules governing competitive interactions between monopoly providers

and private operators;

Developing institutional arrangements to:

Monitor and enforce rules;

Resolve disputes amongst parties; and,

Review and amend rules and dispute resolution mechanisms as necessary?15

Liberalization and telecommunications sector reform formed part of a broader economic

reform process initiated in the 1980s, influenced by the recognition of the importance of

pervasive access to telecommunications in promoting social and economic development.

While the goals of liberalization differ nationally, they are broadly classified as follows:

Interpretation of neoliberal ideology among decision making elites as a justification

for less state intervention;

1980s debt crisis and global recession justified scaling down the public sector burden

on the state, raising revenues through sale of state-owned operators and licensing new

operators;

The growing multilateral trading system and inclusion of basic telecommunications in

the WTOs General Agreement on Trade in Services (GATS) committing countries to

telecom sector liberalization;

10

Integration into the global economy required advanced telecommunications

infrastructure for attracting investment and maintaining national competitiveness;

The underperformance of the sector; and,

Rethinking economies of scale in telecommunications.16

These factors, combined with a revolution in telecommunications technology, resulted in a

global pursuit of telecommunications privatization, liberalization and regulatory reform in the

1990s unparalleled to any technological led reform since the beginning of the century.17

Table 2: . Privatization revenues by sector, 1990-98

This dissertation shall examine telecommunications sector reform with an emphasis on the

liberalization of access to essential facilities and how the reforms have been applied within

the West African context, using Liberia as a case study. Chapter 2 will examine the literature

on telecommunications sector reform and liberalization with an emphasis on interconnection

and access to essential facilities. Chapter 3 will examine the process of telecommunications

sector reform and access to essential facilities within the Economic Community of West

African States (ECOWAS). Chapter 4 will present the Liberian case study of Cable

11

Consortium of Liberia (CCL) and the legal framework for assess to the Cable Landing

Station as an essential facilities. Chapter 5 will present a summary, conclusions and

recommendations.

Chapter 2: Literature Review

2.0 Introduction

In May 2001 the United Nations conducted an appraisal of the effectiveness of the Paris

Programme of Action (PPoA) adopted by the Second United Nations (UN) Conference on

Least Developed Countries (LDCs) in 1990. The appraisal revealed that the goals and

objectives of the PPoA had not been achieved. LDCs were being circumvented by the process

of globalization; further exacerbating their marginalization. The PPoA sought to implement

economic reforms in LDCs by substantially reducing tariffs and trade barriers, liberalizing

currency regimes, privatizing public enterprises, establishing and strengthening

institutional/regulatory frameworks and adopting liberal investment policies. The outcomes

of reform efforts fell below expectations and LDCs faced declining financial resources,

unsustainable and heavy debt burdens, complex trade barriers, and supply-side constraints.

To address these challenges, the Brussels Programme of Action (BPoA) was adopted by the

UN Conference in 2001. The BPoA was based on seven Commitments:

1. Fostering a people-centered policy framework;

2. Good governance at national and international levels;

3. Building human and institutional capacities;

4. Building capacity for globalization within LDCs;

5. Enhancing the development role of trade;

6. Protecting the environment; and,

7. Mobilizing financial resources.18

Commitment 4 sought to increase telephone density to five main lines per 100 inhabitants and

Internet connections to ten users per 100 inhabitants by 2010. The International

13

Telecommunications Unions (ITU) Special Programme for LDCs was formulated to meet

these goals by prioritizing universal access, emergency telecommunications and concentrated

assistance to LDCs. Through Official Development Assistance (ODA) the ITUs Special

Programme has undertaken diverse activities and provided assistance to LDCs focused on:

Promoting universal access;

Bridging the urban/rural access gap and introducing new technologies;

Human resource development;

Rural communication development;

Spectrum management; and,

Developing appropriate ICT strategies based on sound policies, and appropriate

regulatory and legal frameworks.19

The role of the ICT sector in nurturing economic and social development is well documented.

Telecommunications investments influence economic development by reducing production

costs and increasing revenues and employment through direct and indirect effects. Unlike

other infrastructure investments, the benefits of increased telecommunications access result

from increases in information and knowledge.20

The potential for transferring information

provided by the telecommunications sector significantly impacts trade and economic growth

in a global economy.21

Major improvements in ICTs in Africa from 2001 2005, compared

with 1991 1995, added one percentage point to the continents per capita growth rate and

accounted for over half of improved growth performance observed between the two periods.

Every Ten-percentage-point increase in telephone penetration and Internet services increases

economic growth one percentage point.22

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2.1 The Role of Telecommunications Sector Reform

ICTs offer major transformational opportunities and enhance productivity, competitiveness,

wealth creation and poverty reduction by facilitating knowledge based economies and

participation in the global economy. However, these opportunities can only be realized to the

extent that regulatory frameworks create an enabling environment supportive of cultivating

investment in, and widespread diffusion of, ICTs.23

This envisages a framework of market

access for service suppliers clearly intended to foster competition and participation of foreign

firms through a legal and regulatory environment conductive to market entry and elimination

of restrictions.24

Causality between telecommunications investments and economic growth does not

automatically translate investments into growth. Economic growth is not promoted by

telecommunications investments in and of itself. The economic impacts of new investments

are strongest where telecommunications facilities are either absent or inadequate to the extent

that they serve as bottlenecks to private economic activities. The key is not the correlation

between telecommunications and growth, but the institutional mechanisms that determine

how and when investments are made.25

Lack of regulatory stability and clarity is a

disincentive for private investment; conversely, stable regulatory environments can increase

private sector investment by 25% and reduce the cost of owning and using a mobile phone by

Ten%.26

Private investment is therefore contingent on an enabling regulatory environment.

Environments supportive of sustainable investment require NRA independence in decision

making that is transparent, non-discriminatory, objective and free of political influence.27

15

By 2010, 80% of International Development Association (IDA) countries had introduced

competition in the Internet and mobile markets and more than 85 % had established separate

NRAs. These achievements have deepen reforms and improved sector performance28

leading

to more liberalized fixed-line markets and international gateways, fully liberalized mobile

markets and liberalized provision of Internet services.29

These regulatory and institutional

accomplishments have translated into increased foreign direct investment in the

telecommunication infrastructure, especially in SSA. ICT policy harmonization projects such

as the West African Common Market Project has led to increased financial investments in

SSA from China, India and the Gulf States equivalent to the ODA provided by the

Organization for Economic Co-operation and Development (OCED) with commitments

totaling $2.16 billion.30

The harmonization of multilateral and regional commitments into

local laws by many countries were major accomplishments which served to accelerate

regulatory reforms, facilitate international best practice, and provide investors with regulatory

certainty and predictability.31

The opening of telecommunications markets to new infrastructure investments required

migration from government intervention, to development of coherent competition

frameworks. Frameworks grounded on efficient and practical laws guaranteeing private

sector rights and remedies and providing protection from anticompetitive behavior and abuse

of market dominance.32

Recognition of property rights and enforcements is positively

correlated with network expansion and efficiency.33

In historically developed monopoly markets with massive telecommunications infrastructure

built by public funding, general competition law principles are required to guarantee access to

scarce, limited or essential facilities dominated by incumbents. Liberalized

16

telecommunications markets necessitate the interconnection of rival networks through

regulatory intervention requiring that incumbents provide network access to new entrants to

enhance network externalities. Access to new entrants establishes competition by avoiding

unnecessary duplication of costly network components.34

Interconnection, in this context,

refers to the commercial and technical arrangements by which service providers connect their

equipment, networks and services to grant their customers access to the customers, services

and networks of other service providers.35

The goals of access policy are therefore to:

Ensure infrastructure owners operate efficiently and access terms do not distort the

process by which prices are adapted to consumer preferences and demand for

services; and,

Safeguard competitive parity through transparent non-discriminatory access and

charges that reflect the economic costs of performing the supply function.36

Telecommunications liberalization led to massive investments in alternative infrastructure;

however, the local loop remains the primary method of obtaining connectivity to the public

telecommunications network. The dominance of local access by incumbents has remained a

source of regulatory concern due to the propensity of incumbents to use their control over

essential facilities to obtain unfair competitive advantages over competitors in

complementary downstream markets.37

Interconnection, therefore, remains a major stumbling

block to the development of competition and liberalized telecommunications services.38

The most contentious interconnection issues are centered on prices and terms for

interconnection and access for interconnection. Prices are controversial because they affect

profitability and the development of competition. Terms of interconnection and access remain

controversial because they define what competitors receive and when, how and where they

17

obtain interconnection access.39

Therefore, the bottleneck owner must be required to charge

itself the same interconnection charges it levies on its competitors, minus the marginal costs

of providing that service. Also, the price charged for the final product must recover both the

access charge and the incremental cost of the suppliers own retail operations.40 To ensure the

benefits of liberalization are actualized, true competition must be supported by a regulatory

environment that clarifies the terms of interconnection and access between operators,

establishes the rules for interconnection, defines the guidelines for sharing infrastructure, and

institutes interoperability provisions.41

The General Agreement on Trade in Services (GATS) recognizes that access to and use of

public telecommunications infrastructure is indispensible for the competitive provision of

effective services covered by GATS. World Trade Organization (WTO) members are

therefore required to provide suppliers of scheduled services access to the public

telecommunications transport network and services on reasonable and non-discriminatory

terms. The WTOs Reference Paper telecommunications reform checklist of success is

based on six necessary principles to remove regulatory barriers to market access and prevent

anticompetitive practices. They are:

Competitive safeguards: Members must establish safeguards preventing major

suppliers from engaging in anticompetitive conduct;

Interconnection: Major suppliers of Members capable of materially affecting terms of

market price and supply by control over essential facilities or position in the market

must provide interconnection upon request, on non-discriminatory terms and

conditions, and at transparent, feasible cost-orientated rates;

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Universal service: Members may impose universal service obligations that are

transparent, non-discriminatory, competitively neutral and do not create unnecessary

burdens on service suppliers;

Public availability of licensing criteria: Members should make publicly available the

licensing criteria, the decision-making timeframe, and the terms and conditions of

individual licenses;

Independent regulators: Members should ensure that NRAs are separate from and not

accountable to any telecommunications supplier and that decisions are impartial and

based on equal, transparent and objective treatment of all market operators; and,

Allocation of scarce resources: Allocation and use of scarce resources should be

carried out in an objective, timely, transparent and non-discriminatory manner and

made publicly available.42

Telecommunications sector reform in SSA has improved tremendously over the last decade.

Regulatory mandates and requirements have driven network expansion and introduction of

new services in the fixed-line market segments. Requirements for unbundling the local loop,

publication of reference interconnection offers and the setting of minimum quality of service

standards have improved competition in fixed-line markets and protected consumers.

However, growth has been slower relative to mobile markets which received a liberal

regulatory approach, less regulatory intervention and the creation of opportunities for mobile

market development.43

19

Figure 3: Regulating Fixed-lines

Source: ITU

Market liberalization involves the grant of licenses to ISPs and broadband service providers,

setting technical standards, defining price regulations, and designing interconnection

principles and dispute resolution mechanisms. It also requires the identification of key

bottlenecks to sector development and the formulation of appropriate regulatory actions to

address them. Liberalization must also go beyond the provision of mobile services.44

Figure 4: Incentive regulation and growth in mobile services

Source: ITU

20

Licensing restrictions in some SSA countries on terrestrial backbone networks, international

gateways and submarine cables limiting the size of operators networks, obstacles in

obtaining rights of way, and outright monopolies continue to hinder private investments.45

2.2 The Doctrine of Essential Facilities

The threat of market entry in contestable competitive markets is an important constraint on

firms already in markets. This constraint prevents them from anti-competitive pricing because

potential entrants would respond to the opportunity for profit by entering and reducing

prices.46

Markets are contestable where there are no barriers to entry and exit.47

In

telecommunications markets, barriers to entry may be due to legal restrictions, economies of

scale and scope, high fixed or sunk costs and essential facilities.48

As such, the three criteria

test for regulatory intervention applies where:

1. There are high and non-transitory entry barriers;

2. Market structure does not tend towards effective competition within a relevant time

frame; and,

3. Application of competition law is insufficient to address market failure.49

The essential facilities doctrine was developed by Professor A.D. Neale in his treatise of

United States (US) Supreme Court and lower-court rulings dealing with the refusal by a

vertically-integrated dominant undertaking to deal with a competitor. The standard elements

of essential facilities were established by the 1983 US Court of Appeals decision in MCI

Communications Corp. v. AT&T. The four-part test is the standard for imposing antitrust

liability for failure to deal with a competitor and applies where:

1. A monopolist controls access to an essential facility;

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2. The facility cannot feasibly be replicated;

3. Access to the competitor is denied by the monopolists; and,

4. Granting access is possible and there is no valid justification for refusal to deal.50

Essential facilities are critical inputs to retail production at the wholesale level of the

production chain and are essential inputs in the supply of retail products or services.51

Monopoly control of essential facilities can create incentives for anti-competitive behavior to

repress competition and create artificial hurdles for rivals in the market for the final products

sold to consumers.52

Liberalization of the telecommunications sector resulted in the

emergence of two types of markets: provision of services to end users market and provision

of access to facilities market necessary to provide service to end users. Service providers

require access to one or more upstream, or downstream, facilities to provide services to

customers. NRAs must therefore ensure that the prospective access markets develop and

dominant incumbents do no use their control over access facilities to stifle development of

competition and new services.53

Figure 5: Concept of Essential Facilities

Source: ITU

22

Access, within the telecommunications industry, remains an important aspect of regulations

and antitrust.54

Effective competition requires that new entrants have access to facilities with

natural monopoly characteristics;55

this precludes incumbent operators from using ownership

of bottleneck facilities to control market developments.56

Essential facilities include

interconnection inputs provided to facilitate the logical linking of competing networks and

the exchange of traffic.57

Regulation of access terms and conditions to essential inputs by

competing firms remains the single biggest regulatory issue; competition and the success of

liberalization depend on the terms and conditions chosen.58

Particular attention is required when dominant undertakings own and use an essential facility

required by competitors to provide services to their customers; especially when access is

denied rivals without justification; or on terms less favorable than granted to their own

services.59

Within the context of the European Union (EU), Articles 85 and 86 of the Treaty

of Rome (March 25, 1957) specifically prohibit agreements that have as their purpose or

result, the prevention, restriction or distortion of competition within the EU; or conduct

which constitutes an abuse of a dominant position.60

This is consistent with the probability

that incumbent undertakings may continue to remain dominant for some time, both in the

provision of access and services,61

and necessitate regulatory intervention over the long term.

The doctrine of essential facilities attempts to provide the legal certainty and predictability

for access to bottleneck facilities required to facilitate investments in new infrastructure and

services.62

This promotes consumer welfare by eliminating exclusionary, anticompetitive

behavior. The applications of the doctrine of essential facilities and antitrust law have

developed differently in the US and the EU. In the US, the focus of antitrust law is

prohibiting transaction intended to maintain or create monopoly power; in the EU the purpose

23

is to prevent abuse of a dominant position. In the US therefore, essential facilities cases are

considered exceptions to the general Colgate defense principle that undertakings are under

no obligation to deal where there are legitimate competitive reasons for refusal. In the EU the

essential facilities doctrine is a specification of a general duty of dominant firms to deal.63

The principle of obligating dominant monopolies in network infrastructure to contract is

premised on the fact that competition in downstream markets depend on the pricing and

conditions of access in upstream network services. An objective of increasing competition in

downstream markets is to facilitate higher value services than local infrastructure. This has

significance where the refusal of access renders provision of a new service impossible or

limits the development of different new markets, products or services for which there is

consumer demand64

not satisfied by existing products or services.65

In determining whether a dominant firm controlling an essential facility should be obliged to

grant access, the following conditions should be present:

a. Access is essential for competition on the relevant market and refusal of access makes

competition impossible;

b. Sufficient available capacity to provide access;

c. The owner does not satisfy demand, blocks new products or services or impedes

competition on existing or potential services or product markets;

d. The access seeker is prepared to pay a reasonable non-discriminatory price on non-

discriminatory terms and conditions; and,

e. There is no objective justification for refusal of access.66

Important considerations are:

1. Does access achieve or facilitate competition in downstream or upstream markets?

24

2. General public interest significance of access to the economy and impact on national

competitiveness of effective competition in the relevant market; and,

3. The legitimate interest of the facility owner.67

Essential facility cases are all linked by infrastructure owners also participating in a market

dependent on access to that infrastructure, constituting a conflict of interest. They also

involve vertically-integrated dominant firms in one market using their dominance in a manner

to strengthen their position and eliminate competition in a related market.68

2.3 Counter Essential Facilities Arguments

There are concerns that the enforcement of access conditions on owners of essential facilities

amounts to re-allocating monopoly rents accruing from the facilities amongst competitors

with little impact on consumers. Notably, antitrust law does not prohibit monopolies that are

earned;69

therefore it has been cautioned that:

The rights to choose trading partners and dispose freely of ones property are

generally recognized principles of law, therefore violations require careful

justification;

Using competition policy to interfere with a dominant undertakings freedom to

contract requires careful balancing of conflicting considerations. Easy accesses to

production, purchasing or distribution facilities reduce incentives to develop

competing facilities and competition in the long term. The mere fact that retaining a

facility for its own use gives a dominant undertaking competitive advantage cannot

justify requiring access to it;

25

The primary purpose of antitrust and competition law is to prevent distortion of

competition and safeguard the interests of consumers; not to protect the interests of

particular competitors; and,

The essential facilities doctrine is only justified when there is a genuine stranglehold

on the related market.70

Areedas six limiting principles cautions against imposing liability based on the essential

facilities doctrine; rather, he urges the allowance of defenses based on legitimate business

justifications, because:

1. Compulsory access should be very exceptional since there is no general duty to share;

2. A single firms facility is essential only where it is critical to the access requestors

competitive vitality, and the requestor is essential for market competition;

3. Firms should only be forced to deal where dealing substantially increases competition

by reducing prices or increasing output and innovation;

4. Denial of access is never unlawful per se and legitimate business purpose is a valid

defense;

5. Discernment of intent should seek to establish if the dominant firm sought to

exclude competition by improper means or merely to limit competition and increase

profits; and,

6. The duty to deal should not be imposed by a court that it cannot explain or adequately

and reasonably supervise.71

While the roots of the essential facilities doctrine are said to originate in the US from the

1912 Terminal Railroad decision, the Supreme Court in Trinko (2004) denied the existence

of such a doctrine. The Court ruled that essential facility claims are not relevant where there

26

is effective power to compel sharing and regulate its scope and terms.72

Critics argue that

courts conclude too quickly that refusal to deal harms consumers and it remains unclear that

refusal of a monopolist to supply a downstream competitor is contrary to public interest. A

refusal to supply which eliminates a competitor, may not produce a significant reduction of

competition or have a significant anticompetitive effect on the market.73

The essential

facilities doctrine is also considered an assault on property rights of successful firms;

inappropriate application risks damaging incentives for economic efficiency which underpins

economic and technical progress. This is significant where intellectual property (IP) rights are

misrepresented as monopoly rights in a misuse of essential facilities arguments. Imposing

an obligation to supply on a facilities owner without specifying the details of that obligation

compounds the situation.74

The obligation to grant access to essential facilities creates a tension between static

competition and dynamic competition. Static competition increases where access is granted to

facilities essential for downstream markets, reducing more important dynamic competition.

Intervention also reduces incentives to invest in essential facilities, and the incentives for

possible third party duplication.75

Additionally, competition rules may be used, not to enable

expansion of efficient firms, but to protect smaller and medium sized firms at the expense of

efficient or larger firms. This subordinates the interests of consumers and the economy to the

interests of smaller traders.76

Calls therefore remain for the retention of high burden of proof

in essential facilities cases, with access granted only where each of the following questions is

answered affirmatively:

1. Was the monopoly earned and are there compelling external social or economic

reasons beyond monopoly exploitation for forcing access?

27

2. There is a mechanism in place for monitoring and regulating the price and terms of

access?

3. Is it inconceivable to circumvent the use of the facility?

4. Is it impossible in the foreseeable future for new technologies to substitute for the

essential facility?77

28

Chapter 3: Telecommunications Sector Reform in West Africa

3.0 Introduction

The Economic Community of West African States (ECOWAS) was created on May 28, 1975

by the Treaty of Lagos. It forged an economic union amongst 15 West African Member

States: Benin, Cte d'Ivoire, The Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali,

Mauritania, Niger, Nigeria, Senegal, Sierra Leone, Togo, and Burkina Faso. Cape Verde

joined in 197778

and Mauritania withdrew in 1999 due to disagreements over the ECOWAS

Protocol for Conflict Resolution.79

ECOWASs objectives are economic trade, national

cooperation and monetary integration for the growth and development of West Africa80

through effective economic cooperation and integration.81

Figure 6: Economic Community of West African States

Source: The World Bank

Other sub-regional integration arrangements include the Communaute des Etats de lAfrique

de lOuest (CEAO), the Mano River Union (MRU), the West African Economic and

Monetary Union (UEMOA) and the West African Telecommunications Regulatory Assembly

(WATRA).

29

WATRA was established in November 2004 by ECOWAS Member States and Mauritania.

Its membership includes 15 independent NRAs and departments for regulation of

telecommunications services. WATRAs formation was to address sub-regional

telecommunications industry challenges, develop a harmonized regulatory identity to increase

investors confidence and sector investments, and contribute to industry human resource and

capacity building efforts.82

Table 3: Regional Integration and Membership Arrangements in West Africa

Source: The World Bank

3.1 Regional Telecommunications Development

Regional Economic Communities (RECs) are important in enabling regional integration of

ICTs and trade.83

However, the small-scale economies of ECOWAS Member States inhibit

this role. Eight Member States have populations below 10 million, 11 Member States have a

GDP of less than $5 billion, while three Member States are landlocked and rely on

neighboring infrastructure to access critical markets. This prevents economies of scale in

infrastructure development and makes it difficult for governments to pay the high fixed costs

of infrastructure development.84

ECOWAS incumbent operators are also impeded by bad

30

management and poor underdeveloped infrastructure.85

In 2011 ECOWAS penetrations rates

were 2.41% for fixed-line, 61.65% for mobile-cellular and 3.43% for fixed-broadband.86

However, compared with other RECs, ECOWAS provides better access to ICTs, though at

higher prices. ECOWAS international bandwidth indicators of 16 bits per capita and mobile

subscriptions of 25 per 100 inhabitants are the second-highest in Sub-Saharan Africa after the

Southern African Development Community (SADC). ECOWAS broadband access rates and

Internet subscriptions are lower compared with SADC, possibly due to the late arrival of

international broadband capacity which may account for the relatively higher tariffs. The

monthly-averaged prepaid mobile basket cost of $14 is higher than in any other region except

the Central African Economic and Monetary Community (CEMAC), and monthly Internet

access price of $80 is exceeded only by East African Community (EAC). The prices of

international telephone calls and fixed-line telephone service, however, are relatively low.87

WATRAs proactive regulatory intervention and large regional mobile operators has led to

relatively advanced regional mobile roaming arrangements. WATRA has been particularly

active in promoting regulatory ICT harmonization and the ECOWAS Department of

Transport and Telecommunications promotes key objectives of a single liberalized market,

harmonized laws and regulations, coordinating/integrating regional infrastructure projects,

and enhancing regional GSM service. ECOWAS Member States have embraced telecom

sector reform and are very open to foreign investment in mobile telecommunications, with

most countries having two or three foreign operators.88

31

Table 4: Telecom performance indicators for ECOWAS & Mauritania

Source: The World Bank

ECOWAS has international broadband connectivity from several submarine cables including:

1. South Atlantic 3 (SAT-3)/WASC: 14,350 km from South Africa, up West Africa to

Portugal and Spain, connecting 36 countries with 120 Gbps;

2. Atlantis-2: 8,500 km connecting South America, Cape Verde, Senegal, Portugal, and

Spain with 10 Gbps @ $370 million;

3. Glo-1: 9,800-kilometer connecting 17 African countries to the United Kingdom with

318.4 Gbps @ $170 million;

4. Africa Coast to Europe (ACE): 14,000 km from France to South Africa connecting 24

countries with 1.92 Tbps @ $650 million; and,

5. West African Cable System (WACS): 17,200 km from South Africa, along West

Africa to the United Kingdom connecting 15 countries with 3.84 Tbps, @ $650

million.89

32

Figure 7: West Africa's Undersea Cables

Source: Manypossibilities.net

3.2 Telecom Sector Reform within ECOWAS

ECOWAS has commenced several infrastructure projects and activities in cooperation with

the New Partnership for Africa's Development (NEPAD), the EU, the World Bank, USAID

and other donors.90

From 2002 up to 2013 the following sector reform milestones have been

achieved:

February 2002: World Bank launched regional telecommunications harmonization

study;

2004: ITU launched regional project to establish an integrated West Africa ICT

Market;

September 2005: Common Market Best Practice Guidelines adopted by the 3rd

Ordinary General Assembly of WATRA;

May 2006: ECOWAS ICT Ministers validate legislative and regulatory texts for the

establishment of a Common ICT Market;

33

January 2007: validated legislative and regulatory texts adopted by ECOWAS Heads

of States and Government as Supplementary Acts;91

November 2009: WATRA identifies access to submarine cables as most pressing

priority;

December 2010 and March 2011: draft submarine cable assessment report, guidelines

and regulation validated at WATRA and ECOWAS consultative and National ICT

Experts meeting respectively;

June 2011: Access to Submarine Cables Guidelines adopted at the 9th WATRA

Annual General Assembly;

October 2011: Regulation on Access to Submarine Cables in West Africa adopted at

the 11th Meeting of ECOWAS ICT Ministers; and,

2013: Access to Submarine Cables Assessment Report issued.92

3.2.1 World Bank Support

In the 1990s the Bank shifted its ICT strategy from support to large infrastructure projects to

smaller lending interventions of technical assistance (TA). The TAs focused on building

enabling sector environments to mobilize private investments, using competition as the

primary policy tool to promote efficiency and innovation while facilitating regulatory

capacity development. Within ECOWAS, the Bank has been involved in market

liberalization through privatization and licensing in Burkina Faso, Ghana, Mail, Niger, and

Nigeria.93

The Bank and Public Private Infrastructure Advisory Facility (PPIAF) provided support to

ECOWAS to develop a common framework to harmonize national telecommunications

34

sector policies amongst Member States and establish a common telecommunications market.

This was based on perceptions that NRAs within ECOWAS were not autonomous and lacked

the authority to make and enforce regulations.94

A telecommunications harmonization study

was launched in February 2002 and subsequently endorsed at validation meetings in Abuja,

Accra, and Lom.95

The study concluded that:

There was sufficient completed work to create the regional legal framework;

Some Member States had adopted laws and regulations in line with international best

practice;

The ECOWAS Treaty and Protocols provided the legal framework to achieve

harmonization in line with the centralized harmonization model;

Previous failures to implement expressed ideas and principles of the ECOWAS legal

framework were a disappointing track record in advancing Treaty initiatives;

Resources were insufficient to perform enforcement and other regulatory functions;

and,

Different legal traditions of Member States, different levels of liberalization, and

trade-offs affecting the relative gains of individual countries, posed additional

challenges.96

Recommendations were that ECOWAS adopt a centralized harmonization model based on

the existing legal framework for implementation at both the national and treaty levels. An

implementation schedule and draft Protocol were also proposed.97

ECOWAS connectivity gaps prevented Member States from deriving the full benefits of a

highly functional and effective ICT sector. This was due to higher communication costs and

capacity bottlenecks limiting the availability of end-to-end high-capacity bandwidth at

competitive pricing. A regional approach to bridging this connectivity gap was necessary to

35

facilitate better access to international infrastructure. Regional cross-border connectivity was

also impeded by costly routing of traffic through non-regional third-party countries, straining

regional economic and social development. Civil wars in Guinea, Liberia and Sierra Leone

destroyed critical transmission infrastructure, leaving no functional cross-border links

between the countries. There are also no cross-border links connecting Guinea northward to

Mali, eastward to Cote dIvoire and southward to Liberia. This required a new approach to

create regional connectivity, provide redundancy to costly existing routes, rapidly reduce the

missing gaps between the countries, and reduce the fragmentation of existing member

systems.98

In this context, the Bank developed a $300 million99

West Africa Regional Communications

Infrastructure Program (WARCIP) to expand the geographical reach of broadband networks

and reduce communications costs within the region. In WARCIPs first phase, funding was

provided to Liberia and Sierra Leone in the amounts of $25.6 million100

and $31 million101

respectively. In the second phase WARCIP provided similar support to The Gambia, Guinea

and Burkina Faso.102

The WARCIP funding support has three components:

1. Supporting connectivity:

a. International connectivity - facilitating membership to the Africa Coast-to-

Europe (ACE) Cable Consortium;

b. Regional/national connectivity leveraging alternative infrastructure;

2. Creating an enabling environment for connectivity; and,

3. Project implementation support.103

36

3.2.2 ITU Support

By 2003 regulatory reforms within ECOWAS contributed to accelerated sector progress and

increases in penetration rates for mobile communications. The ITU directly assisted

governments, conducted studies, provided training tools, organized workshops and forums,

and sponsored regional and sub-regional organizations. Interventions were based on

implementation of the ITUs Telecommunications Development Bureaus (BDT) operational

plan and focused on accelerating creation of an environment to facilitate rapid extension of

access to ICTs. The ITU contributed to improvements in frequency and numbering

management and interconnection, which was a source of conflict amongst operators.104

Table 5: Status of ECOWAS Regulatory Instruments 2002/2003

Source: Evora-Sagna

Between 2004 and 2007, the ITU collaborating with the EU, implemented the West African

Common Market Project to harmonize policies governing ICT markets within ECOWAS.

This was as a pilot project to develop and promote harmonization of policies and guidelines

based on best practices within ECOWAS and develop a harmonized regulatory framework

for the ICT sector and build human and institutional capacity in the field of ICT.105

The

37

project built on the recommendations and conclusions of the Banks Harmonization of

Telecommunications Policies in ECOWAS study leading to the development and adoption

of:

Harmonized regional ICT policy for:

a. National ICT Policy and Law;

b. Interconnection;

c. Licensing;

d. Numbering;

e. Radio Spectrum Management; and,

f. Universal Access and Universal Service.

Harmonized regional ICT legislation; and,

Harmonized regional regulatory guidelines.106

The regulatory guidelines were adopted by the 3rd WATRA Annual General Meeting (AGM)

of September 9, 2005 held in Dakar, Senegal.107

The harmonized regional ICT policies and

ICT legislation led to the development and adoption of ECOWAS Supplementary Acts by the

Thirty-First Session of the Authority of Heads of State and Government held in

Ouagadougou, Burkina Faso on January 19th

, 2007. The adopted Acts were:

Supplementary Act A/Sa.1/01/07 On The Harmonization Of Policies And Of The

Regulatory Framework For The Information And Communication Technology (ICT)

Sector;

Supplementary Act A/Sa.2/01/07 On Access And Interconnection In Respect Of ICT

Sector Networks And Services;

Supplementary Act A/Sa.3/01/07 On The Legal Regime Applicable To Network

Operators And Service Providers;

38

Supplementary Act A/Sa.4/01/07 On Numbering Plan Management;

Supplementary Act A/Sa.5/01/07 On The Management Of The Radio-Frequency

Spectrum; and,

Supplementary Act A/Sa.6/01/07 On Universal Access/Service.108

Subsequent instruments adopted include the Supplementary Act A/Sa.21d1/1d On Electronic

Transactions Within ECOWAS, Supplementary Act A/Sa.1f01/10 On Personal Data

Protection Within ECOWAS adopted by the 37th Session of Authority of Heads of State and

Government in Abuja, Nigeria on February 16th, 2010 and Directive C/Dir. 1/08/11 On

Fighting Cyber Crime Within ECOWAS adopted by the 66th Ordinary Session of the

Council of Ministers in Abuja, Nigeria on August 19th, 2011.109

In 2009 WATRA identified access to submarine cables as a pressing priority of its members

and requested the assistance of the ITU in developing guidelines and regulations for access to

submarine cables. The ITU funded the preparation of draft guidelines and regulation by

consultants guided by the ECOWAS Commission and the WATRA Secretariat. The draft

documents were reviewed, discussed and validated during a WATRA workshop in Monrovia,

Liberia in December 2010 and at the ECOWAS National ICT Experts consultative meeting

in Lom, Togo in March 2011. The WATRA Guidelines on access to submarine cables were

adopted at the 9th WATRA Annual General Assembly in Accra, Ghana in June 2011. The

ECOWAS Regulation on Condition for Access to Submarine Cables Landing Stations was

adopted at the 11th Meeting of ECOWAS Ministers of Telecommunication and ICTs in

Yamoussoukro, Cte dIvoire on 14 October 2011.110

The Regulations seek to ensure:

39

The grant of licenses to new cable landing stations (CLS);

Amendment of the existing licenses of CLS operators to conform to open access,

nondiscrimination and prohibition of anti-competitive practices on the international

capacity access market;

Withdrawal of restrictions on access to international capacities in licenses or

authorizations previously issued;

Fair and effective access to available capacity on all cable systems operated by an

SMP Operator are provided eligible operators upon request;

Provision by CLS operators of co-location and backhaul services to eligible operators;

Maintenance of a reasonable balance between the need to encourage competition and

preserve a reasonable return on the investments made for the co-location;

Publication by CLS operators of terms and conditions of all services in a Reference

Interconnect Offer;

Transparent charges for all services, operation and maintenance, in accordance with

the cost calculation framework set by the NRA;

Provision by SMP-CLS Operators of Service Level Guarantees consistent with best

practices and equivalent to those applied to their own services or to their

subsidiaries/partners; and,

Availability of equitable dispute resolution mechanisms.111

The design of terms and conditions of access to bottleneck facilities by competing

operators remains one of the most vexing regulatory tasks of NRAs within ECOWAS. 112

The

terms, conditions and pricing for access continue to be root causes of interconnection disputes

in the Region. Examples are disputes between Comium and Gamtel in The Gambia113

;

40

Areeba and Ghana Telecom114

and Ghana Telecom and Spacefon in Ghana115

; NITEL and

other GSM operators in Nigeria,116

and between Lonestar/MTN and Cellcom in Liberia.117

41

4.0 Case Study of the Cable Consortium of Liberia (CCL)

4.1 Introduction

Liberia is situated in West Africa and borders Cte dIvoir, Guinea, and Sierra Leone.

Liberias 14 year civil war engulfed the country, led to substantial loss of human lives,

massive displacement population, widespread destruction of economic and social

infrastructure and the disruption of productive and commercial activities.118

Figure 8: Map of Liberia

Source: Nations Online Project

Liberias land mass is 43,000 square miles, its population 4,092,310 with a growth rate

of 2.52%. GDP per capita is $700; growth rate is 8.1% and inflation 5.2%.119

Liberias Internet penetration rate is 3.72% and access to both fixed and cellular telephone

service 58.83%.120

42

Table 6: Demographic and economic indicators for Liberia

Source: United Nations

The Liberia Telecommunications Corporation (LTC) has historically provided

telecommunications facilities and services in Liberia. The Corporation was created by the

LTC Act 1973 granting it the monopoly to provide telecommunications facilities and services

nationally. The LTC Amendment Act 1976 established LTC as a public corporation under the

supervision of a Board of Directors. The 1978 Ministry of Posts and Telecommunications

Executive Law transformed the Ministry of Postal Affairs to the Ministry and Posts and

Telecommunications (MP&T). It transferred all policy and regulatory functions from the

LTC to the Ministry.121

Liberias civil war destroyed the telecommunications sector, resulting in a fixed teledensity of

0.06%. Mobile communications kept Liberia connected internationally during the war and post-

war communications are almost exclusively via mobile technology. Liberias mobile sector

was liberalized in 1998 and became competitive in 2003 with the introduction of two

additional mobile operators. Mobile density increased from 0.06% in 2003 to approximately

to 5% in mid-2005, well above SSA average. However, in 2003 mobile service was still a

luxury commodity for many Liberians. Internet access was also limited as 85% of users were

large multinational businesses or international organizations with VSAT-based Internet

services.122

43

Figure 9: Liberia's fixed and mobile growth rates

Source: ITU

4.2 Liberias Telecom Sector Reform

Liberia, like Benin, The Gambia and Sierra Leone, issued licenses for competition in the

mobile sector without the enabling legal framework.123

In 1998 the MP&T licensed I-COM

Communications (I-COM) and OMEGA Communications to offer mobile services via TDMA

and GSM technology respectively. LibNet Inc. and Data Technology were also licensed as ISPs

while UN Agencies, NGOs and banks were licensed to install and operate VASAT terminals for

their humanitarian and corporate uses. In 1999, I-COM ceased operations and Atlantic

Wireless Inc. (AWI), was licensed as a mobile operator using the AMPS standard. OMEGAs

license was withdrawn due to license performance conditions and Lonestar Communications

(Lonestar) granted the exclusive license to provide GSM service. By November 2001

Lonestars subscribers exceeded the number of LTCs customers, making Lonestar the largest

provider of telecommunications services in Liberia.124

The ITU prioritized assistance to Liberia, Sierra Leone and The Gambia; the three countries

without a formal regulatory body.125

The ITU conducted the first workshop on Telecom

Reform Policy in Liberia from April 11th

15th, 2000. The focus was developing an affective

telecommunications policy for a competitive environment, and formulation of both a

Telecommunications Improvement Policy for Liberia and Posts and Telecommunications

44

Policy Statement.126

Although funds were allocated in 2003 to complete the sector reform

assistance covering legal framework, spectrum monitoring and interconnection, the assistance

was cancelled due to security concerns.127

President Charles Taylor resigned on August 11, 2003 and the Accra Comprehensive Peace

Agreement of August 18, 2003 created the National Transitional Government of Liberia

(NTGL) to replace the Government of Liberia.128

The Bank approved Liberias Country

Reengagement Note (CRN) in 2004 and provided $0.85 million to the NTGL to create an

interim regulatory framework comprising of a National Telecom Policy & Strategy and

interim LTA (ILTA) legislation.129

The National Telecom Policy & Strategy presented the

NTGLs vision of sector liberalization to improve and increase telecommunications services

and develop an open, competitive market regulated by an independent NRA that reported to

the Head of State.130

Table 7: World Bank telecom technical assistance program to the NTGL

Source: World Bank

The Interim Liberia Telecommunications Authority (ILTA) was created by enactment of Bill

18 by the National Transitional Legislative Assembly (NTLA) on September 5, 2005. Bill 18

amended the Public Authorities Law creating the LTC, the Executive Law creating the

MP&T, and established an interim regulatory framework for telecommunications. The

45

purpose was to prepare a new telecommunications law and establish a longer-term regulatory

framework to recommend to the elected Government. It also established and clarified the

framework for regulation of the telecommunications sector prior to the assumption of powers

by the regulatory authority to be created under the new telecommunications law.131

In September 2007 the Telecommunications Act of 2007 (Telecoms Act 2007) was enacted

into law repealing Act No.18. The new Act established the legislative framework for policy

making, regulation and development of the Liberian telecommunications sector. The Act

defined the responsibility of the MP&T to develop policies for the telecommunications sector

in consultation with the LTA and support the establishment of a regulatory environment for

growth of the sector.132

The Telecom Act 2007 established the LTA as an independent

Commission of five Commissioners, nominated by the President and confirmed by the

Liberian Senate. One Commissioner is designated Chairman of the Commission and all

Commissioners are appointed to a four year term which may be renewed for another four

year term.133

Figure 10: Decline in Liberia's fixed-line infrastructure

Source: UN Data

Between August and October 2003 the MP&T issued 15 GSM licenses, in many cases, with

overlapping frequencies. A Presidential Telecommunications Committee was established by

46

the NTGL to review the issuance of licenses and revise the spectrum plan.134

The Banks

PPIAF provided support to Liberias elected government commencing 2007 to develop a

telecommunications fee and taxation policy, promote competition and improve access to ICT

services. A PPIAF-funded telecommunications sector fiscal-study subsequently led to Bank

support for:

Finalization of rationalized spectrum allocation;

Formulation of sustainable sector taxation;

Formulation of a methodology and license fee schedule for mobile operators;

Standardization of the licenses granted to existing mobile operators; and,

Issuance of GSM licenses.135

On April 24, 2009 four GSM licenses were issued operators for US$65 million in license fees

for 15-year licenses with payments schedule in installments until 2019.136

Licenses of the

three new operators (Libercell, Comium and Cellcom) are alleged to have been hurried,

opaque and without public tender or public assessment of capacity to perform; leading to

accusations of bias and corruption.137

Other support outcomes were finalization of:

Licensing and Authorization Regulations LTA-REG-001, September 2010;

Interconnection Regulations 2009 LTA-REG-003, September 2010;

Regulations for the Treatment of Confidentiality, Dispute Resolution, Compliance,

and Enforcement 2009 LTA REG-0002, March 1, 2010;

Resettlement Policy Framework for the Liberia ACE Cable Landing Project,

November 2010; and,

Environmental and Social Management Framework for the Liberia ACE Cable

Landing Project, November 2010.138

47

Table 8: Liberia's GSM networks Operator License Service MHz Owners

Lonestar Cell 2000 2001 907-

915

PLC Investments (60%), originally Investcom Global

(BVI) now MTN Group (40%)

Libercell 2004 2004 890-

895

Atlantic Wireless International (45%) and HiTS

Telecom (55%)

Comium 2004 2004 902-

902

Comium Group (Lebanon) apparently owned by

Dalloul family

Cellcom 2004 2004 895-

902

Cellcom Telecommunications Limited (BVI) in turn

owned by Emerging Capital Partners (Washington,

DC), Cellcom (USA) LLC (Washington, DC) and

Dialogue Limited (Larnaca, Cyprus). Source: Southerland

The LTA also issued the:

Tariff Moratorium Order LTA-TMO-003: placing a moratorium on tariff increases for

all services offered by GSM operators and Internet Service Providers (ISPs);139

Interconnection Tariff Order, LTAITO002A: mandating all licensed operators,

upon request from another licensed operator, to enter into agreements to establish and

maintain interconnection between networks and provide all other technically and

economically feasible related facilities necessary at established interconnection price

caps, pending the issuance of Interconnection Regulations by the LTA;140

LTA EXEMPTION ORDER-0004/EXO-01/09-16-11: exempts LTC (branded as

Libtelco in 2006) from requirements to pay license fees and defines its rights and

responsibilities as the National Operator;141 and,

Regulations on International Traffic, LTA-REG-0005: instituted policies and systems

to minimize fraud/grey routing and discourage unfair market practices by regulating

international call traffic to ensure revenues therefrom are appropriately accounted

for.142

48

Table 9: LTA 2008 Interconnection price caps

NO. SERVICE TYPES FLOOR PRICE CEILING PRICE

1 Mobile to Mobile $0.06 $0.10

2 Fixed Line to Fixed Line $0.02 $0.04

3 Mobile to Fixed Line $0.06 $0.10

4 Fixed Line to Mobile $0.04 $0.06

Price Caps: Floor is the lowest price to charge and the Ceiling is the highest price to charge Source: LTA

With the assistance of WARCIP Liberia Project funded consultants, the LTA in 2012

undertook a review of Licensing and Authorization Regulations, LTA-REG-001, and drafting

of a revised licensing and authorization regime. The purposes was to transition from a

technology-specific to a technology-neutral licensing framework, considering new market

realities introduced by the ACE cable system, and ensure conformity with the ECOWAS

Supplementary Acts.143

Draft Licensing Fees Regulations were also prepared to clarify and

confirm the obligations of licensees to pay licensing fees determined by the LTA pursuant to

the Telecom Act 2007.144

Draft Quality of Service identifying minimum Quality of Service

Standards to be met by service providers through periodic performance measurement reports.

For the full benefit of international broadband connectivity provided by ACE to be realized

an open and non-discriminatory access regime, consistent with loan contractual

obligations145

, had to be implemented. The Telecom Act 2007 requires the LTA to determine

dominant operators in different telecom markets and if they, or may in future, abuse that

position by preventing competition in relevant markets. In considering the relevant market for

the CCL, it became apparent that changes to the Interconnection Regulations 2009 were

required to give effect to a finding of dominance and the principle of open access.146

Amendments were also required to ensure consistency and compliance with the ECOWAS

49

Supplementary Act A/SA.2/01/07 and give effect to applicable remedies for dominant

licensed providers in markets relevant to interconnection.147

Amended Interconnection Regulations were prepared to incorporate interconnection,

facilities-leasing and access; consistent with the definition of interconnection in both the

Act and Interconnection Regulations which refer to facilities leasing and granting access.

The amended regulations also highlight obligations of dominant operators to provide

interconnection upon request and provide access in terms of facilities-leasing and/or co-

location. The inclusion of co-location in the access obligations confirms the extent of

access anticipated under the Act.148

Despite its importance, although drafted in 2012, the draft Regulations have not been

consulted on, finalized, or adopted by the LTA. This undermines the authority of the LTA

and supports perceptions that the LTA is unable to provide the leadership and environment

for the resolution of interconnection disputes and deliver on its regulatory responsibilities.149

The LTA in 2010 implemented a new National Numbering Plan (NNP) consistent with the

ITUs recommendation E.164. The NNP was implemented without the accompanying

Numbering Regulations. Therefore, in 2012 a draft Numbering Regulation was prepared to

validate the NNP, promote investment, facilitate competition and protect customers.150

The

LTA also prepared draft Siting Regulations on Telecommunications Infrastructure

Deployment to provide general conditions and guidelines on the deployment of telecoms

infrastructure.151

In 2013 the draft Regulations on Penalties, LTA-REG-0006, issued for

50

consultations, identified specific offences and penalties, fines and sanctions imposable on

licensees for violations of license conditions, regulations, rules and orders of the LTA.152

These draft regulations have been pending for two years or more and in that period, the LTA

has been unable to conduct required consultations to finalize the instruments designed to

improve sector interactions and governance. This strengthens sector perception of the LTA as

weak and ineffective153

although, the LTA has determined to finalize and adopt these

regulations by June 2014.154

4.3 The Cable Consortium of Liberia (CCL)

Under the WARCIP Liberia Project, Liberia joined the ACE Consortium and the Cable

Consortium of Liberia (CCL) was incorporated as a public-private partnership (PPP)

comprising Lonestar (10%), Cellcom (10%), Libtelco (20%) and the Government of Liberia

(60%). The CCL signed the ACE Construction & Maintenance Agreement on June 5, 2010

and formalized Liberias membership to ACE.155 The ACE submarine cable landed in

Monrovia on November 3, 2010156

and the ACE cable system was inaugurated on December

19, 2012 providing Liberia with its first international broadband connectivity.157

To implement WARCIP Liberia Project, the Bank and the Government of Liberia (GoL) on

February 8th

, 2010 signed the Financing Agreement for the WARCIP Liberia Project. The

Agreement provided for a 40-year low interest loan of $25.6 million at a service charge of

of 1% annually to implement the Project.

51

In the design of the Project, the Bank identified implementation capacity and sustainability as

key project risks, due to the limited perceived capacity of policy makers and the inexperience

of the LTA with open access regimes.158

$3.32 million was allocated by the Project to support

the development of an enabling environment for the ACE cable landing to mitigate this risk.

This included building the capacity of the MP&T to develop and implement sectorial

policies, and support to strengthen the LTAs capability to regulate the sector.159

In 2011 under Project funding, the LTA conducted a market study and determined that the

relevant market for the CCL was the market for wholesale capacity and access to

international fibre-optic submarine cables. The CCL is the only licensed cable landing station

operator and no other technically feasible alternative is available. Considering the relevant

market, the LTA considered that:

High, non-transitory barriers to entry existed due to difficulty in securing investment

funding for a second landing point;

The lack of effective competition behind the barriers to entry with no credible

competitor for international cables; and,

Insufficiency of Liberias telecommunications/Competition law to resolve possible

market failures because application of the LTAs ex post powers to resolve abuses of

dominance would result in substantial damage to downstream retail markets before

the abuse was rectified.160

52

Figure 11: Market Analysis process

Source: Incyte Consulting

CCLs perceived market share of 100% exceeded the threshold for a presumption of

dominance and control of an essential facility within the relevant market combined with

anticipated pricing behavior strongly supported the hypothesis of dominance. Additionally,

six out of 11 other relevant factors* considered were significant indicators of dominance. The

LTA therefore concluded that CCL was dominant in the market for wholesale capacity and

access to international fibre-optic submarine cables and subject to remedies for dominance.161

The Telecom Act 2007162

and the Interconnection Regulations 2009163

both define a

dominant service provider as a service provider designated to have significant market power

in one or more telecommunications service markets. The ECOWAS Regulations on Access to

Submarine Cables164

adopt the definition of Supplementary Act A/SA.2/01/07 that a

53

company, either on its own or with other companies, holds a dominant position when it has

the capacity to act independent of its competitors, customers and consumers.165

Table 10: Value-chain of related markets relevant to the CCL

Source: Incyte Consulting

4.4 Remedies for CCLs Dominance

The Telecommunications Act 2007 provides that dominant undertakings must publish a

Reference Interconnection Offer (RIO), which should be cost-based and comply with all

regulations, rules and orders of the LTA.166

Dominant providers must also provide access to

network elements, physical infrastructure, ducts and masts, and network software systems.167

Their tariffs, in their markets of dominance, must be approved by the LTA and they may be

required to participate in market studies to develop tariff methods.168

In this regard, the following remedies in Table 10 were considered appropriate:

54

Table 11: Proposed remedies for CCLs dominance

Source: Incyte Consulting

On October 1, 2012 following appropriate consultations, the LTA declared the CCL to be

dominant in the market for wholesale capacity on, and access to, international fibre-optic

submarine cables. The decision requires CCL to set prices for wholesale capacity on the basis

of actual or predicted costs for the first three years using a methodology developed by LTA.

The first review of the caps will occur six months after CCLs RFCS and annually

subsequently. The price caps are as follows:169

Table 12: Equivalent price per E1 per month (US$) based on capacity commitment Wholesale

capacity ordered

Year after Ready for Commercial Service Date

1 2 3

STM1 2,030 1,347 1,006

E3 3,552 2,358 1,761

E1 8,524 5,659 4,227 Source: LTA

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4.5 Analysis

The LTAs interconnection regulations require dominant service providers to grant access to

infrastructure and network elements. However, specific regulations may be required for

access to infrastructure required for distribution of CCLs capacity on cost-based prices. This

includes LTCs Monrovia fibre-ring duct system, to avoid inhibiting Internet access and

diffusion of ICTs. LTA guidelines specifying the circumstances for infrastructure sharing and

imposition of penalties for non-compliance would also be helpful.170

The LTA is criticized because since it established the obligation on CCL to publish a RIO on

its website, the CCL has not published a public offer to date. The CCL has also not been

licensed, although it commenced operations in January 2013. Also, international connectivity

prices on the Liberian market for business data packages are substantially lower than the

price caps imposed by the LTA and continue to decline driven by competition from

Novafone, which recently bought. 5% share in the CCL. However, prices for retail data

packages have not declined substantially. The LTA also needs to address the monopoly

position of the LTC on the fiber backhaul for which it charges substantially more than the

cost for supply of fiber backhaul services. ISPs and other smaller operators are not supplied

capacity directly but are supplied capacity through CCL shareholders because CCL does not

have a de-multiplexer to supply capacity below a STM1.171

This was addressed during a

Banks Mission to Liberia in January 2014 when the Bank approved a request from the CCL

to purchase a de-multiplexer to supply E1 and lower capacity to ISPs.172

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Table 13: WARCIP Liberia Project M&E Results

Source: WARCIP Liberia Project

It is argued that CCL market share is 0% on the wholesale capacity and access to

international fibre-optic submarine cables markets because only its shareholders have been

active in that market, negating the value of the price caps. Reduction of wholesale prices for

capacity far below the LTA price caps set indicates reasonable competition in this market.

The LTA should consider the potential of CCLs shareholders being jointly dominant in this

market and the necessity for price caps on the retail markets. Remedies for LTCs

monopolistic position on the Monrovia fibre-ring providing backhaul services and the market

for leased lines should also be considered. Further market analysis of all telecommunications

market segments must be conducted to identify other access bottlenecks, introduce more

transparency and ensure effective competition.173

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5.0 Chapter 5: Conclusion

5.1 Summary

Over the last decade the ICT/telecommunications sector has achieved tremendous outcomes

and grown phenomenally, driven by a revolution in telecommunications technology

combined with liberalization and telecommunications sector reform. The transformational

opportunities of ICT can only be realized to the extent that regulatory frameworks create an

enabling environment supportive of cultivating investment in, and widespread diffusion of,

ICTs. Liberalized telecommunications markets necessitate the interconnection of rival

networks through regulatory interventions mandating that incumbents provide network access

to new entrants to enhance network externalities.

Essential facilities are critical inputs to retail production at the wholesale level of the

production chain and are essential inputs in the supply of retail products or services.

Monopoly control of such facilities can create incentives for anti-competitive behavior to

repress competition and create artificial barriers for rivals in the market for the final products

sold to consumers. Telecommunications sector liberalization has led to two types of markets:

provision of services to end users market and provision of access to facilities market to

provide service to consumers. NRAs must therefore ensure that the respective access markets

develop and dominant incumbents are prevented from using their control over access

facilities to stifle development of competition and new services. However, the essential

facilities doctrine is only justified when there is a genuine stranglehold on the related

market.

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ECOWAS has commenced several infrastructure projects and activities in cooperation with

the NEPAD, EU, the Bank, USAID and other donors. Sector reform milestones achieved

include regional telecommunications policy and regulatory harmonization, establishment of a

Common ICT Market and Supplementary Acts and Regulation on Access to Submarine

Cables.

The Bank, ITU and other donors have assisted Liberia implement major telecom sector

reforms and develop an enabling regulatory environment largely compliant with the

ECOWAS framework. This assistance has been critical in successfully implementing

Liberias participation in the ACE cable consortium and creating the open, transparent and

non-discriminatory environment for the success of the CCL. However, the LTA must take

urgent steps to reassert its sector leadership fulfillment of its regulatory responsibilities. This

is crucial with reference to interconnection and access to essential facilities.

5.2 Recommendations