The Government has gone from being more or less completely uninterested in the use of ICT to making a complete commitment to it. However as an authoritarian Government it wishes to retain control of all parts of the economy and is only reluctantly allowing market openings at the margins. Its considerable diaspora runs e-commerce web sites outside of the country but is not really allowed to invest in its own country.

For outsiders, it is hard to understand why the Government does not create a more fully liberalised economy, particularly in the field of internet and telecoms. If liberalised, the market would almost certainly be 2-3 times its current size. The Government’s ambitious broadband plans which it says need to be in place before it will consider privatising again, will be impressive if delivered but on one level are simply delaying the inevitable day. Direct delivery by Government is not the only route for delivering wider access.

But there is no opportunity for Ethiopians to discuss these issues. Decisions are taken behind closed doors and rarely debated. Privately policy-makers and key players take the rather patrician view that Ethiopians would be incapable of running the private sector companies that might emerge and that the private sector would rip everybody off. On the rare occasions when there is a discussion about the nationwide broadband plan, those involved seem reluctant to answer searching questions or to monitor the success of the initiative as it is rolled out.

ETC has recently introduced a broadband service as part of its grand strategy. A 512K download speed service costs USD1511 a month after a USD176 set-up fee. This is still expensive even by continental standards and is aimed at corporate customers and cyber-cafes. However, its main advantage is that it is cheaper than a leased line and a number of “low-end” leased line users have migrated downwards. Initial user reports are positive and it seems to be reliable.

ETC has also computerised its internal service processes, including the 97 call system and billing. Despite these improvements, it is proving a massive task turning around the organisation’s culture. Fault response times can often be calculated in months rather than weeks and there is still an extremely long waiting time for new fixed lines.

ETC’s plan to build out a national fibre infrastructure (see interview with its CEO, Tesfaye Biru below) has seen 4000 laid already. The new CEO is the former Vice President of Addis Ababa University and is widely acknowledged to be energetic and ambitious.

It is supporting the Government’s introduction of Wiridanet and Schoolnet. Wiridanet will connect 550 Wiridas, the administrative unit for local government. It has already been used for video conferencing during the recently disputed elections. Schoolnet will eventually connect 550 high schools. It is being used to deliver classroom content like maths teaching. This development is being funded out of the dividend ETC would have paid to Government and from World Bank funding. It is also connecting up 15,000 villages across the country, a task it says will complete in just over two years time.

Separately (but linked to this plan), the Ethiopian ICT Development Authority will call for tenders to supply content and services to make use of the broadband network and will put public funding alongside private investment for the tenders it accepts. In other words, ETC will offer opportunities at the services and applications layer but remain in control of the physical infrastructure.

This approach seems part of a broader strategy to open up at the retail level whilst retaining overall control. In the recent past, Ethiopia has been unique in having long queues of people waiting to obtain mobiles and apparently there is some depth of popular feeling about this issue. ETC’s response has been to appoint five mobile retailers who will compete with each other to provide mobile services. But since they all obtain service from the same supplier (ETC), this is unlikely to produce much price competition, even though it may improve service.

ETC’s attempts to meet the high level of mobile demand has clearly caused its problems at the equipment procurement end of the process. It has recently cancelled a contract with Chinese-owned ZTE who were meant to be supplying an capacity for an extra 200,000 subscribers. The equipment was incompatible with previous equipment supplied by Ericsson.

Whilst the national broadband plan is admirable, it means that ETC has difficulty meeting market demand. In newly built areas near to the capital Addis Ababa, they are not putting in phone connections when new houses are built. As a result, new householders have to wait 6 months to a year to get a line installed. But where infrastructure is in place, service is provided very quickly. As one observer of the company’s performance told us:”It’s a matter of priorities. The company can’t expand into the rural areas and the city as well.”

And there are also a number of troubling questions about the long-term viability of the national broadband plan. If it does not lower current broadband access rates, how will those in low incomes in the villages be able to afford services, whether voice or data-based? And the company has 8,000 employees which means it has to generate sufficient income to pay all their salaries. In order to offer a low-price service that lots of people will use, you need to have a low cost base.

Given the current scale of its fixed lines and mobile subscribers, it could probably operate with about half this number of employees. On my visit to ETC, the lift was not working and as I walked up seven flights of stairs, I noted that their was a women on each landing employed to sweep one flight of stairs.

Privatisation has been put on hold and looks like being a long way away. Its CEO implies in the interview below that it may start in just over two years but sceptics think it may take a change of Government which makes it look more like five years. The opposition parties advocated liberalisation of the telecopms sector and were clearly more in favour of liberal democracy.

ETC is in the process of separating out the different parts of the business into profit centres with a clear distinction between the transport and service access layers. However, you get the feeling that ETC’s CEO is tackling the task of changing the company with “two hands tied behind his back” by the Government: he can’t introduce external expertise and capital and reducing the workforce is a political “no-go” area.

The regulator has the strangest task of any regulator in Africa. It really only has one company to regulate and all the decisions it might take are actually taken by Government through its relationship with ETC. As one local observer told us:”What is there for them to do? The numbering plan and frequency monitoring?” A small number of large international organisations have been given permission to use VSATs.

In the meantime, The regulator has recently issued guidelines anticipating the legalisation of ISPs. But beyond that, ETC faces competition in almost no significant area of its business and there is almost no private sector ICT business except in the computing sector. The latter includes solutions providers and cabling companies. A typical example is Microsan Solutions which has worked with Cisco and Business Connexions on the ETC broadband contract. Siemens also has a presence locally for the same contract.

After initial hostility to cyber-cafes and telecentres, the Government changed the law to allow them. The change of heart seems to have largely come from pressure from stakeholders and donors pushing access to ICTs. It was also beginning to happen and the businesses were run “underground”. Now they pay a small registration fee to the regulator, the Ethiopian Telecommunications Authority. They are not allowed to offer VoIP calling services but there are still grey market providers but they do not advertise their presence.

There are estimated to be between 100 cyber-cafes in Addis Ababa and they charge between 10 cents and 25-75 cents a minute, the more expensive rates being found in international hotels. Users seem to consist largely of university students, high school students and civil servants who do not have access in their own offices. There are are a small number of cyber-cafes in larger towns outside the capital.

Few universities or government organisations have such access but this is all about to change. As part of a World Bank-funded programme (Public Sector Capacity Building), there is an ICT element. This involves computerising areas of government like tax collection (Asycouda, part of the tax reform programme) and customs. The latter has already completed the process and satisfied users were interviewed recently on Ethiopian TV saying that things that used to take 1-2 months now take just a day and that they can make requests online rather than going in person. It also includes Wiradanet and Schoolnet mentioned above.

The British Council is involved in ICT through 4 telecentres including Axum and Gondar. They offer basic cyber-café services including e-mail, fax, internet, photocopying and computer training. The centres are apparently well used although there have been issues with management due to staff turnover and local government re-organisation.

The telecentres are funded by the British Council and the British Embassy. The Ethiopan Science and Technology Commission provides technical support and local government provides office space (in public libraries) and human resources. These telecentres have encouraged the opening of private cyber-cafes in several places including Axum.

UNESCO is offering a slightly wider range of services at the five centres it supports in places like Hara and Lalibello. The centre in the latter is run by CDRE which is an umbrella for 200 NGOs and is currently the most heavily used of the centres. The centre in Modro combines internet access with community radio. It has also funded E-FOSSNET, the Ethiopian Open Source organisation for one year. In addition, it is funding the Institute of Ethiopian Studies to digitise their collection of historic photographs.

One obstacle to greater use of ICT is the difficulties posed by creating Amharic (the script used by Ethiopians) versions of keyboards. Unfortunately there are several versions in existence and they are not compatible which sometimes makes transferring work from one machine to another a “hit-and-miss” affair.

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Interview with ETC’s CEO Tesfaye Biru: “We are struggling with service quality in terms of coverage and delivery”

When did you start at ETC and what were you employed to do?

I joined ETC in January 2003. The objective I was set was to sort the company out. The Ethiopian telecoms sector was not in good shape. There were lots of illegal operators bypassing the network using VoIP and VSAT. There were also initiatives that were part of the National Development Plan to deploy infrastructure nationally with a high level of urgency. In addition, I was employed as part of the search for a private equity partner. By then the process was in a state of limbo because of the lack of interest from a good partner. The Government made the decision to overhaul the company and wanted someone from outside the company to do it.

What did you do before you joined ETC?

I was at Addis Ababa teaching information science and information technology. I was also appointed Vice-President of the University and in that capacity was responsible for rolling out a network there.

What did you find at ETC when you arrived?

I found the technology deployed was not following the trend. We may not be ready for a Next Generation Network but we should make use of readily available technologies.

All the systems were manual and extremely backward. We did not respond to best practice.

There was a low level of staff motivation. We are still struggling with service quality in terms of coverage and delivery. And it was right that the Government wanted to address all these issues.

We have got to provide a world class level of service. We’re now introducing Key Performance Indicators (KPIs) and service management provision. We’re working towards an ISO standard.

What has happened to the privatisation process?

We looked at why it failed in the time required. The decision to privatise was taken to bring in technology and management capability and to move the sector forward aggressively. All the candidates who expressed an interest did not bring these qualities. But there was a genuine desire to go for it.

We concluded that unless you’re strategic yourself, you won’t find that kind of partner. We did a SWOT analysis and identified many weaknesses in ourselves and this was the main one.

A broader question needed to be addressed: was it privatisation or competition that was the issue? We need to give customers a choice and respond to needs. Therefore we need to bring in competition to have a strong telecoms sector. Therefore what did we need to do to prepare for that?

Two things stood out as important: the need for a strong regulatory framework and basic infrastructure. As ETC, we took responsibility for deploying infrastructure. There were roles needed: the Government as policy-maker; the regulator to regulate; and ourselves to deliver infrastructure. The three roles were there but they were not active enough.

So who will compete with ETC?

The regulator has just published the regulations covering ISPs and call centres. ISPs can do anything except offer an international gateway. They can either rent infrastructure from us or build it for themselves.

We are liberalising the lower levels of the value chain. Transport infrastructure will be held by the Government for some time to come because of the heavy investment in infrastructure.

The Government takes the view that access to infrastructure is a basic human right. It’s as basic a need as roads. Wherever there are people, they must have access within a short period of time.

How much have you been investing?

For the last two years we’ve been spending USD3-4 million per year. We’re a profitable company but just not as much as we should be.

What you need to understand is that we’re a separate company from Government and behave like one. We use our dividend to re-invest in the basic infrastructure roll-out. The Government pays us for services and we pay taxes to Government.

What’s happening with mobiles? Ethiopia’s quite unusual in African terms because mobile still lags behind fixed lines.

Mobile is overtaking fixed lines in subscription terms.

We have introduced a restructuring of the business. We’ve separated out the transport layer and mobiles and the ISP are service and access layers. We now have separate business units that trade within the company. Each business unit is a profit centre. We’re working with consultants to sort out these things.

Our retail shops compete with each other. Also our fixed business unit competes with our mobile unit. We want to have a model of inter-company competition.

So when will there be an open market?

A full-blown open market is predicated on two things: the existence of a basic national infrastructure and the readiness of the regulatory framework.

To achieve a basic national infrastructure, the Government has asked us to provide services to 15,000 rural villages and this will complete the Universal Access task. Then the company will be left on its own.

When will that task be complete?

This year we plan to connect up 5,000 villages and at that rate it will take us another two years.

We’ve converted much of what microwave to fibre. The backbone is now fibre and we’ve laid 4,000 kms of it in the last 4-5 months. The local community does the trenching in their own area.

With all this fibre you must be ready to introduce a Next Generation Network?

We’re moving in that direction. In Addis Ababa we now have a network in place that offers access and transport.

We’ve also a school with a graduate programme where we are teaching IP skills and about an IP-related future.

What’s the volume of calls going via IP?

I don’t have the exact figure but the proportion is increasing. Even mobile traffic is using the fibre backbone so the proportion will grow much larger in the future.

What about international fibre connections?

ETC is a member of EASSy. At present we have a high-capacity microwave link to Sudan but by October or November this we will have installed fibre to join up with the fibre in Sudan and this goes all the way through to Jeddah.

We’re working with Djibouti and have laid fibre to the border. We’ve not managed to complete yet because we need to agree the business model with them. We’re looking a Special Purpose Vehicle to achieve a dedicated line out to the FLAG international fibre.

What’s your contribution to EASSy?

We’re studying that at the moment. We started at USD2.5 million. The issue is one of backhaul countries and the landing point countries. There must be affordable prices. We don’t want the landing station countries to become rent collectors. If we can achieve open access, we might raise our investment.

Who’s your current satellite provider?

Intelsat. We were one of the original shareholder consortium and we have a special rate.

What impact will fibre have on your prices?

According to our strategy, we want to be able to offer a no-downtime network so we’ll need a high level of redundancy. Obviously it represents a great deal more capacity at a low price.

What’s the length of your current satellite contracts?

Our original satellite contract was for 15 years but as we add new needs we have rolling contracts.

Who will use all this new connectivity capacity?

Applications and services need to come. We’re working with Government on a number of roll-outs including Wiradanet and Schoolnet. This will involve bundling a set of services for those users. So why not use it for digital cinema? As an agricultural extension information service? A news gathering network?

So you’re quite close to “triple-play”?

More or less (laughs).