Market Reform and Regulation
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score, which is then weighted by 25 percent to get an overall country score. Data were obtained from NRAs and ITU regulatory studies. It is clear from figure 3.8 that the performance of telecommunications regulatory frameworks varies considerably across Africa. A country’s regulatory system requires more than just institutional change for it to be effective. How such institutions are established and managed in large part determines how well they function.
Regulatory Issues Countries across the region have followed a similar path of sector liberalization, albeit at different speeds. NRAs therefore face many common challenges. Three of the most important ones are interconnection regulations, universal services, and radio-spectrum management. Operators are required to interconnect to one another by law and as a condition of their license, but the charging arrangements for this interconnection are often left either to commercial negotiations or are subject to regulation.21 Commercial negotiations usually result in termination rates being set well above cost and far above the rate charged for terminating calls on fixed networks. This raises retail prices and may have an adverse impact on competition (see chapter 2 and the first section of this chapter). These issues have challenged regulatory agencies, which have often lacked the necessary legal and technical tools to resolve them. MTRs are regulated in most high-income countries where there is an interconnection payment system.22 Regulators in Africa have also moved in the same direction by imposing cost-oriented regulatory controls on MTRs. One of the first of these was in Botswana, where the regulator resolved a dispute between the two mobile operators by imposing a benchmark rate based on the termination charges of several European mobile operators, arguing that attempts to derive rates based on costs in Botswana would have taken too much time.23 More recently, Kenya and Tanzania have sought to control mobile interconnection charges by establishing a rate cap. In Tanzania, the NRA made a decision to reduce MTRs gradually on an annual basis (TCRA 2004). In Kenya, the NRA issued a determination on interconnection charges in 2007 and then reduced them further in 2010 (Communications Commission of Kenya 2010). Nigeria’s NRA has also intervened several times by establishing MTR targets (Nigerian Communications Commission 2006). The regulation of MTRs is gradually being brought within a more general competition regulatory framework, following the evolution of regulation seen in Europe since liberalization began. This starts with an assessment of