Rwanda’s stuttering wholesale 4G telecoms network
South Africa believes its own scheme avoids adverse consequences
The Rwandan Government has been building a single 4G wholesale open-access telecoms network in a joint venture with South Korean operator Korea Telecom (KT).
The joint-venture company is the sole wholesaler of 4G LTE in the country. The company has an exclusive licence for 25 years. The company was allocated spectrum in the 800 MHz and 1800 MHz bands, which will be available for access by retail providers of LTE-based services.
KT controls the management of the firm in exchange for an initial investment of USD140 million under the terms of the contract.
The Rwandan government’s 25-year-term equity investment comprises the provision of access to its national fibre-optic networks and spectrum, as well as administrative and other support.
Construction began in 2014, and the network was launched as planned in late 2014 in the capital Kigali.
The joint-venture company, initially named Olleh Rwanda Networks, changed its name to KT Rwanda Networks in 2016.
It was planned that its network would reach 95 per cent of the population (with broadband penetration rate of at least 40 per cent) by 2017, and universal access by 2020.
The rationale for a national network was that it would enhance broadband coverage and speed. The Government believed that the network would reduce costs to end users and support innovation that would drive increased usage through better content and applications. The network would make broadband services available in rural and remote areas.
KT’s chairman and former CEO Suk-Chae Lee pointed out that developing countries should take advantage of broadband because they were not impeded by legacy industries, and recommended a public-private partnership model such as the one KT was using in Rwanda to finance it.
A single wholesale wireless network operator model has been considered in several countries. To date, however, only in Rwanda has there been any actual implementation of the model.
Rwanda is a relatively small country with a population of some eleven million in an area of about twenty-six thousand square kilometres.
It now appears, despite the confident predictions in Rwanda at inception of the scheme, that the rate of adoption of KT’s flagship 4G LTE service has been very low.
By February 2015, there was only a thousand subscribers for 4G LTE in Rwanda, according to data from the utilities regulatory authority.
Many Rwandans apparently prefer to stick with 3G despite the speed edge that 4G LTE has. Consumers seem to prefer affordable broadband to high speed.
The low adoption of 4G in Rwanda was largely attributed to the fact that the product entered the market at a high price.
Since the open access 4G network was launched late in 2014, the retail price of 4G mobile broadband service has stayed flat, with the three major mobile operators all charging a similar price.
There was apparently no sign that mobile broadband services had become more affordable, according to data from the Rwanda telecoms regulator’s website.
To the extent that retail companies sold 4G services, they all had the same wholesale cost. While there had been several reductions in wholesale prices, they had not translated into lower retail prices on a consistent basis.
Yet retailers have reportedly said they earn almost nothing from 4G packages. The mark-up they charge was low and their retail package prices reflected the high wholesale price at which KT supplied the 4G product to them.
In 2016, the wholesaler initiated a 30 per cent reduction. But 4G was still seen as expensive compared with other options like 3G, which was apparently also competitive in speed.
This had shaped 4G’s reputation as an expensive option, a perception KT reportedly has struggled to change.
KT had banked on Rwanda’s three telecoms majors to drive 4G.
But the market leader MTN (for example) had its own 3G product to sell to its customers. Although 4G is one of the data options on its bundles, when customers opt for it, the signal keeps fluctuating back to 3G, which the company attributed to the fact that its 3G signal is still stronger than KT’s 4G.
Significantly, KT was the only player allowed to invest in 4G-enabled technologies. No 4G spectrum is allocated to retail operators.
Operators who wish to provide 4G must supply it through KT’s wholesale network. This has naturally caused no small unease among retail operators, who have called for a review of the policy.
The global club of mobile network operators, the GSMA, warns that launching a network is just a first step. In July 2017, it diagnosed that the Rwanda government was unlikely to achieve its coverage, price and competition goals for the network.
In mid-2016 the network was indeed available in 25 out of Rwanda’s 30 districts, but population coverage was estimated to be only about 30 per cent.
Progress by mid-2017 indicated that it was unlikely that the original coverage target of 95 per cent would be achieved by the end of the year.
In order to retail the wholesale 4G services they buy from KT, the retail operators are commercially inclined (but not obliged) to promote 4G services.
Although retail operators do not operate the 4G network, consumer perception ironically was that retailers were responsible for any problems with 4G services.
Although the 4G product was introduced with much publicity, 3G still dominates the market three years later.
So much so, that KT is tempted now to look for new business beyond the borders of the country.
The GSMA has stated that governments often have ambitious goals when establishing a single wholesale broadband network to deliver broadband services in their country instead of relying upon competing networks.
The KT wholesale network is a true monopoly, in that the operation of 4G infrastructure in Rwanda is reserved to KT by law.
The South African government’s draft communications bill of 2017 proposes to grant a similar monopoly privilege to South Africa’s own proposed wholesale open-access network.
The bill would reserve all high-demand spectrum for the use of the proposed wholesale network. The bill goes so far as to provide for the recall of high-demand spectrum allocated to network operators.
The South African proposal aims to mimic Rwanda’s as-yet-unproven model.
Gary Moore is a South African lawyer and senior Free Market Foundation researcher
For case studies on WOANs in Kenya, Mexico, Russia and Rwanda: http://www.freemarketfoundation.com/Article-View/case-studies-on-wireless-open-access-networks-