A proposal to restrict the number of networks which can provide international connectivity in Uganda has been criticized by industry experts who argue that it will adversely impact the growth of the Internet and national economy.
In a leaked letter to ISPs dated December 15th 2016 and seen by PC Tech Magazine, the Uganda Communications Commission (UCC) said that it had “identified a number of issues that need to be urgently addressed to facilitate the development and encourage the use of internet” and proposed a number of interventions related to local content, censorship, and network interconnection.
Proposals included in the letter would force Internet service providers (ISPs) to host their websites, databases, and other applications within the country; encourage government entities to host their electronic services within the country; and allow the Uganda Internet Exchange Point (UIXP) to connect content providers directly to ISPs.
The letter also proposes the creation of an “internet blacklist” which would restrict access to “websites, domains and IP (Internet Protocol) addresses that have information whose delivery should be restricted on the grounds that it violates the laws of Uganda.”
In what may be the most striking proposal, the UCC seeks to introduce a license for the “establishment and operation of an international gateway” which would be “limited” in number and made available to “infrastructure provider license” holders only. This license would authorize “the provision of telecommunications services that enables international communications and connectivity between Uganda and one or more foreign points.”
While the letter states that this move is intended to improve the health of the telecommunications industry, local and international experts argue that it would have a negative impact on the country.
“Introducing limitations on licensing essentially will impact on the market segments competitiveness. A less competitive market segment will impact pricing and quality of service,” warned Michuki Mwangi, Senior Development Manager for Africa at The Internet Society.
“International best practices and experience has shown that this type of regulatory activity hinders and discourages investment” he added, noting that “any investor looking to make entry in the Ugandan market would have to make serious considerations, on the implications of a less competitive international gateway segment.”
Mr. Mwangi advised that “the regulator should not perceive to determine using policy, economical viability of business, as this may yield unintended outcomes,” adding that a policy to limit international gateways would downgrade Uganda’s telecommunications market status to “partially liberalized.”
This view is similar to that held by Kyle Spencer, Director of the Uganda Internet Exchange Point (UIXP) and Co-Coordinator of the African IXP Association.
“While I do not know the details of this proposal, we generally would not recommend such a policy,” Mr. Spencer said in an interview with this website.
“Uganda wisely liberalized its telecommunications market in the 1990s. This created a highly competitive environment that attracted significant private investment which drove infrastructure development and has helped to keep end-user prices as low as possible,” he continued. “Limiting the number of networks that can provide a path in and out of the country would do the opposite.”
Mr. Spencer said that such a proposal would limit the number of networks that could peer at the UIXP as “there is no technical difference between offering international routes through a commercial international gateway service and through peering at an Internet exchange.”
“As a result, Uganda would become less attractive to content providers who typically wish to reach as many networks and routes through peering as possible,” Spencer further explained.
Notably, the UIXP was not among the stakeholders to whom the UCC’s letter was addressed, though it commends the UIXP for its success in facilitating network interconnection in Uganda since its establishment in 2001.
The UCC’s Fred Otunnu did not respond to our repeated requests for comment on this story.
Potential Conflict with East African Community Policy
Mr. Mwangi noted that the introduction of a limited number of international gateway licenses “would undo significant efforts made by the regional regulators, through EACO, who are looking to open up cross-border interconnection in East Africa. Their goal is to achieve efficient (reliable, high-speed and cost effective) interconnection between the East African countries.”
Mr. Spencer commented similarly, stating that this proposal “would be entirely contrary to the goals of existing East African Community policy which calls for member states to provide an enabling regulatory environment in order to help national IXPs develop into regional IXPs by attracting more international networks and content providers”
Risk of Market Collusion and Oligopoly
Mr. Spencer also noted that a policy which limits the number of international connectivity providers could “create an oligopoly (i.e. a multi-player monopoly) if the number of licensed international gateway providers is small enough to allow collusion and price fixing in the absence of aggressive regulation.”
According to UCC’s website, there are currently 22 Public Infrastructure Provider (PIP) license holders compared to the 24 Public Service Provider (PSP) licenses in Uganda. When implemented, the International Gateway license will become the third licensing category for Internet Access Providers, except that it will only be limited to holders of PIP licenses.
It is not clear why UCC needs to introduce a new “limited” license, considering that some operators are currently able to apply and acquire for both PSP and PIP licenses.