All international traffic has to be routed through Zamtel's gateway. In Zambia, to obtain an International Gateway licence costs USD12, 000,000. In other countries, such as Kenya it only costs USD214, 000 and USD50, 000 for Uganda.
Interconnection fees paid by mobile providers are set at 80% of Zamtel's retail price, which has left no room for competition on prices. This makes Zamtel to have supply constraints which leads to high prices and low quality of service because of congestion. Hence, with a de-facto monopoly on international traffic, Zamtel as a fixed line incumbent operator effectively operates a high-margin, low volume, low-quality business. This status quo is okay for urban households that already in possession of a phone line and for Government departments that do not pay their bills. However, it has resulted in Zamtel's profits not being invested in the expansion the network.
Zain and MTN have to route their international traffic through Zamtel's gateway. On outgoing international calls, Celtel and MTN are charged 80% of Zamtel's retail price as interconnection fee for the delivery of the call. The remaining margin is sufficient to cover the mobile operators' costs associated with administration and delivery of call to the international Gateway. MTN, for example, which is passing on 10% discount of Zamtel's international rates to its customers, has previously claimed that it makes an annual loss of $50,000 by providing international calls. Such losses are depriving MTN and Celtel from investing in the expansion of their networks at a faster rate. Apart from that Zamtel distorts competition through providing both a fixed network and mobile operator in form of Cell-Z. The Zambia Competition Commission noted this in 2003 in its submission to the Select Committee on Transport and Communication : "the position of Zamtel means that it has the power to prevent, restrict or distort competitor access to this essential infrastructure which was built with public funds".
Although internet access is open to competition in general, Zamtel's dominance as a fixed line operator eliminates the level playing field. In Zambia, 5o% of the internet is through dial-up connections, using the fixed-line telephone network controlled by Zamtel. As a result of controlling the landline infrastructure, Zamtel is able to offer better access conditions to its own internet subsidiary than to competitors, for example, Zamtel ha set up so called virtual local access points, which allow customers outside Lusaka to access the internet at local rates. However, these rates are available only to customers of Zamtel Online. Customers of other Internet service provides (ISPs) have to pay long distance telephone charges to access the internet if they are located outside Lusaka.
Its effect on rural communities
There is now growing evidence of the role communication play in enhancing development. In spite of this enabling potential and role, the Zambian Telephony is yet to be widely mainstreamed to assist its rural communities in meeting its development agenda. Many players in this sector recognize the importance of a holistic and multi-sectoral framework and partnership approach that can more effectively used to harness the role communication utilities play in development.
It is therefore prudent to quickly liberalize the International Gateway if Zambia as a nation wants to get positive results in the communication industry with particular interest in using mobile phones-ICTs in attaining the MDGs, especially those related to poverty reduction, education, health, environment and gender equity through.
In a more vivid manner, ICTs in rural communities can create economic opportunities and contribute to poverty reduction; ICTs can assist in managing the processes of providing basic services (e.g. healthcare, education) at lower cost and with greater coverage.
ICTs can be used to strengthen capacities of rural community organisations to advocate and promote local development and monitor the achievement of MDGs. ICTs could be used to create locally relevant content, enhance equity in education and support training of marginalized groups, including youth, women and the disabled; and can also promote entrepreneurship and apply the use of tools to improve their competitiveness in their businesses, this in turn create internal efficiencies and market reach.
As a player in the communication industry, we have categorically come up with the following proposals to level the playing field amongst stakeholders.
1. First and foremost, the Communications Authority needs to be strengthened. This is because the CAZ at the moment is a weak regulator. The problem with the institutional set up of the CAZ is two fold. First it has a weak regulatory mandate. The enforcement and regulatory capacity of the CAZ needs to be improved. CAZ was created by the 1994 Telecommunications Act. The ACT mandated the regulator to promote competition among providers of telecommunication services and infrastructure to ensure the benefits of the telecommunication sector accrue to all of our people and the economy in general, and to take reasonable steps to extend the provision of services in rural and urban areas. These objectives will never be achieved unless CAZ is fully independent. At the moment CAZ does not have the power to issue and enforce regulations without the approval of the Ministry of Communications and Transport. It also can’t compel the operators to behave in certain way. This needs to change. The other area relates to some clarity between CAZ’s role and the Zambia Competition Commission (ZCC). The general trend in other countries has been for the sector regulator to take the lead in enforcing economic regulation if the sector is at an early stage of development. Implementing the basic elements necessary to ensure a competitive environment, such as drafting interconnection rules and creating a licensing framework, requires a high degree of expertise. Once there is full competition and the market has developed, the competition commission would tend to play a more significant role in enforcing competition law, working in tandem with the sector regulator.
2. Restructuring Zamtel so that it begins to operate as an independent profit oriented institution.
3. Instituting a meaningful universal access policy. Government needs to allow free entry into the international segment to new providers that currently are not present in the market, and let the market determine the number of providers.
The continued government ownership creates a conflict of interest in the market. Government ownership may well mean that CAZ are not able to do their job. CAZ are basically Government, trying to regulate another aspect of Government (Zamtel).
The continued control over Zamtel by government may distort competition even after liberalisation of the gateway. This would most likely happen because by virtual of being Government owned, Zamtel may well be able to secure better credit than private sector firms. It would be able to borrow cheaper because it has Government as the "guarantor". This is unfair to other firms. Zamtel has 100% control of the international gateway (it is by definition a monopoly provider of gateway services). Zamtel has 100% control of the fixed line market (it is by definition a monopoly provider of fixed line services). Moreover, it uses its gateway dominance to further entrench its position in the fixed line market – through interconnection charges and also uses its artificially high gateway charges to subsidize its cell phone and fixed line markets.
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