6TH PH.D SEMINAR OF THE INTERNATIONAL TELECOMMUNICATIONS SOCIETY

IMINDS OFFICES

VRIJE UNIVERSITEIT BRUSSEL,

PLEINLAAN 9, 2ND FLOOR

TITLE: REGIONALIZING REFORM OF TELECOMMUNICATION SECTOR REGULATION IN THE EAST AFRICAN COMMUNITY

(EAC): LESSONS FROM THE EXPERIENCE OF THE EUROPEAN UNION (EU)

SUBMITTED BY:

JOSEPH KARIUKI NYAGA (PHD CANDIDATE)

FACULTY OF LAW - KU LEUVEN

(Email: joseph.nyaga@law.kuleuven.be)

INTERDISCIPLINARY CENTRE FOR LAW & ICT (ICRI) -

IMINDSSINT-MICHIELSSTRAAT 6, 3000 LEUVEN (BELGIUM)

PROMOTORS:

PROF. DR. PEGGY VALCKE AND PROF. DR. JOS DUMORTIER

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TABLE OF CONTENT:

1. INTRODUCTION…………………………………………………………… 3

1.1. Principal research question:………………. …………………………5

1.2. Hypothesis:…………………………….. ………………………………5

1.3. Policy relevance:……………………………………... ………………..5

2. LEGAL AND INSTITUTIONAL FRAMEWORK OF THE EAC………62.1. ICT developments in the

EAC……………………………………….9

3. ASSESSMENT OF THE EAC TELECOMMUNICATION POLICIES, REGULATORY AND INSTITUTIONAL FRAMEWORKS…………..10

3.1. Divergences in telecommunications policy frameworks……….11

3.2. Divergences in institutional arrangement………………………..13

3.3. Divergences in regulatory frameworks…………………………...14

3.4. C onvergence of the ICT sector in the EAC……………………….15

3.5. Implication of the inconsistencies to regulation…………………17

4. THE EXPERIENCE OF THE EUROPEAN UNION (EU) ………………18

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4.1. Motivation of the EU as a case study………………………………18

4.2. The EU’s electronic communications regulatory framework (ECRF)………………………………………………………………….20

4.3. Lessons from the experience of the EU……………………………23

5. RECOMMENDATIONS…………………………………………………..2 7

5.1. Regionalizing EAC regulatory framework……………………….27

5.2. Harmonization of Regulatory Frameworks in EAC……………..28

6. CONCLUSION……………………………………………………………..3 2

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ABSTRACT

In the East African community (EAC), there has been an increasing recognition that significant welfare gains could be realized through deep forms of regional integration which entail harmonization of legal, regulatory and institutional frameworks for the telecommunication sector. Implementation of the EAC common market and rapid technological progress especially in mobile wireless technology, have made greater coordination and harmonization of telecommunications policy more attractive. Moreover, the EAC consists of less wealthy nations and therefore an interest in regionalization is essential as a means to pool regulatory resources. This paper assesses the potential gains from regionalized telecommunications policy in the EAC. The paper seeks to assist stakeholders in the EAC and Member States in designing an effective regional regulatory process. To this end, the paper: (i) discusses how EAC regional cooperation can overcome national limits in technical expertise, enhance the capacity of Member States to commit to stable regulatory policy in the EAC and ultimately facilitate infrastructure investment in the region; (ii) identifies trade-distorting regulations that inhibit opportunities for regional telecommunication development and so are good candidates for regional negotiations that reduce indirect market entry barriers; (iii) discusses the EU’s ongoing reforms towards a single market for electronic communication for a connected continent as a case study that the EAC can draw lessons from and there after describes substantive elements of a harmonized regional regulatory policy that can deliver performance benefits.

Keywords: Telecom reforms, legislation, regulation, regional, East African Community.

1. INTRODUCTION The EAC has a common market in place since 2010, therefore, relevant market areas of the telecommunications industry transcend national borders, and little regulation in this sector has purely domestic effects. EAC Member States currently deal with telecommunications policy as a domestic concern, each with its own distinct and dissimilar policy and regulatory regimes. Establishment of EAC common market and rapid technological progress, especially in mobile wireless technology, have made greater coordination and harmonization of telecommunications policy more attractive.

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Moreover, the EAC consist of less wealthy Member States and are therefore interested in regionalization as a means to pool regulatory resources.The case for regionalization of telecommunication reforms in the EAC is hence based on three reasons:First, as telecommunication liberalization has reduced the role of tariffs and quotas in affecting the ability of a service provider to compete in regional markets, inefficiencies in infrastructure industries are more likely to determine the regional competitiveness of domestic industries. Specifically, inefficient domestic infrastructure can cause otherwise efficient national firms to lose both domestic and regional market share to firms from countries with better infrastructure. Second, domestic infrastructure policies can create substantial indirect market entry barriers. For example, a highly inefficient telecommunication sector can effectively protect inefficient domestic service providers from competition from superior regional service providers by increasing the advantage of close proximity between service providers and consumers.Third, both economic integration and technological progress have caused the natural market areas of infrastructure industries to expand, frequently transcending national borders. Telecommunications sector operate more efficiently if its networks are organized according to the patterns of transactions, and liberalization. This has made these patterns increasingly international. Moreover, adjacent networks frequently minimize costs by sharing capacities to take advantage of differences in the time-patterns of usage of infrastructure services during the day and year. Thus, regulation in these sectors rarely has purely domestic effects, and when it does, the reason often is that Member States within the EAC region are taking advantage of opportunities for integrating their networks.Although infrastructure reform programs in the EAC differ among the Member States, most are based on creating market institutions and some degree of competition. The purpose of these reforms is to generate more powerful financial incentives for service providers to improve the performance of the sector. The needed regional reforms should have three common elements:(1) Corporatizing and usually privatizing incumbent operators; (2) permitting and even encouraging competition in the markets that are still protected monopolies; and (3) creating a regional regulatory body that is independent from the incumbent operators.Regionalization of at least some elements of reform is attractive because it contributes to the efficiency goals of policy reform while sidestepping some of the political obstacles to effective reform. Infrastructure reform, when

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implemented in each Member State independently, can become bogged down in a quest for national advantage that undermines development and continued regional integration for the EAC. The EU’s ongoing reform of electronic communication regulation for a single market for a connected continent provides a solid background lessons for the ongoing research on the future regulatory models for the EAC. This paper therefore assesses the potential gains from regionalized telecommunications policy in the EAC. The paper seeks to assist stakeholders in the EAC and Member States in designing an effective regional regulatory process. To this end, the paper: (i) discusses how EAC regional cooperation can overcome national limits in technical expertise, enhance the capacity of Member States to commit to stable regulatory policy in the EAC and ultimately facilitate infrastructure investment in the region; (ii) identifies trade-distorting regulations that inhibit opportunities for regional telecommunication development and so are good candidates for regional negotiations that reduce indirect market entry barriers; (iii) discusses the EU’s ongoing regulatory reforms towards a single market for electronic communication for a connected continent as a case study that the EAC can draw lessons from and there after describes substantive elements of a harmonized regional regulatory policy that can deliver performance benefits.

1.1. Principal research question: What is the most suitable regional response to regulation of telecommunication sector in the East African Community (EAC) and what lessons can the EAC draw from the experience of the European Union’s (EU) ongoing reform towards a single market for Information Society?

1.2. Hypothesis: With the EAC’s common market in place since 2010, a corresponding common or regionalized legislative and regulatory framework at the EAC level for telecommunication sector would be a suitable vehicle to achieve regulatory harmonization and minimize the distortions that arise from divergences in the Member States distinct and dissimilar regulatory policies.

1.3. Policy relevance : The critical assessment of regional telecommunication regulation aims to provide background for current discussions about the future of regulatory policy model in the EAC. In particular, it provides a discussion of the EU

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experience in its ongoing regulatory reform towards a single market for a connected continent. This experience provides ideas and insights that could inform policy makers in their discussions about the EAC approach.

1.4. Methodology/approach : This paper is prepared through desktop research. This included searches through academic and third-party databases, regulators and government websites, and ITU and OECD websites. The paper provides an assessment of the current legislative and regulatory framework in each of the EAC Member States in order to demonstrate the visible divergences there in. These include Member State national laws, regulations, bills and policy documents relating to telecommunication sector. A discussion of the experience of the EU’s ongoing reform towards a single EU market for Information Society is presented as an example of a similar integrated region that the EAC can draw lessons from.

2. LEGAL AND INSTITUTIONAL FRAMEWORK OF THE EAC The East African Community (EAC)1 is the regional intergovernmental organisation of the Republics of Kenya, Uganda, the United Republic of Tanzania, Republic of Burundi and Republic of Rwanda (Member States) with its headquarters in Arusha, Tanzania.

The principal source of EAC law is the Treaty for the Establishment of the East African Community (the “Treaty”).2 The Treaty was signed on 30th November 1999 and entered into force on 7th July 2000 following its ratification by the Original three Partner States – Kenya, Uganda and Tanzania. The Republic of Rwanda and the Republic of Burundi acceded to the EAC Treaty on 18th June 2007 and became full Members of the Community with effect from 1st July 2007.

According to the Treaty, the main objective of the EAC is to widen and deepen the integration process. Article 5(2)3 of the Treaty establishes the 1 http://www.eac.int/2 The Treaty entered in force on 7th of July 2000, and was amended on 14th December 2006 and 20thAugust 2007. The full text is to be found at http://www.eac.int/treaty/3 Article 5(2): In pursuance of the provisions of paragraph 1 of this Article, the Partner States undertake to establish among themselves and in accordance with the provisions of this Treaty, a Customs Union, a Common Market, subsequently a Monetary Union and ultimately a Political Federation in order to strengthen and regulate the industrial, commercial, infrastructural, cultural, social, political and other relations of the Partner States to the end that there shall be accelerated, harmonious and balanced

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objectives to be the formation and subsequent evolution of a Customs Union, a Common Market, a Monetary Union and finally a Political Federation, under the overarching aim of equitable development and economic growth amongst the Member countries.

The entry point of the integration process is the Customs Union. It has been progressively implemented since 2004; in January 2010 the EAC became a full-fledged Customs Union. One critical aspect of the implementation has been the establishment of an interconnected ICT solution for a regional customs system.4

The EAC Common Market Protocol5 entered into force in July 2010, providing for the following freedoms and rights to be progressively implemented: free movement of goods, persons, labour, services and capital; as well as a right of establishment and residency. The Community has since then commenced negotiations for the establishment of the East African Monetary Union. The negotiations for the East African Monetary Union, which commenced in 2011, and fast tracking the process towards East African Federation all underscore the serious determination of the East African leadership and citizens to construct a powerful and sustainable East African economic and political bloc. The ultimate objective, to establish an East African Political Federation, is targeted for 2016.6

The structure of the EAC promotes decision-making through consensus. Each State has the authority to veto details of regulations formed under the Treaty. Once consensus is reached and regulations passed, they are binding on all Partner States. Each State may still, however, achieve regulatory goals through its own individual domestic policies.

The Treaty obliges the Partner States to plan and direct their policies and resources with a view to creating conditions favourable to regional economic development7 and through their appropriate national institutions to take necessary steps to harmonize all their national laws appertaining to the Community.8

development and sustained expansion of economic activities, the benefit of which shall be equitably shared.4 Except for Kenya, EAC countries are using the UNCTAD ASYCUDA system for custom automation.5 Article 47 provides that Partner states undertake to approximate their national laws and to harmonize their policies and systems, for purposes of implementing the Protocol.http://www.eac.int/advisory-opinions/cat_view/68-eac-common-market.html6 The timelines were provided by the 13th Ordinary Summit of Heads of State in 2011.7 Article 8(1)8 Article 126(2)b

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Harmonization is one of the key concepts espoused by EAC. With particular respect to the integration of laws, Article 1269 of the Treaty and Article 4710

of the Common Market Protocol both call for the harmonization of national legal frameworks.11

It should be emphasized that two different law systems are applied among the participating countries: Kenya, The United Republic of Tanzania, and Uganda follow a common law system, while Burundi and Rwanda both subscribe to a predominantly civil law system.12 This has led to somewhat divergent legislative practices and procedures between the groups of countries, and may have contributed to slowing down the process of harmonization efforts in the region.

The EAC has institutional frameworks at the Community level that includes the following:

1. Summit which consists of the Assembly of Heads of State and Government whose function is to provide overall strategy and political direction.

2. The Council consisting of the Ministers responsible for regional co-operation of each Partner State whose function is to Coordinate and formulate policies.9 Article 126:Scope of Co-operation1. In order to promote the achievement of the objectives of the Community as set out in Article 5 of thisTreaty, the Partner States shall take steps to harmonize their legal training and certification; and shall encourage the standardization of the judgments of courts within the Community.2. For purposes of paragraph 1 of this Article, the Partner States shall through their appropriate nationalinstitutions take all necessary steps to:(a) establish a common syllabus for the training of lawyers and a common standard to be attained inexaminations in order to qualify and to be licensed to practice as an advocate in their respectivesuperior courts;(b) harmonize all their national laws appertaining to the Community; and(c) Revive the publication of the East African Law Reports or publish similar law reports and such law journals as will promote the exchange of legal and judicial knowledge and enhance the approximation and harmonization of legal learning and the standardization of judgments of courts within the Community.3. For purposes of paragraph 1 of this Article, the Partner States may take such other additional steps as the Council may determine.10 Article 47: Approximation and Harmonization of Policies, Laws and Systems 1. The Partner States undertake to approximate their national laws and to harmonize their policies and systems, for purposes of implementing this Protocol.2. The Council shall issue directives for purposes of implementing this Article.11 The Sub-Committee on the Approximation of Laws in the EAC Context12 Membership of the EAC is shifting Rwanda and Burundi towards a common law approach.

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3. The East African Court of Justice tasked to ensure adherence to law in the interpretation and application of and compliance with the EAC Treaty. The Court has jurisdiction over the interpretation and application of the Treaty and may have other original, appellate, human rights or other jurisdiction upon conclusion of a protocol to realize such extended jurisdiction.

4. The East African Legislative Assembly tasked with the Community legislative powers, any legislative decision by the assembly which is gazetted by Summit will supersede and take precedence over any other related national law.

5. The Secretariat headed by an appointed Secretary General.13

The EAC’s aspiration and goal is to use regional integration to promote peace, stimulate economic growth, achieve solidarity for its peoples, and strengthen its international profile/stature. The EAC is using regional integration as a vehicle for promoting peace, in order to enhance the prospects for positive economic results. In short, the EAC is focussed on making the East Africa’s economies more mutually interdependent among its constituent Member States. To this end, the EAC’s aims and objectives include the following:

- establishing a Customs Union, a Common Market,

- subsequently a Monetary Union and ultimately a Political Federation in order to strengthen and regulate the industrial, commercial, infrastructural, cultural, social, and political and other relations of the Partner States.

- Accelerated, harmonious and balanced development and sustained expansion of economic activities, the benefit of which is equitably shared.14

Against this background, creation of an enabling legal and regulatory environment has been identified as a critical factor for the effective implementation of e-government and e-commerce strategies at national and regional levels. To achieve operational efficiency of such strategies, strong back up support is needed in terms of legislation and regulation.

13 Article 9 of the Treaty establishing the East African Community( hereinafter the EAC Treaty)14 See Part 1 of the Treaty establishing the European Union and Chapter 2 of the treaty establishing the EAC

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In view of the foregoing, policies and regulatory frameworks of most sectors have been aligned to this objective. Those that have harmonised policies and regulatory frameworks include fisheries, transport, higher education and finance. They have regulatory frameworks and institutions at the EAC level unlike the telecommunication sector.15

2.1. ICT developments in the EAC There are two key areas that have been particularly important for the economic and regulatory environments; they include the improved fibre-optic links between the region and the rest of the world and the expansion of mobile telephony and related services, notably mobile money.16 In July 2009, the first under-sea fibre optic cable network, SEACOM,17 reached Kenya, the United Republic of Tanzania and Uganda. It was soon thereafter connected with Rwanda.18 This marked the beginning of an era of radically faster and cheaper Internet use in the EAC.

In 2010, the second submarine fibre optic cable system, EASSy became operational along the East and South African coasts to service voice, data, video and Internet needs of the region.19 It links South Africa with Sudan, with landing points in Mozambique, Madagascar, the Comoros, the United Republic of Tanzania, Kenya, Somalia, and the Republic of Djibouti. This made it more economical to connect the eastern and southern coast of Africa with high-speed global telecommunications network. Average mobile penetration in the EAC had reached 40 subscriptions per 100 inhabitants in 2010, with the highest level noted in Kenya (61) and the lowest in Burundi (14)20

15 For instance, Lake Victoria Fisheries Organization, East African Community Civil Aviation Safety and Security Oversight Agency (CASSOA), The Inter-University Council for East Africa (IUCEA) and The East African Development Bank.16 See UNCTAD Report, Mobile Money for Business Development in the East African Community:A Comparative Study of Existing Platforms and Regulations, June 2012 (UNCTAD/DTL/STICT/2012/2,available at http://unctad.org/en/PublicationsLibrary/dtlstict2012d2_en.pdf17 http://www.seacom.mu/18 Daily Nation newspaper on the web, 23rd July 2009. The cable covers some 17,000 kilometres.19 http://www.eassy.org/index-2.html. The cable covers some 10,000 kilometres.20 Source: UNCTAD, based on ITU World Telecommunication/ICT Indicators, 2011

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3. ASSESSMENT OF THE EAC TELECOMMUNICATION POLICIES, REGULATORY AND INSTITUTIONAL FRAMEWORKS

One of the corner stones of the EAC’s integration process has been to create a single market, where the trade is free across the EAC and based on the theory of comparative advantages. Harmonization of national telecommunications regulatory frameworks in the EAC Member States to reflect the common EAC framework should be linked to this free trade thought. The harmonization of regulatory frameworks can be seen as a main mechanism to eliminate unfair differences in regulatory regimes, because its purpose is to reduce the differences in law and politics of the Member States jurisdictions. The following sub-sections discuss the current status quo with regard to telecommunication policies, legislative and regulatory settings in order to demonstrate the divergences existing thereof.

3.1. Divergences in telecommunications policy frameworks

The EAC Member States have in the past discussed plans for regional ICT policy harmonisation. However, the process of telecommunications policy harmonisation has been retarded due to a sentiment among Member states that a harmonised telecommunications policy framework would have favoured Kenya, the leading country in the region. Since telecommunications markets in the EAC were amongst the earliest in Africa to open to competition, and since the EAC markets have been historically integrated, the EAC Member States are still in the process of determining if and how a single regulation policy can be applied uniformly.21

Despite attempts by the EAC Member States to harmonise ICT policy and regulatory frameworks, there is still a high degree of heterogeneity among the Member States national ICT Policy and regulatory frameworks in terms of advancement in the harmonisation process. Some of the challenges facing the process of ICT policy and regulatory harmonisation include the following:

existence of multiple national ICT policy and programme initiatives, some of which are often in competition with each other;

21 IT news Africa (2010). East African States discuss ICT policy harmonization, available fromhttp://www.itnewsafrica.com/?p=795.

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very little ownership of EAC regional ICT policy and regulatory initiatives from the Member States governments;

National organisations’ and institutions’ lack of institutional mechanisms to ensure compliance with model policies and frameworks as well as to monitor and evaluate the implementation. EAC Member States are sovereign states with no obligations to adopt and adjust national ICT policy and regulatory frameworks to the policy guidelines issued by EAC regional bodies; and

Different stages of economic, political and social development make it difficult for Member States to have common priorities and therefore to adopt common models or frameworks.22

Although resources have been put into establishing and supporting structures for the EAC regional integration of markets and harmonisation of ICT policies, there has been limited success in implementing harmonisation frameworks to date.

Therefore, each of the Member States has its own distinct and dissimilar National ICT policy. Perhaps the point of convergence stops only at the fact that today all the five Member States have approved National ICT Policies in place. The following table gives an overview of the National ICT policy at the Member States level as the basis for the current regulatory frameworks.

Table of initial classification of ICT policies:EAC Member State

National ICT Policy

National ICT Development Plan

National ICT Development Agency

Autonomous Regulatory Agency

BURUNDI -1996: Beginning of process for restructuring the Telecoms sector, publication of sectoral policy.

e-Strategies being prepared2002-2004(National Strategy for development of ICT Action Plan).

A Directorate of ICT was created in 2006. It is charged with the implementation of ICT plans and strategies

- A Regulatory Authority: ARCT (Telecoms Regulatory and Control Agency), was set up late Sept 1997.

22 Waema, T. M. (2005). In Etta, F.E. and Elder, L. (eds.), A Brief History of the Development of ICT Policy in Kenya. At the Crossroads: ICT Policy Making in East Africa, (pp. 25-43). Nairobi, Kenya: East African Educational Publishers Ltd.

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-Law governing ICT sector was promulgated Sept 1997.- Separation of Posts and Telecoms 1997.

Implementation of plans, programmes and projects is being studied.

- The Regulatory Agency is not independent. It is under the control of the Government, although Burundi liberalised its international Gateway

KENYA National ICT Policy exists since 2005 and has been reviewed on a number of occasions

Plan exists with a special Bureau in the Office of the President, and a Ministry in charge of implementing the National Policy.

Kenya ICT Authority

CCK

UGANDA National ICT Policy exists since 2006 and was approved by the Government and Parliament.

There is an Implementation Plan with two components: infrastructure ande-Gov.

National IT Authority -Uganda. (NITA-U).

UCC

RWANDA National ICT Policy exists since 2000 and was approved by the Government and Parliament.

Plan exists and is known as the NICI PLAN, with various projects and programmes.

RITA RURA

TANZANIA It exists since 2005

Plan exists, but not very

Non existent TCRA

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and was approved by the Government and Parliament

well developed

3.2. Divergences in institutional arrangement As shown in the above table, EAC Member States have various regulatory agencies and regulatory institutions. They fall under the various ministries responsible for ICTs and/or Telecommunications. For instance, in the case of Uganda, it is the Ministry of ICT; in the case of Kenya, it is the Ministry of Information and Communications; while in Tanzania, it is the Ministry of Infrastructure Development (with a Deputy Minister in charge of all communications matters and sectors), in Burundi, the jurisdiction lies with the Burundian Ministry of Defence. In nearly all the cases, there is also a strong ICT Unit within the Ministry of Finance, sometimes referred also to as the Government Computer Centre/Services, for historical reasons. In the case of Kenya, there is also the e-Government Directorate within the Office of the President. For its part, in Uganda, there is also a newly established National Information Technology Authority (NITA), and Rwanda’s RITA. In Kenya, there have also been proposals to have ICT Units, headed by a senior officer preferably at Director Level (like in Rwanda) in some, if not all Ministries and public agencies. In Tanzania, there exists the office of National ICT Coordinator. From the foregoing, it is evident that the ICT responsibilities are distributed across different arms of the government, with little, if any, coordination, with negative consequences including lack of clarity. Further ARCT of Burundi is not an independent regulatory authority as it is placed under the jurisdiction of the Burundian Ministry of Defence. All deliverance of licences are studied by the technical personnel of the ARCT , then by its board of administration, followed by the approval of the Ministry of transports and communications and last of all by the national Ministry of Defence.

3.3. Divergences in regulatory frameworks Apart from the policies, regulation is equally non-uniform. Save for the fact that all the Member States now have functional regulators, there is little beyond that which is uniform. The focus for individual regulators also seems

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to differ, in the absence of a concerted effort to harmonize the regulatory frameworks. The following are examples of the divergences:

Licensing: Tanzania pioneered the converged licensing, supporting triple-play, i.e. telecommunication, IT and broadcasting.23] In Uganda, the emphasis is on infrastructure licensing [24], the objective is to open infrastructure to full competition. Kenya, on the other hand, is in the process of shifting its licensing regime to a unified licensing framework and market structure.[25]

However, the focus has been at the service level, with some of the segments being: international gateway, mobile communication, data operator’s license, ISP, etc.[26] Rwanda’s regulator issues individual and standard telecommunication while Burundi issues only one type of licence, the commercial services licence which corresponds to a basic telecommunication licence. The award criteria for licences and the ultimate responsibilities differ in each of EAC Member States. There are also different local equity ownership requirements for license-holders, ranging from zero local equity ownership in Uganda to a 35% requirement in Tanzania. Further, relevant ministries and regulators have different levels of responsibility for licensing regulation.

Regulation of tariffs: various national tariffs regulatory frameworks have various competing issues. Some Member States’ regulatory frameworks lean towards self-regulation while others provide for strict regulation by the national regulators in the five Member States. Tanzania, Uganda and Rwanda to some extent seem to lean toward self-regulation whereas Kenya and Burundi take the opposite approach of strict regulation.

From the foregoing therefore, it is evident that just as there are discrepancies in policies, so are they regulation. Currently, there does not seem to be any major effort to harmonize the respective regulatory frameworks. Perhaps the two areas where there is most uniformity are firstly with interconnection and sharing of facilities where most national legislations refer to the principle of non-discrimination. Secondly, the fact that Member States have provisions for universal service access.

3.4. C onvergence of the ICT sector in the EAC 23[] Key Legal and Regulatory Findings: Available at: http://www.eac.int/infrastructure/index.php?option=com_docman&Itemid=14624[] As opposed to “service licensing,” An applicant can be granted both or either license.25[] See ‘Implementation of a Unified Licensing Framework and New Market Structure’ published by the CCK in May 200826[] See footnote 8 above.

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EAC’s ICT industry, as a whole, is undergoing a potentially disruptive phase of development. This is because there have been extensive technological changes in its structure in recent years. These changes are the driving force behind the emergence of convergence. Generally, the term convergence has been used to describe almost any trend representing the ever closer contact between the telecommunications, IT and broadcasting industry. The term is most commonly expressed as:

· The ability of different network platforms to carry essentially similar kinds of services, or

· The coming together of consumer devices such as the telephone, television and personal computer. [27]

It occurs when multiple products come together to form one product with the advantages of all of them – e.g. your computer as purveyor of voice as well as text and graphics; cell phones that provide text and graphics as well as voice. This is otherwise referred to as technological convergence. [28]

Convergence has seen major changes in the market structure including the following:

Entrance of new market services providers especially in the mobile market providing services in most Member States:

New services can now be transmitted over various networks. For instance, telecommunication companies are doing content provision. As a result, traditional telecommunication companies are directly competing with broadcasting companies and the newly emerging IT providers. Telkom Kenya is currently providing new services such as internet hosting, mobile services, VoIP and other multimedia services. [29] Others are Uganda Telecom, [30] Tanzania Telecommunication Company Limited [31] and Rwanda Tel. [32] Some IT companies such as

27[] The European Commission’s Green Paper on the convergence of the telecommunications, media and information technology sectors and the implications for regulation, COM (97) 623, Brussels, December 1997.28[]European Commission, Green Paper on the Convergence of the Telecommunications, Media and Information Technology Sectors, and the Implications for Regulation. Towards an Information Society Approach. COM (97) 623, Brussels: European Commission, 1997, (www document) URL http://www.ictregulationtoolkit.org/en/Publication.1500.html]29[] See: http://www.telkom.co.ke/index.php?option=com_content&view=article&id=60&Itemid=9530[] See: http://www.utl.co.ug/31[] See: http://www.ttcl.co.tz/32[] See: http://www.rwandatel.rw/

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Swift Global Kenya Limited, [33] UUNet Kenya, [34] Access Kenya, [35] Africa Online Uganda Limited, [36] and Africa Online Tanzania [37] etc. are not only providing internet services but are also providing telecommunication services. New promising applications have emerged such as mobile-banking. For instance, there is M-PESA system by the Kenyan mobile operator Safaricom. [38] Towards the end of 2013, M-PESA had around 17.5 million subscribers. [39] Zap Mobile Banking was launched in February 2009 by Zain. [40]

Regional mergers and acquisitions in the ICT sector in the EAC: For instance, South African’s MTN recently acquired a 60% stake of UUNet; it was therefore re-branded from UUNet to MTN Business Kenya. Access Kenya and Kenya Data Networks have absorbed much of UUNet’s corporate business since 2008.41 Uganda’s InfoMail (IMUL) merged with the country’s second ISP, Starcom, to form Infocom. [42]

Libya’s Lap Green Networks acquired Rwanda's Rwandatel. It also owns a majority stake in Uganda Telecom (UTL). [43] Convergence Wireless Networks (Convergence Wireless) acquired a 35% stake in WIA Company Limited (WIA), of Tanzania in 16 November 2009. [44]

Expansion of the ICT industry to the EAC regional level: Most service providers are currently providing services in the EAC regionally as opposed to individual Member States. This is due to the mergers, acquisitions and continuous expansion of new services to other sectors.

33[] http://www.swiftglobal.co.ke/#34[] http://www.ics.uunet.co.ke/index.php?option=com_frontpage&Itemid=135[] http://www.accesskenya.com/inner.asp?cat=prods36[] http://www.africaonline.com/countries/ug/37[] http://www.africaonline.com/countries/tz/38[] See http://www.safaricom.co.ke/39[] See http://wirelessfederation.com/news/15801-m-pesa-still-not-profitable-despite-high-growthrate-safaricom-ceo/ for a recent update on M-PESA figures.40[] See: http://www.ke.zain.com/opco/#?lang=en41 See report available at: http://www.standardmedia.co.ke/InsidePage.php?id=2000025563&cid=4&ttl=Mergers,%20acquisitions%20drive%20mega%20deals42[] See: An African Pioneer Comes of Age: Evolution of Information and Communication Technologies (ICTs) in Uganda43[] See: http://www.cellular-news.com/story/26685.php44[] http://us-cdn.creamermedia.co.za/assets/articles/attachments/24554_convergence_partners_-_wia_invests_in_tanzania_-_16_nov_09.pdf

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3.5. Implication of the inconsistencies to regulation Inconsistencies in regulation resulting from traditional separation

As the European Commission Green paper on convergence (1997) [45]

identified, some converging services are facing a regulatory vacuum. Others tend to fall under the jurisdiction of two or more agencies, which leads to jurisdictional conflicts once they start issuing their own rules. New services such as mobile-banking by the M-PESA,[46] or Zap Mobile Banking,[47] have in the past caused major controversy with the bank fraternity.[48] The banking industry’s concern has been that the mobile-banking operators are enjoying privileges similar to those extended to banking institutions despite not being covered by the same regulatory regime. Debate has been rife on who should regulate the mobile-banking operators, whether it should be the central banks and therefore regulated under the Banking Acts or the Communication Acts. Fundamentally, the mobile operations are guided by the Communications Commissions. Others include broadcasting over the internet. It is not clear if it should be regulated as broadcasting or not regulated at all because they are computer based. Inconsistencies also arise when pre-convergence classifications, such as cable and common carrier regulation, lead to similar services with differing regulatory treatments.[49]

Regulatory arbitrage

As stated above, new services sometimes face more than one regulatory regime in the various Member States. Not only are there multiple regulatory bodies, but also conflicting regulations and licensing authorities. As a result, the regional market players have tended to select the regulatory frameworks in the various Member States that advance their interest the most (otherwise referred to as forum shopping). This trend has been made even easier with the establishment of the EAC Common Market

Uncertainty

45[] European Commission (1997).Green paper on the convergence of the telecommunications, media and information technology sectors, and the implications for regulation towards an information society approach Brussels: European Commission. Accessed April 7, 2003: http://europa.eu.int/scadplus/leg/en/lvb/124165.htm.46[] See http://www.safaricom.co.ke/47[] See: http://www.ke.zain.com/opco/#?lang=en48[] This according to a report by the Bankers Association in The East African (Nairobi) 12 October 2008 posted to the web 13 October 2008 49[] Garcia-Murillo, M. & MacInnes, I. (2001). FCC organizational structure and regulatory convergence. Telecommunications Policy, 25:6, 431452

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Due to rapidly changing technology, regulators tend to issue rules for the problems faced today, these causes problems when new technologies become available. Because of this continuous innovation, regulators need to find regulatory frameworks that allow them to better cope with uncertainty.

4. THE EXPERIENCE OF THE EUROPEAN UNION (EU) 4.1. Motivation of the EU as a case study

The EU’s converged legislative framework is often considered a best practice model. The ITU considers the EU’s Electronic communication regulatory framework (the ECRF) to be the ‘paradigm legislation aimed at addressing convergence and its challenges’.50 Commentators have called for the application of the EU model in Australia51 and the US.52 The EU’s the ECRF came into force in July 2003 and forms the basis for all national telecommunications laws in EU member states. Since 2003, further changes have been made to the EU’s regulatory framework. In 2009, a telecommunications reform package was passed that makes a number of changes to the ECRF.53 It establishes a new regulatory agency, the Body of European Regulators for Electronic Communications (BEREC), to ensure a consistent and coordinated approach to regulation. The EU has therefore considerable experience with the opportunities and drawbacks of particular regulatory scenarios.

The EU framework for the ICT sector is built on concepts and principles such as: technology neutrality, the shift from vertical to horizontal regulation, the expansion of the definition of telecommunications networks and services to cover all ECNS and graduated regulation (as a possible answer to differentiated regulatory needs). Further, it focuses on regulatory principles such as transparency, flexibility, regional

50 ITU/InfoDev, ICT Regulation Toolkit, Module 6 ‘Legal and Institutional Framework’, Chapter 4 ‘Impact of Convergence’, section 4.5 ‘Case Studies of Converged Legislation’. 51 See Niloufer Selvadurai, ‘The Creation of the Australian Communications and Media Authority and the next necessary step forward’, 26 Adelaide Law Review (2005) 271 and ‘Regulating for the future - accommodating the effects of convergence’, 13 Trade Practices Law Journal 20.52 See Frieden, Rob, ‘Adjusting the Horizontal and Vertical in Telecommunications Regulation: A Comparison of the Traditional and a New Layered Approach’, 55(2) Federal Communications Law Journal (2003) 208.53 ‘Agreement on EU Telecoms Reform paces way for stronger consumer rights, an open internet, a single European telecoms market and high-speed internet connections for all citizens’, press release, 5 November 2009, http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/09/491.

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harmonisation, proportionality and legal certainty.54 EAC should consider a focus on these concepts and principles in its regional reforms.

The focus is on these regulatory concepts and/ or principles since these are generally recognised as the basic regulatory concepts and principles underpinning reforms of ICT regulatory frameworks worldwide.55 They are therefore accepted as effective and can work in any context irrespective of the geopolitical, social or cultural borders. The essence is to contextualize these basic regulatory concepts and principles into the local cultural, social-economic, and political conditions of the EAC. These make them concise, workable, and effective and fit for the EAC circumstances.

Further motivation for the EU as a case study is that the Institutional frameworks of both the EU and the EAC are similar at first sight just like their powers under the respective treaties establishing them. The EU's institutional framework includes the EU Parliament, the Council, the Commission and the Court of justice and Court of First Instance. 56 The EAC's Summit is comparable to the EU's European Council, because both are their respective Union’s supreme organ. Like the European Council, whose presidency is rotated every six months among its constituent member countries, the EAC's Summit is rotated annually among the Partner States. Key institutions of the EAC and the EU that share similar names are the Commission, the Court of Justice, and the Parliament.

Another area of similarities is with regard to their goals. Although they arrived at their respective goals from different experiences, the aspirations are similar. Both Communities, for example, hope to use regional integration to promote peace, stimulate economic growth, achieve solidarity for their peoples, and strengthen their international profile/ stature. These are provided for in Article 2 of the TFEU and chapter 2 of the EAC Treaty.

The principle of direct applicability of community law is similar in both the EU and the EAC. The treaties for both Communities provide for direct applicability of community law.57 The EC Treaty, Article 249 provides

54 Current legislation available at: http:/Iec.europa.eu/information_society/policy Iecomm/1ibrary/legislation/index_en.htm55 Ilse Marthe van der Haar 2008: The principle of Network Technology Neutrality within the framework of EC Network regulation, Part 1, Chapter 256 Article 7 of the Treaty establishing the European Union (hereinafter the TFEU).57 See EC Treaty, Article 249, and EAC Treaty, Article 8

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that 'a regulation shall have general application. It shall be binding in its entirety and directly applicable in all Member States.' An almost identical provision is contained in Article 8 of the EAC treaty. Both Communities' Regulations are also subject to direct effect and immediate applicability. They are incapable of being conditional. As provided for under Article 249 of the EC Treaty, Communities' Decisions "are binding in their entirety on the party to whom they are addressed”. Both Communities' directives could be directly effective insofar as the provisions define rights which individuals are able to assert against the State."58

Member states of the EAC have enacted legislation giving 'the force of law' to 'the provisions of any Act of the Community ... from the date of the publication of the Act in the Gazette'.59 The EAC Treaty provides for the principle of supremacy of the laws of the community.60 This ensures that conflicts between community law and national law are resolved in favour of the former. This defines the place of community law in national legal systems.

This principle of direct applicability allows both Communities' laws to become part of national legal systems without intervening national measures which aim at transforming the community law into a national one i.e. both Communities' laws do not need measures such as parliamentary resolution, an act of parliament, or an executive act such as cabinet approval.

4.2. The EU’s electronic communications regulatory framework (ECRF)

As mentioned above, the EU’s the ECRF came into force in July 2003 and forms the basis for all national telecommunications laws in EU member states. It sets overarching rules for the regulation of electronic communications services and networks, which member states are required to transpose into domestic law. The UK, Finland and the other Nordic states were the first to implement changes transposing the 2003 EU regulatory framework to domestic legislation. The European Commission (EC) has reported that all EU nations have transposed the ECRF into domestic law.

58 See Grad v Finanzamt Traunstein, (Case 9/70) [1970] ECR 82559 See for instance Kenya: Treaty for the Establishment of East African Community Act 2000, Article 8(1); Uganda: East African Community Act 2002; and Tanzania: Treaty for the Establishment of East African Community Act 2001.60 See EAC Treaty, Article 8{4).

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While the ECRF applies to electronic communications services and networks, it does not apply to the content that travels over those services and networks. Content is regulated at the national level, with broad guidance at the EU level in the form of the Audio-Visual Media Services Directive (AVMS Directive). However, as the EC and commentators have noted, there are elements of the ECRF that do impact on content.

ECRF comprises the following five directives, which apply to all communications infrastructures and associated services:

The Framework Directive—applies to all electronic communications networks and services, including fixed-line telephony, mobile and broadband communications, and cable and satellite television. It establishes the structural and procedural elements of the EU regulatory framework. These include requirements for the establishment and remit of national regulatory authorities (NRAs) and processes for NRAs to define relevant national competition markets and analyse whether there are any operators with significant market power (SMP) in that market. It also sets out rules for granting resources such as numbering.

The Authorisation Directive—harmonises and simplifies authorisation rules and conditions throughout the EU, replacing individual licences with a general authorisation scheme.

The Access Directive—applies to all forms of communications networks carrying publicly available communications services and covers the relations between electronic communications providers on a wholesale basis. It establishes rights and obligations for operators and undertakings seeking interconnection and/or access to their networks. Overall, it means that member states must ensure there are no restrictions preventing negotiations from taking place between operators about the technical and commercial arrangements for access and interconnection.

The Universal Service Directive—concerns the relationship between electronic communications providers and end-users. It requires the provision of directory enquiry services and directories, public payphones and access for users with disabilities. The directive also contains provisions on universal service obligations, such as quality of service, as well as for regulatory control of undertakings with significant retail market power, and a number of users’ interests and rights. NRAs may impose a number of obligations on operators with SMP—these can include imposing ‘must carry’ obligations on the transmission of specified radio and

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television broadcast channels and services, where the relevant network serves as the primary means of access to the services for a large number of users.

The Privacy and Electronic Communications Directive—concerns the processing of personal data relating to the delivery of communications services.

The need to respond to convergence was a significant driver for the enactment of the ECRF. The ECRF also responded to an urgent concern within the EU to harmonise licence/authorisations conditions; these varied across the EU from onerous (for example, France, Belgium) to light (Sweden, Denmark, Finland).61 As the EC has stated, the ECRF aimed ‘to provide a coherent, reliable and flexible approach to the regulation of electronic communication networks and services in fast moving markets’ and ‘to provide a lighter regulatory touch where markets have become more competitive yet ensure that a minimum of services are available to all users at an affordable price and that the basic rights of consumers continue to be protected.’62

Since 2003, further changes have been made to the EU’s regulatory framework. In 2009, a telecommunications reform package was passed that makes a number of changes to the ECRF.63 It establishes a new regulatory agency, the Body of European Regulators for Electronic Communications (BEREC), to ensure a consistent and coordinated approach to regulation.64 While the enactment of the ECRF in 2003 represented significant change, changes are continuing, and the framework continues to evolve. There are currently ongoing discussions on the EC regulatory proposal to complete the telecoms single market and deliver a Connected Continent.65 The overarching aim is to build a connected, competitive continent. The proposal includes the following:

Simplification and reduction of regulation for companies61 Humphreys and Simpson, Globalization, Convergence and European Telecommunications Regulation, p. 99.62 ‘New Regulatory Framework’, European Commission website at http://ec.europa.eu/information_society/topics/telecoms/regulatory/new_rf/text_en.htm63 ‘Agreement on EU Telecoms Reform paces way for stronger consumer rights, an open internet, a single European telecoms market and high-speed internet connections for all citizens’, press release, 5 November 2009, http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/09/491.64 Detailed overview available at: Laurent Garzaniti: Telecommunications, Broadcasting and the InternetEU Competition Law and Regulation65 Overview available at: http://europa.eu/rapid/press-release_MEMO-13-779_en.htm

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More coordination of spectrum allocation – so that we see more wireless broadband, more 4G, and the emergence of pan-EU mobile companies with integrated networks

Standardised wholesale products: encourages more competition between more companies

Protection of Open internet: guarantees for net neutrality, innovation and consumer rights.

Pushing roaming premiums out of the market: a carrot and stick approach to say goodbye to roaming premiums by 2016 or earlier.

Consumer protection: plain language contracts, with more comparable information, and greater rights to switch provider or contract.

4.3. Lessons from the experience of the EU The lessons learned from the EU include inter alia that the regulatory framework represents a bold and innovative response to the challenges of convergence and harmonization. The following is a summary of general lessons drawn from the assessment of the ECRF:

1. Ensure technological neutrality of all laws, and envisage introducing a mandatory legislative "neutrality test".

The experience is that the ICT sector evolves too quickly for legislators to catch up. Laws that are drafted with particular technologies in mind may therefore present a legal hurdle for new technologies.

2. Adopt converged legal rules.Due to the increasing convergence of the ICT sector, it is no longer appropriate to maintain separate laws for the distinct traditional sector. Such separation undermines the core value of the predictability of the legal rules.

3. Envisage maximum harmonization when drafting new regulatory framework that impact the information society.

While the use of uniform and clear criteria for determining the applicable law is recommended, a certain level of complexity will remain, due to the inherently borderless nature of the information society. Maximum harmonization can significantly help to reduce the importance of the question which national law applies.

4. Amend the current EAC legal instruments on jurisdiction and applicable law to include criteria that are suitable for today's complex information society services.

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These legal instruments currently mainly rely on geographical criteria (such as the place of delivery or the country where the damage occurs), which are unsuitable for information society services for which the geographical location is irrelevant or difficult to determine.

With regard to the ongoing reform on course to a single market for electronic communication to achieve a connected continent proposal:

The proposal complements the existing legislation that would make a reality of two key EU Treaty principles: the freedom to provide and to consumer (digital) services wherever one is in the EU. The proposal does this by pushing the telecoms sector fully into the internet age and removing bottlenecks and barriers so Europe’s 28 national telecoms markets become a single market (building on 2009 ECRF, and more than 26 years of work to create that single market).66

The following table is a summary of the main elements of the EC proposal that consist essential lessons for the EAC of how the EU intends to provide solutions to the persisting problems:

Problem Solution

Operators wanting to go cross-border face red tape (both hurdles and burdens)

One-stop shop: operators operating in more than one Member State will benefit from a single EU authorization requiring only one notification, thereby establishing one reference regulator (NRA) for authorization issues (including withdrawal/suspension of the authorization)

Inconsistent obligations for operators operating in more than one Member State

One-stop shop for authorization will provide consistency for companies

Commission will have the power to require national regulators to withdraw draft regulatory proposals which

66 Proposal available at: http://ec.europa.eu/digital-agenda/en/connected-continent-single-telecom-market-growth-jobs

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are incompatible with EU law (thus prevent regulatory inconsistency)

Decisions of national regulators must promote investment and consider all competitive constraints (including from OTTs) – which will be crucial for establishing a level playing field with OTTs

The criteria that the Commission and national regulators apply for selecting markets that should or should not be regulated are strengthened by the inclusion of the well-established “3 criteria” test in EU law. This prevents over-regulation of competitive markets.

Full harmonization of consumer protection rules will remove the need for customizing services for every territory, and give consumers extra certainty

Inconsistent fixed wholesale access for service providers operating in more than one Member State

Standardized fixed access products (Virtual Unbundled Local Access, bit stream access and Ethernet leased lines) and Assured Quality Services for European electronic communications providers) will facilitate market entry and provision of cross-border services

Uncoordinated spectrum access conditions for mobile operators make it more difficult to plan long-term investments, operate cross-border and eventually gain scale.

Common regulatory principles for spectrum authorization procedures for wireless broadband to support

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Today vital wireless broadband spectrum is released at different moments in the EU, subject to different timing considerations and under different conditions

economies of scale Common best practice criteria

for defining the availability and conditions of spectrum for wireless broadband

Harmonization of timing and duration of spectrum assignments for wireless broadband

Commission's power to organize peer review among Member States and to review national assignment procedures

No EU-wide consumer rules (hurts and confuses both consumer and operator)

Full harmonization of consumer protection (not only minimums or options as in current Universal Service Directive)

End misleading advertising of Internet speeds (you will get what you pay for).

New rights to transparent information & easy contract switching (both telecoms + net)

Roaming is an anomaly in a Single Market

Strong incentives for operators to provide roaming at domestic price levels by no later than 2016 throughout the EU. Charges for incoming roaming calls will end in July 2014.

5. RECOMMENDATIONS 28

This section demonstrates the potential gains from regionalized regulatory frameworks in the EAC as inspired by the EU. To this end, the section:

I. discusses how EAC’s regional cooperation can overcome national limits in technical expertise, enhance the capacity of nations credibly to commit to stable regulatory policy, and ultimately facilitate infrastructure investment in the region;

II. Describes substantive elements of a harmonized regional regulatory policy that can deliver immediate performance benefits.

5.1. Regionalizing EAC regulatory framework Regionalized reform is attractive because it contributes to the efficiency goals of policy reform while sidestepping some of the political obstacles to effective reform. Infrastructure reform, when implemented in each Member State independently, can become bogged down in a quest for national advantage that undermines development for everyone. A useful analogy is the process of setting tariffs. When each Member State independently sets each tariff separately, the outcome is likely to be tariffs that are higher than the tariffs that would be negotiated bilaterally as part of a comprehensive trade agreement. The reason is that debating tariffs one product at a time maximizes the effect of the tendency for organized interests with a direct stake in a policy to be unduly influential. Another example is termination charges for international calls, in which many Member States set exorbitant rates for the purposes of implicitly taxing foreigners to pay for part of the domestic network. Of course, if all Member States follow the policy, the primary effect is to suppress regional communications, along with opportunities for further economic integration that require inexpensive communications.

Regionalization of legislative and regulatory policy has important political benefits. Within a single Member State, infrastructure reform, especially when debated one issue at a time, is often blocked by well-organized interest groups. But if reform becomes part of a broader EAC regional policy that covers a range of issues, all stakeholders will likely participate—making it more difficult for a single group to block it. Political interference is more difficult and costly when regulatory policy is part of a regional agreement, or when the regulatory body is a multinational agency.

Some Member States like Burundi that lack formal institutions and technical expertise have still another reason to regionalize regulatory reform. A

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pragmatic response to limited national regulatory capacity is to increase policy and regulatory coordination and cooperation—and ultimately to create regional (multinational) regulatory authorities. These bodies also can be a means for disseminating information and expertise from other Member State that are further along the reform path to those that are just beginning their reform process.

Moreover, regional regulatory cooperation and the eventual creation of a regional regulatory authority are more feasible in the EAC since the Community has already made substantial progress on regional economic integration including the establishment of the common market.

Obtaining consensus from all governments in the EAC for a regional regulator is not easy, due to different attitudes, approaches and commitments to reform, as well as concerns about national sovereignty. Effective international regulatory policy requires considerable cooperation and trust between Member States, which can be built through an assembly of regulators from the Member State. Consensus for a regional regulatory body could increase as Member States reform, and the gains from regional policy coordination and trade become more apparent.

5.2. Harmonization of Regulatory Frameworks in EAC 5.2.1. Spectrum of Harmonization Models

Regional harmonization is not a binary variable. It entails a wide range of policy options that lie between complete national autonomy and full integration (as demonstrated in the figure below). At one extreme, the Member States surrender their sovereignty on regulatory and other policy decisions to a regional regulatory authority (RRA). At the other extreme, the national regulatory authorities (NRAs) retain full jurisdiction over all areas of regulatory policy and decision-making, with the RRA’s role limited to disseminating information, issuing non-binding guidelines, and acting as a source of centralized technical expertise.

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Source: Deloitte Touche Tohmatsu (2003).

Centralized Harmonization

Under full, centralized harmonization, the RRA has the statutory authority to make policy determinations that are binding on the Member States. Moreover the RRA has the legal power and framework to enforce those decisions and to impose penalties in the event of non-compliance by the member states. Thus, the RRA would have the authority to:

Regulate end-user prices and impose quality of service obligations on all licensed telecommunications operators in the Community, with penalties attached for non-compliance

Regulate the terms and conditions of interconnection and access to bottleneck telecommunications facilities, and intervene to resolve interconnection disputes

Manage and allocate all aspects of the frequency spectrum in the EAC territory

Issue licenses for all telecommunications services throughout the Community.

Pre-empt local and national rules regarding rights of way Collect and disburse funds to support universal service and other social

goals in the telecommunications sector Represent the community in international organizations

Under central harmonization the NRAs would have no independent policy-making authority. Instead, their role would be limited to providing an input

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into the consultative process of the RRA, supply data on national market conditions, and advice on implementation issues.

The centralized harmonization model treats the entire EAC region as a single economic space and as such it offers the greatest opportunity to exploit regional economies of scale in the telecommunications industry. It also holds the promise of lowering the cost of doing business in the region by reducing the administrative barriers and regulatory costs of entry (e.g. by facilitating access to the necessary licenses and permits through “one-stop shopping”). The creation of supra-national regulatory authority raises, on the other hand, proper concerns about accountability and the need for checks and balances on the powers of such authority.

Separated Jurisdiction

Under separated jurisdiction, the RRA is charged with regulating telecommunications transactions between the member states and represent the region in international forums while the NRAs have full regulatory authority over telecommunications transactions and services that do not cross national boundaries.

Centralized Policy/National Implementation

Under this model, the RRA issues binding regulatory and other policy directives which are then adopted by the member states and converted into national law. The NRAs have the full responsibility to implement and enforce these directives. Thus, each Member State retains its sovereignty over regulatory matters but it is obligated to implement its national policies in accordance with the overall policy recommendations and directives issued by the center.

In this model, the RRA acts as a policy-making body that establishes regional policy through a consultative process. It is very similar to the one adopted by the EU where the Commission formulates policy and issues directives that have the force of European law. But it is the responsibility of the Member States to adopt the directives into national laws and regulations and thus to establish and implement national regulation.

This model treats the entire EAC region as a single economic space while at the same time it recognizes the importance of national sovereignty and the reality of significant cross Member States differences in institutional endowments and legal structures, traditions and processes. The practical outcome of this compromise between maintaining national sovereignty and

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pursuing regional policy harmonization is likely to be the uneven adoption and implementation by the member states of policies developed by the regional authority. Inevitably, some member states will be slow and reluctant to implement the RRA directives into national laws and regulations.

Decentralized Harmonization

Under this model, the RRA acts as a central source of technical expertise, undertakes regional and benchmarking policy studies, facilitates information exchange, publishes reference papers that summarize the emerging international experience on important policy issues, and organizes regional training programs. The RRA has no regulatory authority but it can issue non-binding regulatory and other policy guidelines. While this model, at least in the early stages of regional integration, represents the most realistic organizational option, it offers very little assurance that uniform and consistent regulatory policies will be effectively implemented across the EAC. Thus, trade distortions created by differences in regulatory efficiency among the EAC Member States are likely to persist.

Based on that foregoing, the recommendation is to establish independent regulatory bodies along the lines of The Body of European Regulators for Electronic Communications (BEREC) of the EU. A regional regulatory authority could play a very important role in reducing the regional risk of regulatory failure due to the lack of technical and economic expertise in critical areas by: encouraging the design of effective and practical regulatory regimes in the Member States; identifying less sophisticated regulatory instruments that do not impose significant informational and analytical requirements on the NRAs; undertaking benchmarking and other studies on important areas of policy and disseminating the findings of those studies through the publication of reference papers and technical guidelines; designing training programs for the staffs of the NRAs.

Thus, such a body should carry out the following tasks:

Identify the substantive regulatory issues that are likely to arise in the Member States that are implementing restructuring and privatization programs in telecommunications (e.g. the pricing of access to bottleneck network facilities, reducing rigidities and inefficiencies in retail tariff structures, competitively neutral mechanisms for funding universal service mandates), and suggest strategies for addressing these issues

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Deepen the regional understanding of how to design effective and practical regulatory mechanisms in the face of scarce technical and economic expertise

Evaluate the efficacy of the new regulatory principles that have emerged in the last decade stipulating a preference for competition and reliance on market-like solutions and assess their applicability to the unique circumstances of the EAC Member States-- in particular the consequences of unstable macroeconomic conditions and imperfectly developed capital markets for the pace and extent of appropriate regulatory decontrol

Identify options for the structural reorganization of industries that reduce the need for regulatory oversight

Develop more precise criteria distinguishing between cases where regulatory intervention is required and those where it is not

Develop models for optimal allocation of scarce regulatory resources among firms and sectors with different sizes, technologies, information asymmetries, and political constraints

Identify appropriate, perhaps less sophisticated, tools of intervention better suited to regulators in the EAC region

Identify the fundamental principles that must be articulated publicly by the NRAs as the basis for their policy analysis and regulatory decisions—e.g., commitment to the financial interests of investors at the baseline level established by the terms of privatization; reliance on the workings of the market wherever there is or could be reasonably effective competition; weigh the cost of rules against the benefits; allow open access to bottlenecks on terms that reflect competitive parity; assure service quality and price levels that are consistent with the competitive standard; provision of economically efficient signals and incentives to final consumers, to suppliers of complementary and substitute services, to upstream suppliers, and to investors.

There are a number of policy and regulatory safeguards that would create an enabling regional environment for the success of the cross-border initiatives. They include the following:

Harmonize international gateway licensing procedures to help overcome ‘artificial’ barriers within the EAC region to flows of intra-regional traffic.

EAC Intra-Regional Interconnection Service: EAC Member States need cross-border interconnection agreements between States to allow traffic flow.

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International termination charges: The effect of implementing a transit service within EAC is that traffic from an operator in one Member State can flow to another uninhibited by tariffs or licensing barriers.

6. CONCLUSION The paper has demonstrated that with the establishment of the common market in the EAC in 2010, most telecommunication service providers are venturing into regional operations. Currently, there is a lack of a regionalized regulatory framework and therefore regulation remains at the Member States level. There various divergences from the national policies, regulation to institutional settings. Therefore, market players are faced with various dissimilar regulatory requirements in the various Member States.

The experience of the EU has been studied as an example from which the EAC should draw lessons from. The European experience of regulating telecommunications (as with the European experience of regulating any other sector) is as much about establishing a common market, as it is about controlling the market power of ex incumbent and powerful newcomer operators and service providers, as it is about curtailing the sometimes diverging interests of individual member states.

The EU has achieved and continues to seek to achieve these objectives with the adoption of a variety of regulatory instruments. With these instruments, the European institutions have sought to maintain flexibility and consistency of approach, with varying but overall satisfactory results, especially in light of the differences amongst the 28 Member States.

Further experience of the EU is that effective regulation needs to respond to technological innovation. The ECRF continues to struggle with the problem of harmonization.

All in all, the examination of ECRF has provided a solid background for the ongoing research on the future regulatory models for the EAC. This experience provides ideas and insights that could inform discussions about the way in which the EAC should approach its reform of the ICT legislation and regulation in this era of convergence and regionalization.

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