Negotiating the Net in Tanzania Introduction by min12172

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									Negotiating the Net in Tanzania
Introduction
Most of the cafes in Dar don’t serve any food. In fact one can’t even get a drink. Yet
lots of people happily pay Tsh1000 ($1) an hour just to sit there. Well, maybe more
than just sit, for these are the Internet cafes and they provide a most valuable service.
Whether in a tiny, grimy basement near the ferry to Zanzibar barely holding a half
dozen aging computers with sticky keyboards and separated by makeshift partitions,
or in a spacious modern room overlooking the sea at the upmarket Slipway with rows
of new computers and computer magazines to purchase, Internet cafes are a rapidly
growing phenomenon in Tanzania.
In fact, people say there are more Internet cafes in Tanzania than in any other African
country—several hundred—mostly in Dar es Salaam, but now appearing in many re-
gional centers. Emailing friends and family abroad is very popular and some surf the
web for jobs or music or other pastimes. Apparently many customers also take advan-
tage of Voice over IP to make cheap international calls. The latter offering remains
against the stated government policy of exclusivity for the monopoly Telco, but very
tempting with rates of 30 -100 US¢ for a ten minute call to Europe or North America.
Equivalent rates via the monopoly Telco and mobile operators are over $3 a minute.
The question is, of course, how has Tanzania gotten to this stage of Internet develop-
ment? It all started in 1996 when Coastal Travel became the first cybercafé, with
seven PC's and a slow and 'very expensive' 10Mbit Ethernet link to Bill Sangiwa’s Cy-
bertwiga, the first commercial Internet service provider in Tanzania. In those days it
was mainly foreigners and travelers doing email at $2 an hour. Not too long afterwards
more outlets started appearing, even ones that offered food! An early example was the
Java Café located at a famous spot called Cozy Café. One who remembers describes
how young men would flirt with both their girlfriends and the Internet and enjoy a plate
of high quality French fries at the same time!
Real growth in the cybercafé industry started after a protracted series of negotiations
in the telecom regulatory arena had come to an end in 1998. At that time clear guide-
lines were issued and several new ISPs licensed. By then the Internet was becoming
much more familiar terrain, at least for the educated urban dweller, and entrepreneurs
saw the opportunity to meet a real need in a country with a large Diaspora.1
The diffusion of the cybercafés reflects many important aspects of Internet diffusion in
Tanzania. Their rapid spread through the country was accompanied by processes of
multiple negotiations as people in schools, cafes and companies sought their own best
solutions to meet their personal and professional priorities. The rise of cybercafés
represents a microcosm of the evolution of the Internet: new and unfamiliar technolo-
gies variously redefined, regulated, de-regulated, and redefined again, moving from
the periphery of contemporary communications systems used by a few “cyber-geeks,”
to the center of a modern system used by millions. At each step, info-pioneers
(whether Internet or other ICTs) negotiate for everything from licenses, to bandwidth,
to controls over content. The Internet doesn’t come automatically to Dar es Salaam or
any other place – it has to be negotiated at every step.



1
  Interestingly though it is believed that most of the early entrepreneurs had their origins in
South East Asia rather than being members of the indigenous population and their extended
families in the Diaspora.


                                                1
In 1990 on the eve of the Information Revolution, Tanzania stood out as the most so-
cialized country in Africa, and as it turned out badly hurt economically by the failure of
the economic policy known as ujamaa. Today despite remaining heavily dependent on
donor funding—the country enjoys a multi-party democracy, a free market economy
and outshines its neighbors in respect of macro-economic stability, political stability
and social cohesion. This profound political and social transformation has been ac-
companied by equally dramatic changes in the telecommunications arena—from a
time when the import of computers was prohibited, there was a decaying phone sys-
tem and no data communications, to now, when Tanzania enjoys a healthy ICT sector,
rapidly expanding national and international data communications and significant pub-
lic Internet access.
The diffusion of the Internet in Tanzania must be seen within a context in which GDP
per capita is estimated to be only US$251 and half the population live on less than $1
a day. Seventy percent live in rural areas, but telecom infrastructure is heavily concen-
trated in urban areas and especially the commercial capital, Dar es Salaam. Neverthe-
less there is a range of public sector reform initiatives and a poverty alleviation pro-
gram that in 2001 enabled the country to reach a completion point in the HIPC (Heavily
Indebted Poor Countries) process. This has significantly increased aid for develop-
mental activities and the flows are likely to grow over the next few years, including
those into the telecom sector.
The country’s economic reform process, especially with regard to privatization and in-
vestment, is also changing the telecomm landscape, with international firms entering
the economy and rolling out infrastructure as a business.

Education
Education has faced a number of challenges over the last three decades including lack
of investment, outdated and inappropriate curricula, and departmental fragmentation.
As a result school enrolment and literacy levels have declined significantly since the
1980’s and the education system yields inappropriate and uncompetitive material for
the requirements of the job market, self-employment and wealth creation. The Gov-
ernment is implementing the Primary Education Development Programme but those
measures alone will not resolve the sector-wide problems that impact the education
pipeline. Additional steps will need to be taken to overhaul the entire sector, particu-
larly in order to improve the ICT skills of suppliers and users of ICT goods and ser-
vices.

Financial Services
On a positive note, various reforms in the financial services sector have resulted in
great improvements over the last decade. For instance, the national payments system
and clearing house started operating in March 2002 and has resulted in significant im-
provement in financial services. However the sector is still relatively backward com-
pared to other countries in the region in terms of the financial instruments available. In
addition the legal framework and institutions for the sector support paper-based trans-
actions and do not provide for electronic records, nor for adequate safeguards to cre-
ate an environment of trust for electronic transactions. The culture of cash as opposed
to credit transactions needs to be changed.
In all countries, the policies and strategies necessary for effective exploitation of ICT
(and the Internet in particular) need active and continuing participation from all major
categories of stakeholder. Thus it is significant that Tanzania’s policy drafting proc-



                                            2
esses have increasingly recognized the need to be consultative and take broad stake-
holder interests into account. In particular a broadly-based Task Force under the Min-
istry of Communications and Transport finalized the drafting of the first National ICT
Policy in August 2002. Significant benefits are expected once this policy is imple-
mented. Among other things it is expected to pave the way for an eGovernment strat-
egy as well as sector-specific implementation plans that will manifest through contin-
ued diffusion of the Internet.
In the pages that follow it will become evident that the tangible changes in telecom in-
frastructure, end-user facilities, etc., are often the first visible outcomes of discussions,
debates, and negotiations that may have commenced months or years earlier. Particu-
larly in the telecom and Internet arena, there are a large number of actors whose for-
mal, informal and even personal relationships dictate the path into the future. Readers
are encouraged to bear in mind the following actors as they read the case material.2 i

Current Status
The telecom sector is a key sector that has been undergoing reforms since the early
1990s including shifting balances between public and private role-players, monopoly
and competition, domestic and foreign ownership and centralized and decentralized
governance. In 1993 Tanzania established independent regulatory agencies for broad-
casting and telecom and agreed to the unbundling of the telecom and postal organiza-
tions. The latter took effect in 1994. The telecom entity was the first “strategic” parasta-
tal to be privatized and in 2001 the government sold 35% of it to an international con-
sortium. The transaction has generated considerable controversy and has yet to be
concluded. Indeed in one direct outcome in September 2002, the union representing
the organization’s workers called for the President to remove the Minister of Commu-
nications and Transport. This development has dire implications for the country’s over-
all privatization process and not just the potential adverse impact on the telecom sec-
tor itself.
As will be discussed in more detail in subsequent sections, Tanzania has had Internet
activity since at least 1990, albeit understandably at a very rudimentary level in the
early 90’s. Until recently use has been confined largely to Dar es Salaam, and has
been at the low levels of usage characteristic of most African countries. Lately, how-
ever, there is evidence of quite rapid growth. For instance international Internet band-
width trebled from 2001 to 2002, and at the same time there has been a rapid expan-
sion of the national network that now includes virtually all first-tier geographic regions
and some districts. Dialup subscriptions have grown by a factor of six in the last two
years and there has been a proliferation of cybercafés providing public access to the
web. Impressive as this may sound, however, the absolute numbers remain very small
by developed country measures.

Current National Connectivity
Tanzania lacks an Internet backbone, has no Internet exchange point or direct landing
point for the Internet. Data service providers connect to the Internet via satellite in
countries as diverse as France, Norway, the UK and USA. Collectively this bandwidth
amounts to only a claimed twenty four mbps. A subsidiary to the telco recently rolled
out twenty or so two-mbps national links to regional centers. This connectivity certainly


2
    Appendix 2 provides more detail in each case.


                                                3
offers opportunities for businesses, local government and private citizens to gain ac-
cess to the Internet, but as yet there is little traffic.

LANs
Several large companies, central government departments and key government and
parastatal agencies have LANs and Internet connectivity, but not so the large numbers
of small to medium public and private institutions throughout the country that lack elec-
tricity, let alone computers and connectivity.3 As regards other sectors, with the excep-
tion of the University of Dar es Salaam—which is a significant user and provider of
Internet connectivity to the academic community and beyond—there is minimal Inter-
net usage in schools and tertiary educational sector. The same applies to the health
sector, although the Muhimbili University College of the Health Sciences (MUCHS),
one of the earliest users of the Internet in Tanzania, continues to make use of the
Internet for telehealth purposes. In addition at a new facility the Aga Khan Hospital is
using the Internet for limited telemedicine applications.

Industry
A healthy industry has grown around the Internet. In addition to the hundreds of cyber-
cafés and emerging public call centers, there are now over a dozen ISPs in the coun-
try, serving upwards of 30000 Internet accounts.4 As regards other modes of public
access, the multipurpose telecenter phenomenon has not as yet taken on in Tanzania.
There is one telecentre in Sengerema, which went online early 2001. Three more tele-
centres are due for construction in refugee camps near Bukoba as part of a recent
agreement between the Government and the ITU.

Cybercafés
Cybercafés and public call centers (PCOs), however, are the phenomena of real inter-
est in Tanzania. The first cybercafé opened in 1996 and growth took off in 1998. The
original intention was to open up access to the Internet in a country with minimal and
expensive access to domestic telephones and computers. A recent survey (ref. to
come) suggests that there are now several hundred cybercafés in the country (possi-
bly more than any other country in Africa), with perhaps 90% in Dar es Salaam.5 The
survey gathered quantitative data from about sixty cybercafés in several towns and the
results suggest that most have fewer than ten computers and connect to their ISPs via
microwave local loop. The survey suggests that the typical user of cybercafés in Tan-
zania is a young unmarried male with a secondary or tertiary education, who is either a
student or self-employed. Another survey in rural areas, however, concluded that us-
ers were more typically in the 30-40 age bracket.6 Usage is typically for email, although
there is some websurfing and—despite being illegal—a good deal of telephony using
VoIP. There is also a growing use of cybercafés for online chatting, especially by
young professionals and businessmen.


3
  A major training house in Dar es Salaam fills two large rooms with trainees learning to type on
manual typewriters.
4
  This in a country of over 30 million people, but it is estimated that each Internet account has
ten users.
5
  It is noteworthy that the ITU has proposed changing its definition of universal access from
“telecenters in every community” to “Internet cafes in every community.” (ITU ref.)
6
  Olaf Nielinger, private comm..


                                                4
The establishment of internet cafes boomed between 2000-2001, but inevitably com-
petition forced down prices to unrealistic levels and now researchers in Tanzania ob-
serve a consolidation of the market; a considerable number of cafes have closed,
some have reduced their number of computers (esp. where connectivity fees depend
on the number of computers connected), and some Internet cafes have moved to
smaller premises, due to high office rents.7
PCOs are an alternative and blossoming voice communications facility for those lack-
ing mobiles or landlines. Indeed at least one mobile provider has just introduced a
technology specifically geared at PCOs and any shop that wishes to introduce paid
calls to mobile telephones.
With regard to Internet content production, there are now several hundred Tanzanian
websites and a couple of substantial country portals. Perhaps ten percent of the sites
have Kiswahili language content. Some are clearly targeted at local Tanzanians offer-
ing chat rooms, sports information, slang dictionaries, local humor etc., but by and
large the sites appear to target non-Tanzanians with an interest in Tanzania, and the
Tanzanian Diaspora. There is little evidence of commerce being conducted via the
Internet in Tanzania, although there is at least one online shopping portal—
Watawetu—serving Tanzanian residents, and some business-to-business e-commerce
as well. (Sida ref. ).
All in all, the ITU estimated a total of 300,000 users in Tanzania in 2001, or about one
percent of a population of 33 million. The recent rollout of two-mbps lines to regional
centers is likely to increase this user base by accelerating the growth in cybercafés as
well as business use of the Internet in the regions.8
The next section fleshes out this bare-bones description of the diffusion of the Internet
in Tanzania and traces the historical events that have led to the present situation. In
particular to convey the pull and push of the different social actors, we must describe
the phased evolution of their relations over time since there were important continuities
as well as changes.
Pre-commercial Phase (-1993)
In 1987, the Tanzania Media Women’s Association (TAMWA) was born and offers perhaps the first exam-
ple of electronic data communications in the country, all the more surprising in an era of stereotypical
male geeks! TAMWA quickly entered the ICT arena by obtaining training for members in desktop publish-
ing to produce their magazine Sauti Ya Siti. Shortly thereafter empowered by modern technology, they
installed a modem for e-mail with support from APC, Says founder Fatma Alloo,
“Those were the years of the UN conferences, when women were mobilizing around issues of development, violence
and reproductive health. At that time, the telephone infrastructure was poor. Nonetheless, we decided to download
messages, get them translated into Swahili, and let women know what was happening and how to mobilize around
issues of concern before going to these UN conferences. The exercise proved highly innovative and had tremendous
impact nationally and globally.”
From Fatma Alloo, Women Encountering Technology, in Rowing Upstream: Untold Stories: The Beginning
of ICT in Africa.

Many years before the Internet appeared on policymakers’ agendas, NGOs and aca-
demic institutions were preparing the way for the revolution to come. At this stage the
negotiations were primarily over… While the Tanzania Media Women’s Association

7
 Private Communication: Olaf Nielinger
8
 Observers note, however that ICT awareness raising is needed to promote ICT and the Inter-
net not as a “club or high tech gadget” but as an everyday and everybody’s tool for efficient
communication and provision of goods and services. They note that raising general literacy and
demystifying ICT are crucial for accelerated and sustainable use and growth of the Internet.


                                                       5
(TAMWA) was likely the first organization to use email in Tanzania (see box), it was
1990 that marked the start of a long and more or less continuous process culminating
in widespread commercial access to the Internet.
Thanks to the pioneering efforts of biostatistician Bill Sangiwa at the University of Dar
es Salaam, others in partner countries and the IDRC, two three-year projects . Eastern
and Southern African Network () enabled electronic mail between researchers at the
University of Nairobi, Makerere University, University of Dar es Salaam (UDSM), Uni-
versity of Zambia, and University of Harare, and of course the rest of the world. Each
node ran a suite of Fidonet software on an IBM compatible AT with a 40MB hard drive,
linked via a modem and a dedicated phone line to the existing (and very shaky!) tele-
phone system. Also the same universities were tackling another project, planning to
exchange health and medical information via HealthNet, a satellite-based communica-
tions service operated by Boston-based NGO Satellife.9 Because of the overlap in the
participating institutions, the common source of funding and other areas of commonal-
ity, the two projects were merged in 1991.
The objective of the project was to reduce costs of international calling and improve
speed and reliability of transmissions by using the satellite. This required a license for
use of the satellite frequency spectrum. Without a regulator, however, it was the telco
working with Department of Communications in the Communications Ministry that was
integral to such licensing procedures.10 In addition to this process being long and in-
volved, the incumbent telco had no desire to give up frequency allocations, or see its
revenue base eroded by the use of satellite transmissions as opposed to lucrative in-
ternational dialing!

          CNI #1: Negotiating the First Satellite Data Transmissions

                   Loss of monopoly telco revenue and frequencies
                                         vs.
       Lower costs and improved access for research and health-related projects


Yet, there was plenty of international support for connectivity through the IDRC and
also the National Startup Resource Centre at the University of Oregon, as well as local
support from the Director General of the Muhimbili Medical Center, but this was a new
idea to the Ministry of Communications and they had to make the final decision. So,
while there was no formal negotiation as such, Sangiwa describes how he had to work
“behind the scenes” on a person-to-person basis with government officials, enlist con-
tacts in the Ministry of Health to educate all the players, present the merits of the case
and gain support. At the same time he had to lobby the Tanzanian telco to get their
support and approval for a spectrum allocation.
In due course the Ministry of Communications supported the application and granted
satellite frequencies for HealthNet and ESANet transmissions, usage being restricted
to a “closed user group.” As a result of this successful negotiation ESANET and
HealthNet were able to survive and grow as research and health networks of profes-
sionals, using store-and-forward email procedures via satellite.
9
  Satellife purchased 60% of the capacity on the UK University of Surrey-built Low Earth Orbit-
ing (LEO) satellite to enable this service.
10
   The department in turn had to get clearances from Government Security functions for specific
allocations.


                                              6
    While of limited scope and potential for conflict, this was the first negotiation for an al-
    ternative to the POTS for national and international data transmission. It prepared the
    way for future Internet policy, regulation, and legislation and tested the ground rules for
    future negotiations. For instance with little effort during 1992, COSTECH (the National
    Commission for Science and Technology) and the University of Dar es Salaam Com-
    puting Centre, also started offering closed user group store-and-forward email ser-
    vices, although in some cases the definition of “closed user group” was rather broadly
    interpreted!
    During the same period several other telecom-related activities were under way that
    were to have a lot of influence over the future diffusion of the Internet in Tanzania.
•            Drafting a new Telecommunications Act. Prof. Mgombelo, a former electronics
    professor at UDSM and now MP, chaired a government committee that, with technical
    assistance from the World Bank, drafted the new Telecommunications Act—eventually
    promulgated late in 1993. It called for unbundling of the Tanzanian Post and Tele-
    communication Company (TPTC) and establishment of the Tanzania Communications
    Commission to regulate telecom activities
•            The launch of the Presidential Parastatal Sector Reform Commission (PSRC)
    that would oversee the progressive privatization of state-owned companies and as-
    sets, including the telco. It is noteworthy that the span of state-owned companies cov-
    ered an estimated 80% of the economy at the time. Privatization focused on smaller
    and non-strategic assets before moving to the larger transactions. The privatization of
    TTCL following the unbundling of TPTC was the first large transaction involving a “stra-
    tegic” utility.
•            The Telecommunication Restructuring Programme, designed to overhaul the
    whole telephone network in Tanzania. It was delivered in three phases, TRP I – TRP
    III, between 1993 and 2000 as a multi-donor project with the World Bank and Sida as
    prime donors. TRP was one of the major catalysts for telecommunication and IT-
    developments in Tanzania. It comprised major network rehabilitation and moderniza-
    tion and also policy and regulation and institution-building aspects. It has seen more
    than $250 million invested in an almost all-digital network in the country.
•            The lifting of the need for a permit to import or own a computer or television set
    that had been in place since 1974 then especially intended for mainframe computers,
    although this was only loosely enforced in the 90’s.
    So the period up to 1993 was characterized by the first steps towards electronic data
    communications in Tanzania—well before the technology appeared on the political ra-
    dar screen. Driven by enthusiasts and champions of data communications in the re-
    search and NGO communities this resulted in real benefits to the emerging members
    of the Internet community. The period also saw the first substantial moves towards
    telecom liberalization and privatization and regulation of the rapidly developing telecom
    sector. Those moves would open the way for substantially more activity in fixed line
    and mobile telephony and the start of commercialization of data communications.
    Commercial Phase (1994-1998)
    The promulgation of the Telecommunications Act of 1993 clearly marks the beginning
    of a most vibrant period in the evolution of telephony, data communications and the
    Internet in Tanzania, including the first steps in commercialization of many telecom
    services. It heralded a period of rapid, and in some cases, dramatic change in the
    country’s telecom landscape, including the first competition for telecom, courier and
    local IT business. The much higher stakes also led to a series of conflicts and negotia-



                                                 7
tions between public and private sector players in which the emergent Telecom Regu-
latory Authority played a central role.
A key outcome of the 1993 Telecom Act was the emergence of four new legal entities:
the Tanzania Telecommunications Company Limited (TTCL), the Tanzania Postal
Corporation, the Tanzania Communications Commission (TCC), and the Tanzania
Postal Bank. Overseen by the then Managing Director of TPTC, Mr Adolar Mapunda,
the change took effect on January 1, 1994 and saw TCC charged with regulation of the
postal and telecommunications industries.
The TCC was the first telecom regulatory authority in Africa.11 The President and the
Minister of Communications and Transport are credited with having had a clear vision
of the role of an independent regulator, especially in guiding the sector reform process
and implementing national sector policy. They engaged in extensive consultations and
evaluations before the President appointed Prof. Awadh Mawenya as the Chairman of
the Commission—a man known as a distinguished professional with integrity. The
Communications Minister similarly appointed a strong team of six commissioners for a
three-year term. The work of the TCC was carried out by a secretariat whose Director
General, Mr. Emmanuel N. Olekambainei, was also appointed by the President. It fell
to the TCC to guide and regulate the new and increasingly complex arena of voice and
data communications. In May 1994, they published conditions, guidelines, procedures
and fees for licensing service providers and frequency allocation, and set about licens-
ing importers and distributors of telecom equipment as well as local contractors. While
TTCL was granted a ten-year period of exclusivity for national and international voice
communications, TCC encouraged limited (regulated) competition in data communica-
tions services, paging, courier services and mobile telephony.
The TCC decided at an early stage to let retail suppliers operate without licenses, as
long as their wholesale suppliers had TCC licenses. The early Internet cafes therefore
did not require any license under that arrangement. During 1994/5, being the first
regulator and aware of the associated heavy responsibilities, TCC with the assistance
of the World Bank, carried out intensive training for its Commissioners and secretariat
staff on telecom and utilities policy and the regulatory skills needed.


                          “You Are Now Entering a Corruption Free Zone”

           This sign was displayed at the entrance to the TCC offices to impress upon all the
           importance of no corruption in regulation of the sector, especially since corruption
           was beginning to threaten public service. The Commission put out strict rules for
           its Commissioners and staff, while remunerating them well and transparently. Says
           Mr. Olekambainei, the first Regulator, “The TCC insisted on following the law and
           enforcing regulations strictly with transparency, consistency, accountability and
           without fear or favor so as to lay the right foundation and set the proper prece-
           dent.” Of course the real independence of a Regulator remains debatable, since
           the President hires and fires the Director General, potentially overriding the influ-
           ence of the Commissioners to whom the DG technically reports.

In 1993 the first mobile (analog) operating concession had been granted to Mobitel
(jointly owned by TPTC (later TTCL) and Millicom International.) The company started
operations in 1994. Thereafter they engaged in a long fight with the Regulator over li-
censing and other issues. They claimed that they did not need a TCC license and ob-

11
  While such an authority had already been muted in Nigeria, it was only in 1995 that NITEL
came into being. It would take even longer before telecomm regulatory authorities in other Afri-
can countries came into being.


                                                   8
jected to TCC conditions on geographic zones, migration to digital technology and the
required 35% local share holding. Eventually their concession was converted into a
formal license in 1995. Also in that year a second mobile license was awarded to Tritel
through an open tender process during which TCC, supported by the Minister of
Communications, had to deal with interference from interest groups including politi-
cians. This competition led to a decline of about 60% in mobile charges. ii
The first steps towards an open competitive market for telecom were taking place, so
too was an open debate on telecom policy. Towards the end of 1995 (and at the time
when the national general elections brought in a new Government) the Regulator
hosted a three-day forum of public and private sector players on telecom and the liber-
alization of the sector, the first such exchange. This started a process, which some two
years later (1997), saw the publication of a National Telecommunications Policy that
would spell out principles of continued liberalization of the sector and government’s
progressive divestment of its stake in the incumbent telco. The policy also spelled out
the need for development of rural telecom services and the creation of a Rural Tele-
com Development Fund. This decision has still to be implemented, but at least the is-
sue of universal access and service remains on the agenda.
The Regulator in Tanzania took his job very seriously and, despite a reporting line to
the Communications Minister and the Minister’s legal right to intervene, jealously
guarded his statutory independence. In the end a dispute between TCC and Mo-
bitel/Millicom pushed too many buttons and in May 1997—on the same day that the
Regulator visited Mobitel’s offices in Arusha—the regulator was suspended and later
relieved of his duties, in his own words, “for being too independent, strong and pig-
headed.” This led to a regulatory hiatus that was to last for over a year. During the hia-
tus, for instance Mobitel sued the Acting Regulator on the question of whether its li-
cense was a national one or restricted it to particular geographic zones. It is alleged
that there was political interference in the process, and there was an illegal out-of-court
settlement in the Attorney General’s office in favor of a national license for Mobitel ef-
fectively legalizing Mobitel’s Mwanza and Arusha operations. TCC declined to be sig-
natory to that agreement.
In 1998 the TCC started a process of negotiations with existing ISPs. They sought a
basis to formally license ISPs to acquire their own international access. The ability of
consumers to choose wholesale Internet providers and the international market would
place the telco in a competitive market. Issues included initial fees, annual fees, royal-
ties on turnover, and whether arrangements should be retrospective or not. Clearly this
had the potential for a major impact on the pace of diffusion of the Internet in the coun-
try.
The TCC wanted to open and grow the market for Internet access and services, and
set acceptable fees. However TCC’s position appeared to focus on generating fees to
support their annual budget as evidenced by their opening position: a $50,000 initial
license fee, $20,000 annual renewal and 5% of turnover to be applied retroactively.
The existing ISPs did not want retrospective charges and wanted minimal rates since
they were getting no additional benefits. Additionally the ISPs did not collaborate well
with inordinate suspicion among the various players. The final agreed level was $2,000
initially, $10,000 annually and no percentage of turnover.
Soon after publication of the new licensing arrangements in April 1999, the numbers of
IAPs and ISPs started to grow and gradually prices started to decline. While the open-
ness of this negotiation process was regarded as very valuable, the uncertainty it gen-
erated is claimed to have slowed down the growth in the ISP industry by upwards of a
year. The opening up of the telecom industry in Tanzania provided real encourage-


                                            9
ment for commercial interests both local and abroad to stake their claims in a poten-
tially very lucrative arena. Inevitably this led to disputes and conflicts, especially given
that the TCC had to build human capacity in increasingly complex territory and the
Telecommunications Act was not explicit in some of its clauses. For instance as men-
tioned above, Mobitel was in a dispute with the regulator around the conversion of its
operating concession into a formal license, its unlicensed roll-out outside the coastal
zone, the conditions for licensing and release of frequencies by Mobitel for use by
ZanTel in Zanzibar. There were also several disputes between Mobitel, Tritel and
TTCL involving interconnection rates and procedures.
Sometimes the disputes required high-level political intervention. One case over the
35% local shareholding requirement needed the President to uphold the regulator’s
position. And sometimes the Regulator had to roll up his sleeves and intervene di-
rectly. An oil company was found to be using its “private point to point” communica-
tions license to communicate with its international business contacts via South Africa.
The regulator disconnected its VSAT. Then there was a dispute with Mobitel involving
its illegal roll-out and provision of service in Mwanza and Arusha without TCC license.
The regulator traveled to Arusha to give them formal notice to padlock their doors!
In summary, therefore, the period 1994-1998 in Tanzania was one of dramatic change
in telecommunications. There were important steps towards competition in the telecom
arena, with mobile telephony opening up to two competitors and data communications
to three. The first ISP’s launched and Internet cafes appeared. These were vital steps
in the diffusion of the Internet in Tanzania, but the period was not without significant
teething problems. The independence of the Regulator was challenged on several oc-
casions and political interference eventually led to his dismissal. January 1997 to mid
1998 was a period of regulatory confusion with no Commissioners and hence legally
no Regulator. The foundation, vision and regulatory culture put in place by the original
Commissioners and secretariat staff under the Chairmanship of Prof. Mawenya were
all “shaken to the roots.” It is claimed that this was made worse because none of those
Commissioners who had exposure and experience were reappointed into the new
team. At the same time the restructuring of the secretariat that followed removed some
of the experienced staff and the ones who remained felt intimidated and threatened.
While the main action played out in the mobile arena, the hiatus affected data commu-
nications as well, and likely slowed the rollout of the Internet in the country. The publi-
cation of a National Telecommunications Policy and eventual resolution of the regula-
tory hiatus, however, heralded the next phase in Internet diffusion.
Competitive Phase (1999-)
By the end of 1998 the Telecom Restructuring Programme was essentially complete
and 95% of the national fixed line grid was digital. Regulations that required telecom
operators to apply for licenses for specific zones had been dropped in favor of national
licenses. Formal licensing procedures for ISPs were in place, allowing ISPs to apply to
become data access providers and obtain their own international gateways.12 Telecom
costs and prices were coming down. The TCC had new commissioners and a new
Director General.
With the notable exception of fixed line telephony, this was the start of an essentially
open and competitive telecom environment in Tanzania, and resulted in significant

12
  ISPs are not allowed to operate their own international gateways. Unless they apply to be-
come access providers (which to date none have) they must connect through the data opera-
tors’ gateways.


                                             10
growth by several measures. By September 2002 mobile subscribers had grown from
38000 in 1998 to 360000, and were more than double fixed line. As regards the Inter-
net the number of ISPs increased from four to six in 1998 and Internet cafes were
starting to proliferate. By 2000 there were six data service providers supporting sixteen
ISPs sending and receiving data via satellite. By 2002 there were fourteen data access
providers, twenty two ISPs, and several hundred Internet cafés. Dialup Internet ac-
counts had grown from a few hundred to more than 30000, total Internet users were
estimated to have grown from 3000 to 300000 and Internet host names were nearly
doubling each year.
The following paragraphs describe some of the many facets of the rapidly growing
telecom environment in Tanzania in this Competitive Phase. But the story also shows
that developments were not without stresses and strains!
The Privatization Process
In virtually all countries one of the most contentious elements of ICT reform continues
to be shifting the balance between the public and private sectors. Central to this aspect
in Tanzania is the the Parastatal Sector Reform Commission which during the 90’s
was gearing up for privatization transactions, including the government’s partial di-
vestment from TTCL. In preparation for privatization TTCL was restructured and ob-
tained separate licenses for different services. It entered the ISP and Internet café
business via a wholly owned subsidiary, Simunet. It also transferred its 25% stake in
Mobitel to government, freeing itself to launch into the mobile arena via its CelTel op-
eration. There were severe criticisms that TTCL unfairly favored CelTel in provision of
network access and capacity. TTCL was also accused of reneging on its interconnec-
tion agreements with Mobitel, unilaterally offering to settle for $2 million as against an
alleged owing of $20 million.
TTCL was partially privatized in 2001 with the sale of 35% of its shares to an
MSI/Detecon consortium for $120 million. The strategic investor paid one tranche of
$60 million and assumed management control. Government provided this first tranche
to TTCL for re-investment in the company to enable it to proceed with the rollout of ru-
ral connections. The subsequent establishing of Celtel, however, makes observers
suspect diversion of those funds. Squabbling over the extent of TTCL debtors’ book
prior to the transaction—despite a due diligence by the strategic investor—and the
disagreement on interconnection monies due to Mobitel, have led the consortium to
place a moratorium on paying the second tranche of $60 million13. This transaction re-
mains mired in controversy and both parties have placed full-page ads in local news-
papers presenting their positions (see box). There are demands for the removal of the
Minister of Communications and Transport over the issues that are emerging. Clearly if
the deal breaks down, apart from the adverse impact on the telecom sector itself, it will
send bad signals to the international community as to future privatization of strategic
companies.




13
  According to MSI, the issue of fraud and bad debts was much larger than previously recog-
nised and there remains disagreement over the treatment of a US$115m debt.


                                             11
                                   MSI and TTCL: The Facts
            (Extracts from paid newspaper advert by MSI/Detecon signed by the Chairman)
     MSI/Detecon paid the first tranche of $60 million [of the total payment of $120 million for
    35% of TTCL] in February 2001. The difficulties since then, for both MSI and the Tanzanian
    Government, have revolved around establishing a set of fair and reasonable accounts to
    measure the financial performance of TTCL in the Year 2000. When the new management
    at TTCL began to review the accounting systems and data, a number of serious issues
    were revealed. In particular a very large proportion of the company's recorded revenue in
    the year 2000 and before was never collected, and the age of much of the debt was such
    that it was never likely to be. The total uncollected debt due to non-Government sources
    amounted . . . 115 billion shillings [$115 mn] at the end of 2000.

        •   MSI has not conspired with the TTCL Auditors
        •   MSI has not sought to cheat the Government
        •   MSI has not sought to obtain loans from TTCL at any time
        •   MSI and its backers have the funds and will make whatever second tranche
            payment is due when the accounting issues are resolved.
        •   The TTCL Executive Management has followed the rules of good governance
            and transparency throughout.

As part of TTCL’s agreement to maintain its exclusivity on basic wireline and interna-
tional connectivity through February 2004, it undertook to increase fixed lines nation-
ally from 180 000 to 810 000, reaching all 9000 villages in the country by the end of
the period. As hinted above, TTCL has not made any serious attempts to meet its roll-
out commitments. In fact through defaulting on those targets is currently subject to a
US$6.7 million fine.
Mobile Telephony and the Interconnection Regime
At the end of 1998 the TCC invited bids for a third mobile operator. Vodacom won the
bid and went into operation in August 2000. The mobile market transformed and ini-
tially there was a significant drop in prices. Vodacom’s entry into the mobile market
also spurred Mobitel to bring forward by two years its plans to replace its analogue
ETACS network with a GSM system, and to significantly increase its rollout of national
mobile coverage.
As competition grew, so did stresses in the industry. Some mobile operators are said
to have bypassed the Regulator and directly approached politicians with complaints on
regulatory issues, confounding efforts by the Regulator to avoid political interference
and act professionally and transparently. By contrast, from industry’s side, there were
growing complaints about the Regulator, with criticisms such as lack of technical know-
how, inconsistent application of the regulations, changing rules, uneven application of
the rules, and interference by government officials. Perhaps as a result of all this, the
ongoing disputes with Mobitel and threats of court action, the Telecom Act was
amended in 2001 to strengthen enforcement and empower TCC to re-allocate fre-
quencies and impose massive fines on defaulters.
Finalizing a set of acceptable interconnection rules was also taking a long time, alleg-
edly delaying further possible reductions in prices for both voice and data. So the
TCC’s “Interconnection Determination” issued in September 2002 was widely ac-
claimed. It was expected to resolve some of the nagging issues on competition, fair
tariffs and interconnection rates and disputes, generally leveling the playing field and
hopefully reducing prices. It was hoped that this determination would counteract many
of the angry accusations against the Regulator. Early in October, however, the Regula-


                                              12
tor suddenly announced a delay on enforcing the Interconnection Determination until
10th January 2003 citing “technical reasons”. This opaque decision resulted in an out-
cry and the dust has yet to settle.
                          Box: press reports on TTCL Saga
Institutional Developments in the Public and Private Sectors
During the competitive phase key actors typically try to create alliances and institutions
to advance their interests and projects, but they also add new policy concerns and
prompt ongoing adjustments. We see this playing out in Tanzania in different ways.
For instance the changes that took place in the Regulatory Authority in 1998 were not
the last. When a new Minister for Communications and Transport (the Late Hon Ernest
Nyanda) was appointed at the end of 1999, he removed the incumbent TCC Commis-
sioners and replaced them with new ones while the President appointed a new Chair-
man [We need to know why this happened]. At the end of 2000 a new Minister (Hon.
Mark Mwandosya) was appointed. He retained the TCC team and decided to actively
address the problems facing the sector. In August 2002 the Minister of Communica-
tions and Transport changed the composition of the TCC Commission replacing some
commissioners [was this a new minister?].
Within the industry a national Telecom Forum launched with representation from many
of the groups of actors listed in the Introduction. [Who initiated this? Who participated?
When exactly did it happen? Has this forum been at all active?]. Also the Communica-
tions Operators Association of Tanzania (COAT) came into being, inviting membership
from private sector telecom operators such as the mobile phone companies, data ac-
cess providers etc. and encouraging industry to collaborate in its dealings with gov-
ernment and the Regulator [Who initiated COAT?]. COAT subsequently spawned the
Mobile Operators Association of Tanzania (MOAT), but both bodies were moribund by
2002, apparently as a consequence of infighting in the industry. Whatever the reasons,
industry appears to have lost an important opportunity to speak with one voice on criti-
cal issues affecting telecom in the country.
On a more positive note, the participation of civil society in telecom matters received a
major boost in 2000 when an electronic forum “eThinkTank” formed (see box). eThink-
Tank continues to play an important role in lobbying government and fostering public
participation in ICT and telecom in particular.
               The Voice of Civil Society Loud and Clear in Tanzania
  When cousins David Sawe from government IT and Simbo Ntiro from a private
  sector management consultancy launched eThinkTank as an online forum on ICT
  matters early in 2000, they could not have foreseen the enthusiasm of their col-
  leagues both within and beyond the borders of the country to debate issues such
  as VoIP, Internet Exchange Points and ICT Public Policy. By mid-2000 the group
  had a hundred members, and was set to grow to three hundred a couple of years
  later. Vigorous debates continue online, the most recent being around the myste-
  rious goings on in the TTCL saga. But soon the debates moved from the cyber
  world to the real world of meetings, seminars and conferences. eThinkTank can
  also claim credit for accelerating the pace of development of a national ICT Pol-
  icy, spearheading a process which was eventually taken up by a government-led
  public/private steering committee now drafting the policy document.




                                           13
Internet Diffusion
Central to this case is the Internet, but we have to look to telecomm issues beyond the
Internet itself to appreciate the factors influencing its diffusion. For instance the various
disputes in the fixed and mobile arena were undoubtedly having their effect. Also
TTCL was very slow to meet its legal obligations and the consequent limited rollout of
fixed lines was seriously delaying access to the Internet in rural areas. Nevertheless
several measures suggest that Internet usage was taking off during the period. The
rapid increase in ISPs from six in 1998 to sixteen in 2000 has already been noted.
Published statistics note a leap in dialup customers from 4500 in 2000 to 20000 in
2001, and Internet users from 115000 to 300000 over the same period. Network Wiz-
ard statistics indicate that 2000 was the year of take-off for .tz hosts as well. From a
base of 218 hosts at the beginning of 2000, exponential growth kicked in and contin-
ued up to the latest figure of 1684 hosts in mid-2002.

                                      .tz Internet hosts

                1800
                1600
                1400
                1200
                1000
                 800
                 600
                 400
                 200
                   0
                   Jan-97   Jan-98    Jan-99    Jan-00     Jan-01   Jan-02




                                               14
                                Estimated Internet Users

             350000

             300000

             250000

             200000
             150000

             100000

              50000

                  0
                       1996     1997      1998          1999      2000    2001




                              Internet Dialup Subscriptions

              35000
              30000
              25000
              20000
              15000
              10000
               5000
                  0
                       1998        1999          2000          2001      2002


While cybercafé stats are not recorded anywhere, observers report rapid growth in
those numbers over the same period. Certainly competition has rapidly driven down
the charge for access to a very low 50 US¢ an hour, a level analysts regard as uneco-
nomical and likely to lead to a shake-out in that industry. There are conflicting esti-
mates for Tanzania’s international bandwidth, but it seems that outward bandwidth
leapt from about 4 mbps in 2001 to 12-15 mbps in 2002. As regards the bandwidth of
the domestic backbone, if we add up the capacity of all the backbone links in a coun-
try, then Tanzania enjoys over 40 mbps domestically. This thanks to Simunet’s rapid
rollout of 2 mbps links to all twenty two regional centers in the country over the
2001/2002 period.

                  CNI #3: Voice over Internet Protocol (VoIP)
  Organizations with access to the Internet are providing VoIP services to con-
                         sumers despite its illegality.
Through the popularity of Internet cafés an Internet culture is rapidly developing. Some
say this is due in part to widespread availability of VoIP in the cafes despite the exclu-
sivity on basic telephony and international voice traffic granted to TTCL and that brings




                                           15
down the cost of international voice calls by up to a factor of ten.14 The Regulator is
well aware of the situation and has at various times attempted to contain VoIP, in early
2001 even forming a high level task force to examine the options. The task force is yet
to report back. Here it is suggested that the issue directly influences the future of the
Internet in the country. It needs negotiation and resolution rather than allowing continu-
ing contraventions of the Telecom Act, distortions in the marketplace and apparent dis-
regard for the law by the authorities.
At issue are the stipulations of the Telecom Act of 1997 that accorded TTCL exclusivity
on so-called basic telephony services and international traffic. This exclusivity was re-
inforced for a four-year period following the partial privatization of TTCL in February
2000. Cybercafés and other clients of ISPs, are, however—sometimes blatantly—
providing VOIP services well below fixed line or mobile rates. They often use the TTCL
national and international circuits, thereby depriving TTCL of revenue and contraven-
ing its legal rights. TTCL has objected to VoIP and insisted that the practice be
stopped. In response the Regulator claims to survey cybercafés regularly and has
threatened action against delinquent cybercafés. He has not, however, imposed sanc-
tions on any cybercafés apart from apparently confiscating equipment on occasion.
The eThinkTank forum15 has enabled widespread public debate on this topic, resulting
in strong civil society support of VoIP’s desirability for the consumer. And end-users
(including members of the Diaspora) continue to make use of VoIP despite its illegality.
Among the issues are whether the regulations make sense in light of convergence of
voice and data communications, and the ability of the Regulator to enforce the law.
The Regulator commissioned a Task Force to look into such issues and report back
with recommendations by the end of 2001. The secretary of the Task Force claims that
he has not been able to bring anyone to the table for the planned meetings and there-
fore has not been able to prepare a report.
In the meantime Simunet’s recent roll out of Internet connectivity to all regions will
simply extend VoIP opportunities widely throughout the country over corporate Virtual
Private Networks (VPNs), making policy enforcement even more difficult. The question
remains: should the Regulator enforce a ban on VoIP (which would be counter to in-
ternational trends), allow it under some or all circumstances, or turn a blind eye until
TTCL’s period of exclusivity lapses?

                                       CNI #4
                       National Internet Exchange Point (IXP)
     Whether to establish an IXP to enable all local traffic to bypass international
                                        links.
Yet another critical issue that is subject to current debate and negotiation in Tanzania
is that of a national Internet Exchange Point or IXP. At present the different IAPs and
ISPs do not connect locally and have different international landing points, all via satel-
lite into the USA, UK, France and Norway. As Internet usage and the numbers of IAPs
and ISPs has increased, so has Internet traffic between them and therefore the use of
scarce and expensive international bandwidth to exchange local packets. It is now
common practice for IAPs and ISPs within a country to set up a local exchange point
for the express purpose of identifying data packets initiated at one point in the country

14
   Ironically rumour has it that TTCL is using VoIP to switch international calls to local custom-
ers, giving it an unfair advantage over its mobile competitors.
15
   See box on page xx


                                                16
and destined for another. Other countries’ experience is that an IXP improves re-
sponse times for exclusively local traffic (sometimes dramatically), increases Internet
usage and significantly reduces unit costs of data transmission.16
An IXP results in clear winners: local ISPs reduce costs and improve service; Internet
cafes, local businesses, government and private users get better service and possibly
also reduced rates; and the country saves foreign exchange. But there are also los-
ers, specifically local providers of international access who lose revenue and might
suffer from excess bandwidth capacity for a while. This is especially relevant to a mo-
nopoly incumbent who stands to lose the most. There are also other issues: ISPs are
well-known for being highly competitive and wary of collaborations that might require
them to reveal numbers of customers, extent of traffic, etc. Regulators may construe
an IXP as another Internet business and call for license applications and fees, major
ISPs and IAPs may feel much less need to collaborate than their smaller rivals.
In Tanzania there has been a war of words around an IXP for a couple of years. Sus-
picions and lack of cooperation among ISPs, and between ISPs and IAPs and Simunet
have blocked final resolution of the issue. Recently a fledgling ISP Association came
into being, comprising nine large ISPs but excluding Simunet. It has agreed to design
and implement an IXP for the exclusive use of its members and has identified prem-
ises to house the facility. Donors have offered to fund any needed construction. The
ISP Association has submitted a formal application to the Regulator, who has had a
cautiously positive reaction. The association awaits a formal response.
Summary
The period since 1999 saw more and more individuals, groups and institutions decid-
ing that the Internet was something they wanted to use, own, control or block. Once
they engaged, they mobilized like minded people to pursue their common goals and
strategies through overt and covert lobbying and negotiations. As other reforms in
telco and in society more broadly spread, one result was the opening up of all telecom
markets in Tanzania to vigorous competition under the eye of the Regulator. The coun-
try is clearly enjoying a vibrant and competitive telecom marketplace.
It is striking that, despite many accusations and counteraccusations—especially in the
mobile arena—court actions and threats of court action, ongoing criticisms of the com-
petence and evenhandedness of the Regulator, delays in provision of infrastructure,
etc., still the telecom industry advanced rapidly and by many measures Internet activity
grew dramatically. It is easy to lose sight of the fact however, that most of the action
was in Dar es Salaam and more recently in the major regional centers. If the notion of
Internet diffusion is taken to include “dispersion” then Tanzania has a long way to go.
While Internet cafes are starting to appear in smaller towns, there is almost no evi-
dence of Internet usage in schools or medical facilities. Affordability is one factor,
availability of infrastructure another. So there are several issues to take care of if the
Internet is to be more widely accessible and is to benefit the population as a whole.
The planned opening up of the fixed line marketplace by 2005 is an important step in
bringing down basic telecom costs, a ruling on the legality of VoIP is awaited as is the
formation of a local Internet Exchange Point. Importantly the announced Interconnec-
tion Determination must be implemented.
Concluding Comments [To come]
16
   The latter is particularly relevant In Africa since the international accounting procedures for
Internet traffic leave African countries paying for both outbound and inbound traffic over the
international backbone.


                                                 17
   Appendix 1: A Brief Perspective on Tanzania
   Located in East Africa, Tanzania neighbors Kenya in the northeast, Uganda in the
   northwest, Rwanda, Burundi and the DRC in the west and Zambia, Malawi and Mo-
   zambique in the south.
   Tanzania stands out among its neighbors because of its relative political stability and
   social cohesion post independence. Tanganyika gained its independence in 1961 and
   the country is the result of the 1964 Union between Tanganyika and the Zanzibar Isles.
   The architect of the union was Tanzania’s first president, Julius Nyerere who also
   adopted a socialist economic policy popularly known as Ujamaa. Together with Kenya
   and Uganda, Tanzania was part of the East African Community, which collapsed in
   1977 primarily due to ideological and economic policy differences between the leaders
   of the three countries exacerbated by the global cold war. Tanzania embraced multi-
   party politics in 1992 and the incumbent President Benjamin Mkapa was democrati-
   cally elected by universal suffrage in the first multiparty elections in 1995. He is close
   to completing his second and final term in November 2005 and it is most likely that the
   ruling party will succeed in the ensuing elections, continuing with much the same pol-
   icy thrust and increasing the pace of reform.
   Though Nyerere may have led Tanzania close to economic ruin, he is credited with
   having enhanced social and political cohesion among Tanzanians primarily through
   policies that discouraged tribalism and religious animosity, enhanced literacy and re-
   duction of income differentials, and encouraged the widespread usage of Kiswahili.
   Kiswahili thus remains a unifying factor among Tanzanians though English is acknowl-
   edged as an official language and is increasingly widely spoken, especially among the
   young. The majority of Tanzanians are, however, challenged in this regard. While na-
   tional cohesion means that Tanzanians have overcome the tribal barriers and conflicts
   that challenge other African countries, there has been some recent unrest that has
   been attributed to religion. Christians are predominant at 45% of the population; Mus-
   lims (dominant on the coast) are about 35%, with a mix of traditional and other relig-
   ions comprising the remaining 20% of the population17. Some indicative social indica-
   tors are set out in the table below.

                               1996     1997    1998     1999     2000     2001
Population (millions)          30.6     31.5    32.4     32.9
Urban population (% of N/a              N/a     26       32
Poverty %                      N/a      N/a     N/a      N/a
Illiteracy %                   N/a      N/a     28       25



   Table 1: Social Indicators
   Indicators used in the Poverty Reduction Strategy Programme (PRSP) reflect the reali-
   ties of poverty in Tanzania. However only some can be measured empirically, and not
   all have the same baseline or dates. The key indicators are illiteracy, inadequate clean

   17
     These figures are estimates as Tanzania does not collect nor encourage collection of data
   along religious lines—a factor that contributes to Tanzania’s unique unity, cohesion, peace and
   stability. For instance in the recent population census no data on tribes or religion was col-
   lected.


                                                 18
and safe water supply, poor health services, high mortality rate, malnutrition, environ-
mental degradation, unemployment, low incomes, homelessness and poor housing.
However in summary it is estimated that about 50% of the population is living on less
than US$ 1 a day.
Tanzania’s public sector reform initiatives coincided with the shift from a socialist de-
velopment strategy to a market-orientated one in the late 1980s. This reorientation is
building its own momentum, and the Tanzanian economy is expected to continue to
perform well, on the back of considerable inflows of mineral-related investment and an
upsurge in the tourism sector. Real GDP is forecast to grow steadily from a rate of 5.4
percent in 2001 to 7 percent in 2004. The country is also expected to maintain a stable
macroeconomic environment with fairly low interest and inflation rates as well as a
stable exchange rate. Several factors explain this stability including continued donor
budget support, healthy export earnings and the generally prudent monetary policies
adopted by the Bank of Tanzania. The 2001 GDP per capita was estimated to be
US$251.
Driven by the need to reverse decades of post independence economic decline, the
Government embraced market common sense and reform of the country’s moribund
civil service as a key pillar of reform. In essence the reforms are redefining the role of
Government. The umbrella reform programme is the Public Service Reform Pro-
gramme (PSRP) that embraces a number of wide-ranging central and sectoral re-
forms. The PSRP focus is on the cultural transformation of the Tanzanian public ser-
vice into a truly client-centered institution, and this is a significant driving force. As part
of this process several service-oriented Ministries, Departments or Agencies (MDAs)
have been transformed into executive agencies taking government further out of ser-
vice delivery and reinforcing its role as creating an enabling environment and a level
playing field as well as providing necessary catalytic role for other actors. In addition
the country reached the completion point under HIPC (Heavily Indebted Poor Coun-
tries) in 2001 and is implementing a poverty alleviation programme under PRSP. This
has significantly increased aid for developmental activities and the flows are likely to
increase over the next few years. There is progressive realization of the need for inte-
grating and creating partnership between development and investment for achieving
sustainable political, cultural, social and economic development.
The education sector has faced a number of challenges over the last three decades
including lack of investment, outdated and inappropriate curricula, fragmentation (three
different ministries and two agencies are responsible for primary, secondary, tertiary
and vocational education, and for curriculum development and teacher training.),
HIV/AIDS, poor oversight etc. As a result the education pipeline is disconnected and
yields inappropriate and uncompetitive material for the requirements of the job market,
self-employment and wealth creation. Literacy was estimated to be 68% in 2000, down
from the 90% achieved in the 1980s. Gross enrolment for primary school pupils in
1996 was 77.8% down from 90% again in the 1980s. The Government is implementing
the Primary Education Development Programme with a key focus of improving enrol-
ment and number of schools and desks. However these measures will not resolve the
sector-wide problems that impact the education pipeline and additional steps will need
to be taken to overhaul the entire sector. As a result privately-educated pupils have
inordinate advantages in the job market.
Various reforms in the financial services sector have resulted in great improvements
over the last decade. The national payments system and clearing house started oper-
ating in March 2002 and has resulted in significant improvement in services. However
despite the good progress made, the sector is still relatively backward compared to


                                              19
other countries in the region in terms of the financial instruments available, the capital
market in terms of capitalization, activity, and relevance, or the services that can be
provided by institutions. In addition the legal framework and institutions for the sector
supports paper-based transactions and does not provide for electronic records, nor for
adequate safeguards to create an environment of trust for electronic transactions. Ad-
ditionally, the culture of cash as opposed to credit transactions needs to be changed.
Further far-reaching reforms and new legislation are urgently needed to pave the way
for electronic commerce.
The telecom sector is a key sector that has been undergoing reforms since the early
1990s. In 1993 Tanzania started on the classic path towards liberalization of the ICT
sector with the formation of independent regulatory agencies (the Tanzania Broadcast-
ing Commission – TBC and Tanzanian Communications Commission – TCC), and un-
bundling of the PTT telecom and postal organizations in 1994. The broadcasting and
print media were fully liberalized in 1993. It is also noteworthy that the PTT was the
first “strategic” parastatal to be privatized18. In 2001 the government sold 35% of the
incumbent telecom company to an international consortium, which, despite its minority
shareholding has assumed management control. There is significant controversy sur-
rounding this transaction, which has not been conducted to the satisfaction of several
stakeholders, and the transaction has not been concluded. Indeed as a result of this
extreme dissatisfaction, in September 2002 the union representing TTCL workers
called for the President to remove the Minister of Communications and Transport. This
has dire implications for the overall privatization process and not just the potential ad-
verse impact on the telecom sector itself.
Onerous restrictions on the importation of computer equipment were also lifted in the
early 90’s and reforms continue within the sector as it begins to face up to conver-
gence, the challenges of developments in ICT, the broadening and deepening of the
ICT industry, and increasing demand for improved services and facilities.
Vested interests, bureaucracy, corruption and other obstacles within the public sector
have hindered the process of reform, liberalization and modernization. Prior to privati-
zation, over 80% of Tanzania’s economy was in the hands of the public sector, primar-
ily in parastatal organizations. Because of a weak but growing local private sector and
the challenged education sector, there are significant gaps in the human capital and
entrepreneurship required for effective reforms and to modernize rapidly. However the
private and education sectors are taking up these challenges seriously and vigorously.
Although approximately 70% of Tanzania’s population is rural, most ICT infrastructure
is heavily concentrated in urban areas with a major focus on the commercial capital
Dar es Salaam. Tanzania lacks an Internet backbone, has no Internet exchange point
or direct landing point for the Internet. Data service providers connect to the Internet
via satellite in countries as diverse as France, Norway, the UK and USA. Other public
infrastructures such as roads, electricity and water, while improved significantly over
the last fifteen years or so, are still not adequate to meet the needs of the country. Fur-
ther investments in infrastructure were announced in the 2002 budget speech. Tanza-
nia’s development partners heavily support infrastructure investments.
Since the early 1990s, Tanzania’s policy drafting processes have increasingly recog-
nized the need to be consultative and take broad stakeholder interests into account,

18
  At present there is significant activity in preparing for the unbundling of the power utility in
readiness for privatization, and other large transactions such as in the water and transport sec-
tor will follow.



                                                20
and now to directly include stakeholder representatives in the drafting of policy for
consideration by Government. This has meant that Acts or Policies in the sectors that
impact ICT have been drafted in a consultative manner. In addition the process of pre-
paring the national budget is increasingly taking a “listening” stance and improvements
and changes over the last five years may be attributed to this posture. In this spirit a
broadly-based Task Force under the Ministry of Communications and Transport final-
ized drafting the first National ICT Policy in August 2002—likely to be submitted to Par-
liament in the final quarter of 2002. Significant benefits are expected once this policy is
implemented. Among other things it is expected to pave the way for ICT development,
increased ICT applications and an eGovernment strategy as well as sector-specific
implementation plans.




                                            21
Appendix 2: The Main Actors in Diffusion of the Internet in
Tanzania
                    Relative strength and influence
Early academic Exemplified by Bill Sangiwa, then a biostatistician at the UDSM,
and      research enthusiasts and champions of data communications worked be-
pioneers          hind the scenes at a time when the Internet was still “below the
                  radar.” They used their personal contacts in government and pow-
                  ers of persuasion to put the first building blocks in place that would
                  prove essential for future Internet diffusion.
International De- The IDRC, the NSRC, the World Bank and others were critical
velopment Part- players, offering technical support and funding for the high-risk
ners              ventures that characterized the early days. They worked to per-
                  suade government departments to adopt progressive policies and
                  support implementation of communications-related projects, by
                  local researchers, NGO’s and commercial entities. IDRC and
                  NSRC were most prominent in establishing the first Internet ac-
                  cess in Tanzania. Several bilateral development partners have had
                  significant influence on diffusion on the Internet. Key players have
                  been the World Bank and DFID in supporting and funding the pri-
                  vatization process including in the telecom sector. Key supporters
                  of further sectoral reform have been the World Bank, SIDA, JIICA
                  in unbundling the telecom sector, and SIDA in strengthening the
                  TCC and MOCT as an ongoing process.
President     and Government has the ultimate authority in progressive support for
Cabinet Ministers Internet developments, or benign neglect, or active blockage of
                  initiatives. Tanzania was fortunate to have a President and Minis-
                  ter of Communications and Transport in the early days to strongly
                  support progressive reform of telecoms and Internet develop-
                  ments. This manifested particularly in the creation of an effective
                  regulatory authority (TCC) with strong commissioners through an
                  open consultative process and the free hand given to the head of
                  the regulatory operations.
                  Subsequently changes in ministers and possible behind the
                  scenes influence of private sector players counted against continu-
                  ing progress. This especially undermined the independence of the
                  regulator and triggered the hiatus in regulation that lasted from
                  1997 until 2000.
                  On the equipment side, government has also signaled its support
                  for the ICT sector through zero-rating of VAT on computer equip-
                  ment.
                  However there have often been severely conflicting interests in
                  government resulting in obstacles to a level playing field. For ex-
                  ample the privatization organ (under the guidance of the Ministry
                  of Finance) is interested in the best financial short-term return on
                  partial privatization of the PTT while providing extremely attractive
                  incentives to potential strategic investors; the Ministry of Commu-
                  nications and Transport is interested in significant rollout of tele-



                                          22
                   com facilities by the incumbent to bring affordable communications
                   facilities to the masses; while the TCC is increasingly interested in
                   generating license fees to finance its own operations. These con-
                   flicting interests from various power bases have distorted opera-
                   tions in the sector significantly resulting in private sector players
                   having to influence the party whose interests are most in line with
                   their own bottom-line interests to their own ends.
TCC     Commis- Again contrasts are evident in Tanzania. The first Chair of TCC
sioners         was a strong and progressive force and led an effective team of
                commissioners. Subsequently the regulatory hiatus resulted first in
                a regulatory vacuum and then a weak acting chair of the TCC and
                commissioners appointed through an opaque process. Thereafter
                there were at least two changes on sets of Commissioners and
                heads of the TCC. This maintained a level of uncertainty in future
                directions for telecom, which inhibited local and foreign investment
                and diffusion of the Internet.
Telecomm Regu- The first regulator was a strong and especially effective force in
lator          building an independent regulator and enforcing policy and legisla-
               tion. Among other things he spearheaded the first public private
               debate on telecom policy. His effectiveness can be measured by
               ongoing evidence of political interference and private sector at-
               tempts to challenge rulings and bypass regulations to further their
               own commercial interests. He paid the ultimate professional price
               when he was abruptly removed from his position in 1997. Thereaf-
               ter an ineffective acting regulator followed by one appointed
               through a non-transparent process weakened the regulatory au-
               thority, enabling undue political influence and increasing the power
               of private telecom operators and investors, especially Mobitel and
               Vodacom. Subsequent decisions by the incumbent regulator cast
               great suspicion over the actual independence of the regulator par-
               ticularly where the regulator has intervened in interconnection dis-
               putes between for example, Mobitel and TTCL—an issue that re-
               mains unresolved to date since 1998; the most recent and telling
               example is the Interconnection Determination #3 of 2002 that
               sought to resolve the various and bilateral (among operators)
               agreements and prior Determinations that resulted in an uneven
               playing field, high consumer prices, and unfair termination agree-
               ments such as “sender keeps all”. This determination was to take
               effect on 1st October, with the national currency being introduced
               for all retail rates on 1st January 2003. Industry experts and ob-
               servers were full of praise for this Determination and were eager
               for the public and operators, to reap the benefits. However on 3rd
               October the regulator backed down from enforcing this Determina-
               tion, delaying its implementation to 10th January 2003 without giv-
               ing any reasons. This has caused a national outcry and further
               calls into question the ability of the Regulator to be professional,
               consistent, and independent in developing the telecom sector for
               the benefit of all.
Mobile Operators   Have been a powerful force in telecom in Tanzania, bringing inter-



                                         23
                    national investment and building a vigorous mobile industry. At the
                    same time they have engendered ongoing disputes with govern-
                    ment and the regulator as regards licensing, pricing and intercon-
                    nection agreements and policy regarding foreign investment. The
                    dispute with Mobitel over local shareholding in the company and
                    threats of court action probably triggered the dismissal of the regu-
                    lator. The subsequent resignation of the CEO of Mobitel and other
                    key senior managers in early 2002 was probably also a conse-
                    quence of this dispute. In addition the Mobile Operators Associa-
                    tion of Tanzania that was a platform by which all operators were
                    previously able to address common issues, is in effect defunct
                    since 2000.
TTCL and its        Despite movement towards deregulation of fixed line telephony,
commercial Inter-   the monopoly operator remains very powerful in this arena, with
net access pro-     inevitable impact on prices and service. It is able to use its infra-
vider,   Simunet    structure, access to capital and strength in the market place to at-
and its mobile      tack operators in the deregulated section of the telecom market-
operator Celtel.    place as well, specifically through its wholly owned ISP and mobile
                    businesses. TTCL through Simunet is funding a major rollout of
                    rural backbone with investments in the tens of millions of dollars,
                    probably funded out of retained earnings. TTCL stands accused of
                    failing to meet its obligations to increase access in under-serviced
                    regions. It is also at the centre of a major dispute with its interna-
                    tional investor as regards the valuation of the company that led to
                    the agreed share price.
Privatization       International investors in the telecom arena include Millicom Inter-
stakeholders        national, Vodacom South Africa, and the MSI/Detecon consortium.
                    Overtly and covertly they have played a powerful role in influenc-
                    ing the implementation of government policy and regulations gov-
                    erning telecom. Again government has to strike the delicate bal-
                    ance between promoting telecom and the Internet for the public
                    good and its desire to encourage local foreign investment in the
                    ICT sector. However the conflicts of interest between privatization
                    stakeholders and apparent government interests perhaps can be
                    exemplified by the Government’s own shareholding in Mobitel
                    alongside Millicom International and other local shareholders. The
                    government has still been unable to offload its shareholding
                    through the privatization organs placing the Ministry of Finance in
                    further conflict with the Regulator and Ministry of Communications
                    and Transport.
Internet Access The IAP’s played a pivotal role in bringing data communications to
Providers (IAPs) the country. From the beginning however, competition between the
                 four original licensees dominated and prevented collaboration on
                 international gateways that would have significantly reduced costs
                 of access. It is noteworthy that in the early days of IAP operations
                 the licensees segmented the market very effectively among them-
                 selves with TTCL providing services primarily to the educational
                 sector and a few ISPs, Wilken providing corporate services, SITA
                 servicing the travel sector and Datel taking the lions share of the



                                           24
                    ISPs. This segmentation is more blurred in present days, but there
                    are few conflicts between IAPs than ISPs.
Internet Service A highly competitive but still apparently very profitable segment of
Providers (ISPs) the industry, the Internet Service Providers serve individual cus-
                 tomers, Internet cafes, NGOs and to a lesser extent businesses.
                 The ISPs appear to be having it “easy” with substantial monthly
                 incomes, low cost structures and no requirement to meet quality of
                 service standards. The segment remains highly competitive and
                 fragmented although recent moves to form a joint Internet ex-
                 change point my foster more collaboration.
Cybercafés          The top of the food chain, very much at the behest of the ISPs,
                    IAPs, TCC and government. In essence they are entrepreneurial in
                    character. There are no owners of chains of greater than five and
                    these are only within Dar es Salaam or with branches in other ur-
                    ban centers such as Arusha, Moshi, Dodoma etc. While some
                    players are interested in forming a strong brand they lack invest-
                    ment capital and entrepreneurs with unsustainable business mod-
                    els continue to dominate the market.
Civil Society (via Civil society has an unusually strong voice in Tanzania thanks to
eThinkTank)        the emergence and nurturing of eThinkTank by a couple of dedi-
                   cated people bridging the public-private divide. While the eThink
                   Tank has no formal authority, it has succeeded in engaging local
                   and international participants in some key debates like VOIP, and
                   most recently has successfully put national ICT policy in the fore-
                   front of government thinking.
                   Through this virtual organization, the private sector has a forum at
                   which debates can take place, issues can be discussed, players
                   can be educated, and subsequently powerful members of the pri-
                   vate sector can take their arguments to government, ISPs IAPs,
                   vendors etc. and have informed decisions made. An example
                   might be the debate over the cost of wireless equipment with
                   members of eThink Tank in the Diaspora exposing the reality else-
                   where. As a result wireless access up-front costs have come down
                   from a ball-park of $6,500 in 2000 to around $600 in late 2002. But
                   it is noteworthy that the proposed National ICT Policy was drafted
                   by a Task Force wherein eThink Tank has about 40% member-
                   ship. In addition the key input to the government policy drafting
                   process was an ICT Policy Framework developed by the eThink
                   Tank in partnership with a government department and UNDP.

Nascent but in- Private sector consumers or providers of services have been in-
creasingly power- creasingly vocal, through initial consultations through fora such as
ful private sector eThink Tank on issues that affect their bottom line. One of the
                   most notable examples of pressure from the private sector being
                   taken up by government was the removal of duty and VAT on
                   computer equipment in the national budget of 2001. However
                   since duty and VAT continued to be levied on computer peripher-
                   als, spare parts and standard software such as operating systems,



                                          25
                         further debates made it obvious that there was little net benefit. As
                         a result presentations during the financial year to Treasury re-
                         sulted in a regularization of this distortion and exemption was ex-
                         tended to include peripherals, spare parts and standard software.
                         This was further clarified in the national budget of 2002. This is an
                         excellent example of a well-intentioned policy shift by one arm of
                         government (Treasury) being deliberately misinterpreted by an-
                         other arm (TRA) with an informed intervention fomented by civil
                         society (eThink Tank) and private sector intervening further for the
                         eventual net benefit of all. Arguing convergence the private sector
                         has also insisted that it should be able to deploy voice over its
                         WANs and VPNs regardless of the position of the Regulator. Again
                         the technical arguments are well-formed beforehand through civil
                         society fora. The private sector has historically dominated ICT
                         training. However there have been a number of concerns on appli-
                         cability of courses, degree of usefulness, quality of outputs and
                         consistency of standards and there are efforts to regularize these
                         issues.
    Tertiary educa- Tanzania’s universities have historically played an important role in
    tion sector     the diffusion of the Internet— note the role of the Muhimbili Medi-
                    cal College of Health Services providing the first “closed user
                    group” store and forward email access followed by Internet access
                    at the University of Dar es Salaam (UDSM). Sokione University of
                    Agriculture was also an early provider of Internet and email ser-
                    vices in the early 1990’s. However subsequently the role played
                    has been even stronger with the UDSM’s Computing Centre sup-
                    porting research into the Tanzanian Smart Card (among other re-
                    search projects that are now turning commercial), being a training
                    ground by networking the entire university thus providing access to
                    all its students, and finally by introducing a Cisco Regional Train-
                    ing Centre in 2001, a Linux training course, and adopting the In-
                    ternational Computer Driving License qualification. Thus the out-
                    puts of students with increasingly professional and directly relevant
                    vocational skills is improving the take-up of graduates of degree
                    and short courses in the growing private sector market place and
                    in government. This sector receives some significant support from
                    a number of development partners including UNDP, SIDA (who is
                    also supporting the transformation of the Dar es Salaam Institute
                    of Technology into a Technology University), JIICA, and other
                    partners. The overall impact of this sector is likely to continue to
                    grow in the long-term.




•          i
             Early academic and research pioneers: Enthusiasts and champions of data
    communications worked behind the scenes at a time when the Internet was still “below
    the radar.” They used their personal contacts in government and powers of persuasion
    to put the first building blocks in place that would prove essential for future Internet dif-
    fusion.


                                                 26
•           International Development Partners: The IDRC, the NSRC, the World Bank and
    others were critical players, offering technical support and funding for the high-risk
    ventures that characterized the early days.
•           President and Cabinet Ministers: The ultimate authority in progressive support
    for Internet developments, or benign neglect, or active blockage of initiatives.
•            TTCL, its data service provider, Simunet and its mobile operator Celtel:
    Despite movement towards deregulation of fixed line telephony, the monopoly operator
    remains very powerful in this arena, with inevitable impact on prices and service.
•            Commissioners in the Regulatory Authority: The first Chair of TCC was a strong
    and progressive force and led an effective team of commissioners. Subsequently the
    regulatory hiatus resulted first in a regulatory vacuum and then a weak acting chair of
    the TCC and commissioners appointed through an opaque process.
•            The Telecom Regulator: The first regulator was a strong and especially effec-
    tive force in building an independent authority and enforcing policy and legislation.
•            Mobile Operators: Have been a powerful force in telecom in Tanzania, bringing
    international investment and building a vigorous mobile industry. At the same time they
    have engendered ongoing disputes with government and the regulator
•            Privatization stakeholders: International investors in the telecom arena include
    Millicom International, Vodacom South Africa, and the MSI/Detecon consortium.
    Overtly and covertly they have played a powerful role in influencing the implementation
    of government policy and regulations governing telecom.
•            Internet Access Providers (IAPs) The IAP’s played a pivotal role in bringing
    data communications to the country. From the beginning however, competition be-
    tween the four original licensees dominated and prevented collaboration on interna-
    tional gateways that would have significantly reduced costs of access.
•            Internet Service Providers (ISPs) A highly competitive but still apparently very
    profitable segment of the industry, the Internet Service Providers serve individual cus-
    tomers, Internet cafes, NGOs and to a lesser extent businesses.
•            Cybercafés: The top of the food chain, very much at the behest of the ISPs,
    IAPs, TCC and government. In essence they are entrepreneurial in character, but of-
    ten work to unsustainable business models.
•            Civil Society: Civil society has an unusually strong voice in Tanzania thanks to
    the emergence and nurturing of an electronic forum known as eThinkTank that has
    now grown to several hundred members. Started and maintained by a couple of dedi-
    cated people bridging the public-private divide, this is an unusual example of an elec-
    tronic community that has triggered real change in a national ICT arena.
•            An increasingly powerful private sector: Private sector consumers or providers
    of services have been increasingly vocal, through initial consultations through fora
    such as eThinkTank on issues that affect their bottom line.
•            Tertiary education sector: Tanzania’s universities have historically played an
    important role in the diffusion of the Internet although their influence has yet to pene-
    trate further down the education pipeline.
    This extensive list reveals how complex and interactive the process of Internet diffu-
    sion is even in a relatively small developing country. Each of these groups of actors
    was at least at one point involved in formal and often informal negotiations with other
    actors. Indeed, there is so much negotiation in the evolution of the Internet that we


                                               27
later use a framework to identify several “critical negotiating issues” to highlight promi-
nent points of contention and how if at all they are resolved.

ii
  Three applicants were awarded data communications licenses—Datel (jointly owned
by TTCL and France Telecom), Wilken AFSAT and SITA (airline industry)—and there
was a promise of five-year exclusivity for data transmission. These licenses allowed
international data communications and, independent of TTCL, the licensees estab-
lished satellite links to the outside world. Although there was competition between the
providers, charges for dial-up access remained around $70 a month before tax, “exor-
bitant” in the view of some. This was partly due to each of the operators using expen-
sive outside gateways (Dubai, Paris and London) and their refusal to implement a joint
“international internet hub” in the country as recommended by some in the sector in-
cluding the TCC.
At the same time, Internet pioneer Bill Sangiwa, saw the need for the new-fangled idea
of an “Internet Service Provider.” First he had to persuade the regulator that there was
a difference between data access (which was now closed to new applicants) and data
services. He succeeded in this effort and obtained a concession to provide data ser-
vices. He registered “Cybertwiga” late 1994 with a view to providing Internet services,
but it was only in August 1996 that Cybertwiga started offering public services, includ-
ing the first cybercafé at Coastal Travel. Several months later other ISPs started ap-
pearing. Over 1996-1998 international data access was limited to the existing IAP li-
censees. While ISPs did not need licenses or pay fees to TCC, they had to purchase
bandwidth from IAPs at high cost. This kept dialup and leased line costs high and re-
stricted the growth of the Internet industry.




                                            28

								
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