1

Stumbling Ahead: Transforming Ghana’s Telecommunications Industry

Arnold Chandler, M.S.

Telecommunications Policy Brief Golden Gate University

August 15, 2000 Abstract: This paper explores the problem of establishing regulatory authority in the Ghanaian telecommunications industry as a case study for regulation and liberalization in developing countries generally. By highlighting the missteps and shortcomings of the Ghanaian liberalization program for telecommunications, this paper will illustrate the indispensable role that the consolidation of regulatory authority must play in the transition from a state-owned industry to a fully privatized competitive market in telecommunications services. Introduction

Much of the interest in telecommunications services in developing countries derives from basic questions that policy-makers and researchers have about the consequences of telecommunications reform. Given the place of orthodoxy that neo-liberal theory has assumed in political economic analyses over the past couple of decades, “liberalization” has ascended as the banner for the movement in general policy reform that has affected most of the world’s nations. Competition for the supply of goods and services has demonstrated a dynamism and adaptability to changing consumer demands and technological possibilities that “statist” development strategies of the past have proven unable to achieve. The success of East Asian countries in adopting state-led strategies for rapid growth and development notwithstanding1, privatization and liberalization have shown clear advantages over policies where states take advanced positions in their economies for the provision of goods and services. Extending these basic premises to the provision of telecommunications services, however, is not an automatic assumption. Although privatization and liberalization of telecommunications services will have clear benefits for consumers and economies as a whole, the realization of these benefits will depend on the greater role the state must exercise in a “regulatory” capacity. Contrary to the “de-regulation” that was in vogue in the political discourse of the Reaganite and Thatcherite 1980s, expanded regulation is the idea that carries the day for the restructuring and reform of telecommunications services across the world.2 This is largely because states must manage the transition from a market structure where there is a single state-owned monopolist for local exchange access, to one where there are multiple private telecommunications operators offering multiple competitive services.

1 See Peter Evans et. al. (eds), Bringing the State Back In (New York: Cambridge University Press, 1985) and Robert Wade, Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization (Princeton: Princeton University Press, 1990) 2 See William H. Melody, “Telecom Reform: Progress and Prospects” in Telecommunications Policy, Vol. 23, Number 1, Feb. 1999; p 7 (Elsevier Science, London)

2

These competitive service providers, moreover, require competitively priced local access or regulated rates that approximate those that would prevail under competitive market conditions. This very tall policy order requires more than wishful thinking. It demands very clear policy guidelines and the establishment of an independent and competent regulatory authority capable of overseeing the transition. The road map for fully liberalizing telecommunications industries, however, is as yet incomplete due to insufficient empirical tests of the implementation of alternative competitive models.3 Nevertheless, there are consistencies across the experiences with telecommunications reform in different countries to suggest that there are certain essential building blocks to liberalizing a formerly nationalized network service industry. The following sections of this paper will attempt to sketch out some of these building blocks by analyzing how telecommunications reform has proceeded in Ghana and what it’s consequences have been for the industry and consumers. It is hoped that analysis of the Ghanaian experience with telecommunications reform will highlight some of the salient issues relevant to reform in other African nations and the developing world more generally. Ghana in Brief Economy

Ghana is a small country located on the western coast of Africa. It has a population of roughly 19 million people and a GNP per capita in 1998 of $390 (US).4 According to World Bank statistics, 31% of Ghana’s population are below the national poverty line, 67% reside in rural areas, and the illiteracy rate for citizens over the age of 15 is 36%. Ghana’s GDP in 1998 totaled 7.5 billion dollars (US) and the production of primary products was the largest earner of foreign exchange. GDP in that year was composed of 37.6% agricultural production, 37.6% services, and 24.8% industry with only a third of industrial output in manufacturing.5 Gross domestic investment, as a percentage of GDP, is 22.9% with less than a third composed of private investment. In fact, data from 1992-1996 show private investment accounting for only 4.1% of Ghana’s GDP.6 The country’s inflation rate in 1998 was 19.3%, down from 27.9% in 1997, and it’s trade balance in the same year showed a deficit of $728 million dollars (US) along with a current account deficit of $492 million dollars. In terms of resource outflows, Ghana transferred $572 million dollars in 1998 to service debt form various sources, both public and private. It’s total debt-to-GDP ratio is 92%.7 The overall picture to be drawn from a review of these statistics, as well as an analysis of historical trends in Ghana’s economy, is that the economy is dominated by

3 See Roger G. Noll, “Telecommunications Reform in Developing Countries”, AEI-Brookings Joint Center for Regulatory Studies, Working Paper 99-10, November 1999. Taken from http://www.brookings.org 4 World Bank, “Ghana at a Glance”, 1999; taken from http://www.worldbank.org 5 Ibid. 6 Patillo, Catherine; in “Investment, Uncertainty and Irreversibility in Ghana”, IMF Working Paper no. 169, December 1997; taken from: http://www.imf.org 7 World Bank, “Ghana at a Glance”

3

agricultural production and relies heavily on the export of primary products which account for 36% of GDP.8 The manufacturing sector is small relative to both the agricultural and service sectors and the majority of the population is employed in agricultural activities. This renders the entire Ghanaian economy dependent on the price performance of it’s primary products in world markets, namely for gold, cocoa and timber. The volatility of the prices for these commodities produces volatilities throughout the Ghanaian economy from year to year. Moreover, natural disasters, such as a recent drought, can have seriously depressive effects on economic performance. Any long-term investment plans, with a 5-year or more time horizon, must account for the potential impact such volatilities may have on the recovery of investments at a competitive rate of return. These issues are very important in setting the macroeconomic context for long-term investment in telecommunications in Ghana. Political9

Ghana’s road to a multiparty democratic system of government has been a rocky one since the country obtained it’s independence from Britain in 1957. The political history of the country has been dominated by the authoritarian rule of military dictators, punctuated by two brief periods of democratically elected governments, each lasting no more than 30 months. The current President of Ghana, Jerry John Rawlings, was elected in 1992 in an election suspected to have been fixed. Four years later, however, he was re-elected in an election considered by all parties to have been fair. The 1996 election, in many sectors, was viewed as a referendum on Rawlings’ Economic Recovery Program (ERP), launched in 1983 following his takeover of the country in a coup de ′etat which toppled a democratically elected leader who he himself helped to gain election. Ironically, Rawlings removed the leader for instituting economic policy measures that he would later implement on a larger scale himself. In the political history of Ghana, austerity measures and structural changes in the management of the economy have had disastrous effects for the political leader in power if they seriously harmed the economic situation of urban interest groups. These groups had historically resorted to strikes, riots and general urban unrest if prices for food or imports became unaffordable. Ghana maintained food price controls and inflated exchange rates through administrative foreign exchange controls that undervalued imports from abroad, benefiting urban dwellers. However, these controls depressed the urban price for food produced in the countryside and raised the price of commodity exports produced in the agricultural sector, reducing foreign demand and hurting rural farmers. These policies, because they staunched the inflow of foreign currencies and increased their outflow, would eventually strangle exports and lead to a foreign exchange crisis in the country. Political leaders wishing to

8 Ibid. 9 Much of the historical recounting in this section is from general research I have done on Ghana over the past few years. For a brief, but good, review of this history see, Gyimah-Boadi, E; “Explaining the Economic and Political Success of Rawlings: The Strength and Limitations of Public Choice Theories”, in John Hariss et.al (eds) The New Institutional Economics and Third World Development (Routledge; London, 1995) pg.306.

4

avert such a catastrophe were faced with the unsavory option of offending politically hostile urban residents whose unrest could serve as the pretext for a military takeover.

This problem seemed to run on a political cycle in Ghana until Rawlings took power in 1981. After a brief stint experimenting with populist economic policies and seeking assistance from the Soviet Union, Rawlings decided to turn to Western donors and international financial institutions for help getting Ghana’s economy out of depression. For nearly two decades, Rawlings has implemented a far-reaching program of economic and political reorganization making Ghana the “poster-child” for neo-liberal reform in international political and financial circles. Along the way, however, Rawlings was not shy about resorting to authoritarian measures, and in some cases outright political violence, in order to suppress opposition to his reform programs. In more recent years, however, Rawlings has garnered a considerable degree of political legitimacy and favor among Ghanaians despite his earlier political tactics. This is largely because the Ghanaian economy has performed relatively well in recent years due to infusions of cash from financial institutions like the World Bank and the IMF, as well as bilateral aid from developed countries. Moreover, to his credit Rawlings has reversed the historical unequal exchange between rural farmers and urban workers who formerly relied on state price controls to keep the price of food and other commodities at depressed levels.10 The agricultural sector has experienced substantial growth since reforms were instituted and the mining sector, whose largest output is gold, has been the major driver of the Ghanaian economy in the 1990s. In addition, the government of Ghana has divested several state-owned enterprises (SOEs) which numbered as high as 300 in 1983.11

Despite improvements in GDP growth, structural adjustment in Ghana has not been without social costs. Broad-based austerity measures and retrenchment of state personnel have reduced the public sector through layoffs and forced Ghanaians to pay user fees for services, such as secondary education, that were formerly financed by the state. These measures led to public protests and political outcry from those on the losing end of structural adjustment policies. However, the pitch of the outcry appeared to have attenuated somewhat in the early to mid-1990s, since Rawlings was able to win re-election in 1996 despite significant opposition.

Political liberalization in Ghana has been marked by the growth of democratic political institutions, the development of a free press, a growing and politically active middle-class, and an expansion in the broader institutions of civil society. The recent trend suggests that Ghana has a more responsive, representative, and accountable political system than in the past and that it is likely to stay the course. All signs indicate, moreover, that Rawlings, despite his considerable popularity, will step down following elections in December 2000, since he is ineligible for another term under the Constitution crafted in 1992. However, whether this bodes ill or well for reform and macroeconomic stability is a standing question. For purposes of exploring the environment for the telecommunications industry, it is important to keep in mind that the next President of Ghana, following the 19 years reign of Rawlings, will have a very large role to play in the formulation of telecommunications policy. These policy measures could reflect either

10 Ibid. 11 U.S. Embassy, Accra, “FY 1999 Commercial Guide: Ghana”. Released in 1998. Taken from: http://www.state.gov/www/about_state/business/com_guides/1999/africa/ghana99.html

5

embrace or dissatisfaction with neo-liberal reform generally. Despite speculations, however, we are forced to wait and see. Telecommunications Authority, Management and Investment before Reform: 1882-1995

The first public telegraph line was installed in Ghana in 1882, linking the capital of Accra with the nearby city of Christianborg. These lines were later extended out to cover the main cities of the southern region.12 In 1886, telegraph lines were also extended into the central and northern regions of the country. The management of Ghana’s budding telecommunications system was initially placed under the Public Works Department of the British colonial government. However, following the enactment of the Post Office Ordinance in 1886, management of the system was transferred to the Post Office. Later under the colonial administration, a Post and Telecommunications Department (PTD) was created that oversaw the management of the telecommunications system until the early 1970s. In 1974, the PTD was corporatized by the military headed National Redemption Council and placed under the control of the Ministry of Transport and Communication which still formulates policy for the sector. The Post and Telecommunications Corporation (P&T), forerunner to the partially privatized Ghana Telecom currently operating in Ghana, was governed by a board of directors and managed by a director general. The board decided general policy while the director-general, accountable to the board, managed the organization, maintenance, development, and financial policies of the corporation’s services, both domestic and international. The director general was also responsible for implementing government policies affecting telecommunications services as well as observing and interpreting international conventions relating to international telecommunications. Underneath the director-general was a deputy responsible for the engineering oversight of the telecommunications system and the another deputy responsible for the posts. In 1975, the year following the creation of the P&T, the new state-owned corporation launched the First Telecommunications Project (FTP) which included obtaining multilateral and bilateral financial support in order to expand and modernize both the domestic and international telecommunications services networks in Ghana. The project was planned to last from 1975 to 1979 and involved investments of more than $76 million, which came from the government of Ghana, the World Bank, Japan, the African Development Bank, and Canada.13 The project, however, was not completed until 1985. When finished, it resulted in the increase of Ghana’s telephone line capacity by about 50% upon the installation of 12 new electronic exchanges to replace aging and obsolete automatic and manual telephone exchanges. Moreover, FTP included the construction of a tertiary exchange, a telex network, a message switch in the capital and an earth station in the country. Microwave radio links for telephone and television transmission were installed from Accra to the northern part of Ghana, along with a 500-kilometer 12 See Francis K. A. Allotey and Felix K. Akorli, “ Telecommunications in Ghana”. Taken from: http://www.vii.org/papers/ghana.htm 13 Ibid.

6

microwave radio link between Ghana and it’s two neighbors, Togo and the Ivory Coast. The international link between Ghana and it’s neighbors was part of the PANAFTEL (Pan-African Telecommunications) Project which was a continent-wide program aimed at eliminating the routing of telephone traffic between African countries through Europe. After completing the First Telecommunications Project in 1985, the government of Ghana launched a less successful Second Telecommunications Project (STP) in 1987 to continue upgrading and expanding Ghana’s telecommunications networks. The STP not only secured finance to fund further network expansion and modernization, it included provisions for separating the Posts and Telecommunications Corporation into two separate entities. The planned separation of P&T, however, did not occur. By 1992, the P&T had received about 30% of committed loans, totaling $50 million (US), for upgrading Ghana’s telecommunications networks.14 With these funds the P&T completed an international telephone switch, rehabilitated the satellite earth station, rehabilitated cable networks in parts of Accra, installed radio telephone facilities in thirty-six rural and isolated locations, and installed a 100-line telex switch.15 By 1992, the cost of the STP had to be adjusted upwards from it’s initial estimate of $140.7 million to $173 million. The majority of the funding for STP came from Japan’s EXIM Bank and OECF, while additional funds came from Holland, France, Ireland, the International Development Agency, the Government of Ghana and P&T.16 Despite lofty goals, by 1992, the STP had failed to achieve many of it’s planned objectives. Part of the reason was: “delays in approving projects due to administrative controls; poor conditions of employee service, resulting in high staff turnover and the inability of the P&T to attract and retain qualified personnel; shortage of skilled and qualified managerial, professional, and technical staff; lack of funds to reduce excess unproductive work force; and the absence of sufficient in-house facilities to promptly process bills.”17 Despite a $50 million investment by 1992, the STP had a relatively modest impact on telecommunications services in Ghana. Direct exchange lines (DELs) increased from 38,046 in 1986 to only 44,834 in 1990. However, the number of working DELs did increase from 60% operable in 1987 to 89% in March 1992. Between 1986 and 1990 Telex lines increased from 316 to 881, while international telephone circuits increased form 41 to 277 in 1992.18 All projects under the STP were completed in 1994. It was expected that the STP would leave Ghana with sixty automatic exchanges linked by about 41,000 kilometers of microwave radio networks, as well as 77,000 connected direct exchange lines. The revenues for P&T were projected to be around 25 billion cedis in 1994 compared with 17.8 billion cedis in 1992.19 Nevertheless, despite the substantial investments under the STP, Ghana had a telephone penetration rate of only 0.31 lines per one hundred inhabitants in 1994. Moreover, in 1995, only 37 of 110 administrative districts of the country had telephone exchange facilities and there were only 35 payphones, 32 of which

14 Ibid. 15 Ibid. 16 Ibid. 17 Ibid. 18 Ibid. 19 Ibid.

7

were in Accra, in the entire country. Faults-per-line averaged three times-a-year with a duration of 7 days each and the installation of new lines cost $3,500 as compared to $1,000 in developed countries. P&T, furthermore, had deficient manpower resources to maintain and upgrade telephone networks as needed. 20 By 1995, twenty years after the start of the FTP and around $300 million later, Ghana still had a seriously deficient telecommunications network. It was clear that huge and efficient investments would be required to expand Ghana’s telecommunications network to meet the enormous pent-up demand reflected in long waiting lists for telephone service. By 1995, however, multilateral assistance for network expansion in Ghana was significantly less forthcoming. The government of Ghana in turn launched a program to reform and restructure the telecommunications system in order to draw in the enormous financial resources necessary to upgrade Ghana’s information infrastructure. This restructuring of P&T would mark a serious departure from Ghana’s telecommunications policy over the past several decades. The Fastest Privatization in Africa Although the reform of the telecommunications system in Ghana began in 1995, the liberalization of terminal equipment and wireless services markets began to occur in 1987. Prior to the 1980s, P&T was the sole authorized supplier and distributor of telecommunications terminal equipment to the public. It also was exclusively authorized to install and maintain telecommunications equipment used to provide public telecommunication services.21 In 1987, however, equipment and wireless services markets were liberalized when regulations were relaxed, “allowing private companies to be issued licenses and allocated frequencies enabling them to produce, install, and maintain any compatible telecommunications equipment.”22 The major overhaul of regulations governing the provision of fixed communications services, however, would not take place until new policies were adopted by the Ministry of Transport and Communications in 1995 and the Ghanaian parliament passed the National Communications Authority Act of 1996. In 1994 the Ministry of Transport and Communications (MOTC) launched the “Accelerated Development Program” (ADP) for telecommunications. This program was to begin the process of liberalizing the telecommunications sector in Ghana to improve the “reliability, availability, and quality” 23of public telecommunications services, with a teledensity goal of between 1.5 and 2.5 telephone lines per 100 people by the year 2000. Moreover, through the ADP, the MOTC sought to improve public access in rural and urban areas with the specific goal of making at least one payphone accessible to all villages with 500 or more people. Also, included under the ADP was a plan to extend the geographic coverage of mobile cellular telephone services to include at least half the Ghanaian population and all of the regional capitals.

20 Ibid. 21 Ibid. 22 Ibid 23 Ministry of Transport and Communication, Ghana; taken from: http://www.communication.gov.gh/

8

The actual policy elements of the ADP included the following: 1. P&T, or the Ghana Posts and Telecommunications Corporation, would be re-named

Ghana Telecom and restructured in accordance with ownership changes involving the sale of a 30% strategic equity stake in the corporation to Telekom Malaise Berhad, also known as Telekom Malaysia. Telekom Malaysia’s equity stake, purchased for $38 million (US), also included the assumption of managerial control of Ghana Telecom with government representatives to be placed on the company’s board of directors. Telekom Malaysia would also assume $80 million of GT’s debt (much of which was acquired during the FTP and STP). As a condition of it’s licensure, Telekom Malaysia would have to install 225,000 new telephone lines and 360 new payphones in Ghana within five years. Also included in it’s license is the right for GT to offer several services nationwide, including: voice telephony, leased lines, public pay phones, telegraph and telex, data, mobile, and value added communications services.

2. Competition in all telecommunications services would be introduced through the

nearly simultaneous tendering of a Second National Operator’s (SNO) license with the same rights but different requirements than Ghana Telecom. Ghana Telecom and the SNO would have exclusive rights under their licenses to offer fixed voice telephony for 5 years. A consortium of telecommunications companies, led by Western Wireless Company (based in Cambridge, Mass., USA), successfully bid for the SNO license in 1997. The joint venture, named Westel Ltd., is 56% owned by Western Wireless while the Ghana National Petroleum Company holds a 34% equity stake, and African Communications Group Telesystems owns 10% shares. Westel is bound by it’s license to install 50,000 new lines in three years.

3. A national regulatory authority would be established, known as the National

Communications Authority (NCA), which is responsible for issuing and renewing licenses to operate telecommunications networks in Ghana. The NCA was given very specific duties under the National Communications Authority Act of 1996 along with a number of basic objectives. These objectives include:24

1. Assuring that system operators achieve the highest level of efficiency and are

responsive to customer and community needs. 2. Promoting fair competition. 3. Protecting operators and consumers from the unfair conduct of other operators

with regard to quality of communications service and payment of tariffs. 4. Protecting the interests of consumers.

It is important to analyze the organizational structure and responsibilities of the NCA in order to ascertain how it may achieve these basic objectives.

24 Ibid., “Accelerated Adjustment Programme 1994-2000);

9

National Communications Authority The National Communications Authority is intended to act as an independent national regulator of the telecommunications industry in Ghana. Its responsibilities are to “advise the Minister of Transport and Communications on policy formulation, to ensure compliance with regulations and telecommunications law, to grant licenses for the operation of communications systems, to assign and allocate the use of frequencies, to establish the national numbering plan and assign numbers accordingly, to designate standards for communications equipment, to determine a code of practice relating to international operators and accounting rates, to provide guidelines on tariffs chargeable for the provision of communications services, and to establish training standards for communications operators and to monitor those standards.”25 The NCA will be governed by a Board of Directors comprised of one Chairman, one Director-General appointed by the President, one representative of the National Security Council, and four other persons with knowledge relevant to the functions of the NCA. Other than the Director-General, appointment terms for the members are for four years with possible re-appointment upon expiration of their terms. The Board is granted general rule-making authority, whereby through “legislative instrument”, it may issue binding rules on communications network operators that are intended to implement provisions of the Communications Act. However, it is important to note that few rules are specified in the Communications Act which bear directly on proscribing or prohibiting specific behavior by communications operators.26 In other words, interconnection policy, the filing of tariffs and the determination of charges, the publication of operators’ basis for determining tariffs, quality of service and other performance standards, issues of local access determination, and non-discrimination are all issues that are left to the NCA to decide with no specification in the statute as to how these matters are to be handled. Moreover, these issues may be dealt with as conditions of licenses issued to operators, but their is no systematic statutory description of general policy in this regard. For matters of interconnection, the statute specifies that operators may interconnect their networks but they are not required to do so.27 Moreover, the statute states that an arbitration panel will be established for network operators unable to resolve a dispute over interconnection. The statute does provide that in the event that a rule-making by the NCA is disputed by an operator, the operator may appeal to the judicial system in Ghana for redress.28 Judicial review, therefore, offers a higher authority to which network operators may appeal in the event of potential expropriation or unfair decisions rendered by the NCA. Although the National Communications Authority is autonomous from both the day-to-day bureaucratic influence of government decision-making, as well from the actual

25 Ibid. 26 National Communications Authority Act, 1996 Act. 524; Ministry of Transport and Communication, Ghana; taken from: http://www.communication.gov.gh/ 27 National Communications Authority Act, Part III 28 Ibid.

10

operation of telecommunications networks, it has not exercised an effective role in the telecommunications industry in Ghana. Perhaps the most important reason for this fact is that the agency has no staff. Although the law promulgating it’s existence was passed in 1996 the NCA remains a non-existent entity in actual fact. Even if the NCA is staffed at the Board and executive levels, it faces serious obstacles in assembling lower level personnel sufficiently expert in the many complicated regulatory issues that managing the transition to a competitive telecommunications marketplace entails. The fact that so many of the elementary issues relevant to liberalization of telecommunications services are unspecified in the National Communications Authority Act, the NCA must have a quite large and competent staff in order to marshal and synthesize the amount of information that would be required to make informed rule-makings in very expensive commercial matters. The fact that the NCA is yet to be put in place, is perhaps indicative of the difficulties the government of Ghana has had in finding sufficiently competent staff who can be drawn away from the private sector to public service. For a richer perspective, it is useful to consider some of the theoretical issues in designing regulatory authorities in developing countries that may shed some light on the problems with the NCA and potential pitfalls it confronts in future decision-making. To set the context, however, we should examine the recent performance of the telecommunications industry in Ghana to glimpse the state of the market without regulation. State of the Marketplace

Expanding access to and improving the quality of basic telecommunications services has been a long-held objective of the government of Ghana. This fact is reflected clearly in the nearly $300 million of public investment in telecommunications networks from 1975 to 1994. Since the First and Second Telecommunications Projects met with only limited success, liberalization is viewed by political leaders in Ghana as the best long-term option for expanding network investment in the face of diminishing bilateral and multilateral financial assistance. Creating real competition in telecommunications services, however, faces considerable hurdles that are reflected in the current structure of the telecommunications market in Ghana. The two national fixed loop providers, Ghana Telecom and Westel, haven’t developed an entirely amicable relationship in their brief coexistence. In fact, despite obtaining it’s license in 1996, Westel was unable to start operations until 1999 due to a protracted battle with GT over interconnection matters.29 The lack of a regulatory authority left Westel without timely regulatory relief, instead relying on drawn out arbitration proceedings. Since it has only been operational for a short while, Westel has concentrated it’s roll-out in a relatively concentrated geographic portion of southern Ghana in the capital of Accra and Kumasi.30

29 See Financial Times Country Briefs, “Telecommunications: Callers Get Wrong Message”; November 4, 1999; taken from: http://www.ft.com/ftsurveys/country/gha_serv.htm 30 See Juliet Amoah, “Competition for Improvement-Westel” Ghana Review International, 1999, taken from: http://www.ghanareview.com/

11

Ghana Telecom, the incumbent monopolist, controls nearly all of the fixed local access market.31 At the same time it controls almost none of the mobile cellular market. As noted earlier, there were approximately 77,000 direct exchange lines in Ghana in 1994 under the control of the then Posts and Telecommunications Corporation. At the end of 1998, according to statistics cited by the managing director of GT, Ghana Telecom owned 133,426 lines. An increase of 26.4% over the total of 105,538 lines in 1997.32 An article in the BMI Communications Technology Handbook, puts this figure over 200,000 by February of 1999.33 Like Westel, GT planned to introduce mobile cellular services in Ghana by the year 2000. In 1998, GT had revenues totaling 320 billion cedis (which using the August 2000 exchange rate is around $57 million (US))34 up 16.7% from 274.1 billion cedis in 1997.35 This revenue was due to domestic, and in large part, international calls, since the company was yet to launch mobile cellular and data services in 1998. The managing director of GT attributes increasing revenues to cost control measures, an increased billing collection-to-service ratio, capital commitments in 1997, and increased capacity utilization from 66.3% in 1997 to 82.4% in 1998.36 Despite revenue growth, the director of GT notes major problems with recruitment of qualified engineers and technicians. Moreover, organizational restructuring and the transformation of GT’s inherited organizational culture poses problems for management in accelerating expansion. The most important setback noted by GT’s head, however, is the “behaviour of local and international finance markets which regard Ghana as a risk market, and hence, their inability to discriminate between Ghana Telecom and others, thus making the cost of debt very high.”37 Despite GT’s efforts, there is grumbling in the marketplace among consumers who have felt that, while the number of lines deployed have increased, the quality of service has been dismal. An article in the Financial Times noted that, “people complain that there has been almost no improvement in service and a notable lack of investment in Ghana Telecom, raising questions about whether the government should not sell a greater stake. Critics doubt whether Telekom Malaysia was the optimal investor.”38 Furthermore, although investment in expanding subscriber lines is making progress, its impact is uneven. For example, more than 50% of all telephone lines in Ghana are located in the city of Accra alone.39 Rural residents have fared rather poorly in the cue to receive basic telephone service. The rural wireless local loop (WLL) access provider, Capital Telecom, given limited license to operate local access networks in rural areas in

31 Ibid. 32 Ghana Telecom, Managing Director’s Review of 1998 Performance 33 See Communications Technology Handbook, 1999 authored by BMI-Techknowledge Group.; BMI-T/Mbendi 34 Taken http://www.ghana.com/, on August 15, 2000, current exchange rate for cedis is 5700 per U.S. dollar. 35 Ghana Telecom, Review of 1998 Performance 36 Ibid. 37 Ibid. 38 See Financial Times Country Briefs, “Telecommunications: Callers Get Wrong Message”; November 4, 1999; taken from: http://www.ft.com/ftsurveys/country/gha_serv.htm 39 See “AISI-Connect National ICT Profile: Ghana”; AISI-Connect database - Error! Bookmark not defined. Telecom/GDP stats source: ITU/World Bank. Internet hosts: Network Wizards: 2000

12

1994, was “swallowed up by overwhelming market trends” and apparently in dire financial trouble not long after starting operations in 1997.40

A similar fate seems to loom for Westel, the second national operator, which endured a rocky start before it finally went operational in 1999.41 The company, since it began operations, has only managed to secure a mere .80% of the mobile phone market and a paltry 1.11% of the fixed phone market.42 Despite speculation that the company is on the verge of bankruptcy, its managers attest “we are moving in the right direction”.43 According to statistics quoted from Westel’s management, there were 239,872 telephone lines in Ghana by the first half of 1999. This suggests a considerable market advantage GT has over the 1,500 or so telephone lines and the 170 payphones owned by Westel in mid-1999.44 Westel’s management planned to expand to 215 payphones by December of 1999, as well as meet it’s license requirement of installing 50,000 telephone lines over the next three years. The company presently provides both wireless and wireline fixed telephony along with prepaid and payphone card services. It’s recent foray into expanding it’s market share for pre-paid phone cards was stifled by anti-competitive tactics by GT which refused to make it’s phone booths accessible to Westel phone cards.45 Given its short time in operation, Westel’s networks only cover the Accra-Tema metropolis. In fact, many people are unaware that the company even exists, further subduing any lofty notions about competition in Ghana’s telecommunications marketplace. Westel, however, hopes to gain a stronger presence when it expands the coverage of it’s networks over the next two years to include the larger cities of Kumasi and Takoradi. Looking at the mobile telephony market in Ghana reveals a different picture than fixed telephony. This is so largely because: competition in wireless and other services has been permitted since 1987; deployment is typically more rapid for mobile wireless than fixed wireline service since start-up and sunk costs are lower; and the only firm with sufficient market power to seriously stifle competition, GT, has been focused on fixed telephony deployment and hasn’t made serious entry into the cellular services market. Despite the existence of competition, however, there is significant concentration in the mobile cellular services market. The largest provider, Mobitel, controlled over 70% of the market in 1998.46 Mobitel is a subsidiary of Millicom International, a joint venture by companies in the UK and Luxembourg, that first began operation in 1991. By 1998, the company had over 22,000 subscribers and it’s service was available in 6 regions of Ghana, making it the most widespread mobile phone company.47 Mobitel’s two largest competitors are Celltel Ltd. and Scancom Ltd., marketed as Spacefon, who both have networks limited in coverage primarily to the capital and other major urban areas. Scancom, the second-

40 Ghana Review International, “Competition for Improvement-Westel” 41 Ibid. 42 Ibid. 43 Ibid. 44 Ibid. 45 Ibid. 46 See Africa IT Exhibitions Conference (AITEC), “Duopoly Provides Naton’s Telecoms Lifeline”; 2000 taken from: http://www.aitec-africa.com/cia/articles/duopoly.htm 47 Ibid.

13

largest cellular operator in Ghana, had expanded it’s network since it started operations in 1996 to cover the Accra-Tema metropolis and several other major urban areas by 1998. Celltel, the third largest cellular operator, had only expanded it’s network to cover the Accra-Tema metropolis by 1998 after starting operations in 1995. In addition to Mobitel, Scancom and Celltel, GT and Westel were issued GSM licenses and planned to begin mobile wireless services in 1999. Other wireless providers have been licensed to operate in Ghana but they have only deployed very small networks or haven’t begun operations at all. Although there appears to be real competition in the mobile services market, there will be a serious threat to competition when GT makes it’s full entry into the segment. There have been recent problems for mobile companies who seek to interconnect their networks with GT’s. According to mobile phone companies, the problems are a mix of technical difficulties and a lack of cooperation on the part of GT.48 In fact, mobile telephone companies view these problems as the result of the lack of regulation of Ghana’s telecommunications market. Mobitel’s managing director, Phill Dunglinson, stated recently that, “The central issue for the industry is the proper establishment of the NCA. The will was there, and a lot was accomplished in the early days, but too soon the eye was taken off the ball. We need another concentrated effort.”49 Furthermore, the recently appointed director-general of the NCA, Mr. Mahama, acknowledged that the process for allocating spectrum in Ghana for the past few years has been “a bit haphazard.”50 He further lamented that, “If I had to do it all again, I would have set up and strengthened the regulatory agency before I liberalised.”51 Mr. Mahama’s insight has hit on the crucial issue that is at the core of the argument set forth in this paper. That is, establishing competent and effective regulatory authority is a necessary preamble to liberalization of a formerly monopolized telecommunications system. Without a set of very specific policy guidelines accompanied by a vigilant and well-staffed agency to enforce them, telecommunications markets in developing countries like Ghana aren’t likely to enjoy the much touted fruits of competition. In the next section, some of the theoretical bases for assessing the necessity and design of regulatory authority in Ghana are discussed. Regulatory Authority: Issues and Discussion The major problem faced by Ghana’s leaders in the design of regulation for the telecommunications sector is how to control anti-competitive behavior by the monopolist, GT, while at the same time encouraging local and foreign private investment in all of Ghana’s fixed and mobile service providers. Putting aside, for the moment, the general problem of attracting foreign finance capital to Ghana, and other African nations more generally, this section of the paper will address how competition can be safeguarded and investment in telecommunications networks encouraged. The following analysis is

48 Financial Times, “Telecommunications: Callers Get Wrong Message” 49 Ibid. 50 Ibid. 51 Ibid.

14

intended to highlight issues, based on theoretical insights, that the design of regulatory authority must ultimately address. To mix metaphors, it is safe to say that Ghana’s liberalization agenda for telecommunications was on the right track but, unfortunately, fell short of the mark. Ghana’s experience is instructive, however, and highlights issues that cut across national experiences with telecommunications reform. These issues include the following: the problem of investment uncertainty in African countries generally and Ghana in particular; the necessity of establishing a regulatory authority to accompany privatization of public telecommunications operators; the problem of establishing the “legitimacy” of the regulatory authority in the eyes of investors and operators; and the need to implement safeguards against political interference and manipulation within the design of the regulatory authority. Each of these issues will be considered in turn. Uncertainty and Investment Overcoming barriers to entry and reducing investment uncertainty are the two biggest requirements for creating a liberalized telecommunications industry in Ghana. Supporting the lamentations of Ghana Telecom’s managing director about his inability to attract finance capital, is a general investment uncertainty that discourages investment in the Ghanaian economy as a whole.52 This fact is reflected in the paltry level of private investment in the Ghanaian economy over the past few years. An article which explored uncertainty and investment in Ghana found that manufacturing firms whose businesses involved large sunk or irreversible costs required relatively high rates of return thresholds before they entered into an industry.53 Moreover, those firms already invested in high cost industries required similarly high thresholds to justify expanding the scale of their current operations. Given the general macroeconomic turbulence that a country dependent on short-term foreign capital endures, it is not surprising that there is investment uncertainty in Ghana. For telecommunications operators who must make large sunk investments in plant deployment, macroeconomic instability offers plenty discouragement. Furthermore, the foreign investors on which these operators must typically rely for capital are likely to be skeptical about the competitiveness of the perceived rate of return. This important issue would only bode ill for telecommunications investment in Ghana if not for the level of pent-up demand for telephone services reflected in long waiting lists for basic access. According to World Bank statistics, the number of people waiting to receive telephone service in Ghana totaled 28,300 in 1998.54 This fact may bolster the claim that telecommunications services are profitable in Ghana, but it does not entirely allay other concerns about where the market or regulations may take the industry in the future. Problems with Privatization Alone

52 Patillo, “Investment Uncertainty and Irreversibility in Ghana” 53 Ibid. 54 World Bank, “World Development Indicators”, “Table 5.10: Power and Communications”, 1999. Taken from: http://www.worldbank.org/data/wdi2000/pdfs/tab5_10.pdf

15

It has been recommended by some that a larger level of investment in telecommunications in Ghana could result from the tendering of a larger stake in Ghana Telecom to private investors.55 Some, furthermore, have argued that complete privatization of GT will bring in much needed infusions of cash to the government treasury while providing potential investors more assurance that possible government meddling in GT’s board of directors will be eliminated. Although there is perhaps some merit to these claims, the mere privatization of GT alone is hardly adequate to ensure increased investment and competition in Ghana’s telecommunications networks. In fact, for developing nations more generally, an econometric study conducted in 1998 found that privatization of telecommunications operators, without the accompanying establishment of a regulatory authority, resulted in a decrease in mainline telephone deployment.56 Using a data set covering 30 African and Latin American countries, including Ghana, from 1984 to 1997, the author found that “competition” was,

significantly associated with increases in the per capita number of telephone mainlines, number of payphones, connection capacity, and with decreases in the price of a local call. Privatization by itself is significantly associated with decreased mainline penetration and connection capacity, and positively correlated only with payphones. Privatization combined with the existence of a separate regulator, however, is significantly associated with increases in connection capacity and labor efficiency (as measured by employees per mainline), and substantially mitigates the negative correlation with mainlines.57

Although in this study “competition” was defined as the number of mobile telephone operators not owned by the government, cellular operators, nevertheless, “offer benchmark comparisons of the incumbent and are potential threats to the incumbent since they can increase penetration swiftly at relatively low cost per additional subscriber.”58 In Ghana, although the number of telephone lines increased even though there was no regulatory authority and GT was partially privatized, this was the outcome of explicit license roll-out requirements rather than competitively induced investment. Additionally, the expansion of main telephone lines in Ghana since 1995 is due almost entirely to GT. Although, as the author makes clear, the above study is not definitive, it does, however, suggest a clear precedent to direct future research and policy-making. Legitimizing Regulatory Authority Such policy-making, moreover, must address not only the problem of designing a regulatory authority, but establishing a “legitimacy” for that authority

55 Financial Times, “Telecommunications: Callers Get Wrong Message” 56 See Scott J. Walsten, “An Empirical Analysis of Competition, Privatization and Regulation in African and Latin American Countries”, May 1999. Taken from http:/www.worldbank.org 57 Ibid., p. 1 58 Ibid., p.7

16

in the eyes of stakeholders.59 It is not enough to merely pass legislation creating a regulatory authority, as the Ghanaian case adequately attests, but it is necessary,

to create stable environments for investment with assurances that capital invested in long-term projects such as telecommunications networks will not be subject to arbitrary expropriation. Because all possible exigencies cannot be addressed by legal guarantees, regulatory agencies are being established as dispensers of non-arbitrary decision-making and due process. Notwithstanding the rationales underlying their origins, the efficacy, if not survival, of these regulatory agencies depends on their success in earning legitimacy in the eyes of the public and the stakeholders.

In it’s usage here, “legitimacy” connotes the idea of “consent” on the part of stakeholders. This consent involves a basic belief in the rightfulness and fairness of decisions rendered by the regulatory authority. This sort of legitimacy is a crucial antidote to that part of investment “uncertainty” that derives from fears that future regulatory rule-makings may expropriate long-term investments. Regulatory authorities must also win legitimacy in the eyes of other state agencies and ministries whose policies may complement or conflict with regulatory policies.60 For example, authorizing a rural telephone provider to expand it’s network in a certain region could conflict with rules affecting land title or “rights of way” administered by another agency or ministry. For competitive service providers, the regulatory authority must also allay concerns that rulings will favor the incumbent operator who the government has a stake or interest in. In Ghana, for example, not only does the government currently own a 70% stake in the incumbent provider, but,” some of Ghana’s most powerful figures are closely involved in certain companies.”61 Incentives for political manipulation must be countered by regulatory safeguards which prevent “capture”. This is all the more important given that “regulation” itself is a relative novelty in the Ghanaian political economic experience. Historically, the state’s role in the Ghanaian economy has been extensive, with outright ownership of more than 300 enterprises in 1983.62 Moreover, state ownership of productive sectors of the Ghanaian economy in the past was part of a larger system for consolidating political rule. Ghana’s political economy, prior to political and economic liberalization throughout the 1980s and early 1990s, was built around a “patronage-based” system of political-administrative control.63 Under this system, political support for a ruling faction was built around the distribution of public resources and coveted positions in state enterprises to key political groups. In other words, the consolidation of political authority was built around distributing the resources of the state. Hence, the objective of would-be powerholders was to “capture the state”, and in effect, privately appropriate its resources. Although

59 See Rohan Samarajiv, “Establishing the Legitimacy of New Regulatory Agencies”; International Journal of Knowledge Infrastructure, Management and Regulation, Vol. 4, No.3 April 2000; taken from: http://www.telecompolicyonline.com 60 Ibid. 61 Financial Times, “Telecommunications: Callers get Wrong Message” 62 U.S. Embassy, “FY 1999 Commercial Guide: Ghana” 63 See Robert Bates, , Markets and States in Tropical Africa (Berkeley: University of California Press, 1981) and Naomi Chazan and Donald Rothchild, “The Political Repercussions of Economic Malaise” in Calaghy et. al (eds) Hemmed In: Responses to Africa’s Economic Decline (New York: Columbia University Press, 1993) p. 180

17

Ghana has since undergone considerable political and economic restructuring since the early 1980s, with over 200 of the then 300 state enterprises divested, there has been little experience with “regulation” or the establishment of “regulatory authority”. Hence, precisely how Ghana may establish the legitimacy of it’s regulatory agency is not entirely clear. There are, however, two basic forms of legitimacy it must establish in some form or another. These are: expertise-based legitimacy and judgment legitimacy. Expertise-based legitimacy is the belief held by stakeholders that the regulatory agency possesses the necessary level of competency to make relatively informed, fair and reasonable rulings. It is noted that, “Given the complexity of the subject matter, this claim is reasonable. Good regulation requires technical skills that must be learned and continually updated. The claim for legitimacy based on expertise requires the recruitment of qualified personnel, ongoing and high-quality training and the effective communication of these initiatives.”64 For Ghana, however, the marshaling of information that regulation requires is undermined by the inelastic supply of qualified professionals in the near-term.65 For the supply that does exist, the regulator must provide adequate compensation to attract these individuals from the private sector. This places Ghana at a serious loss in staffing it’s NCA in the near future. In addition to, and dependent upon legitimizing it’s expertise, the regulatory authority must legitimate it’s “exercise of judgment”. Judgment involves making decisions that utilize technical analysis, but in large part, entails balancing the importance of competing values. It has been argued that:

For certain, good regulatory practice involves expertise and technique. But it is always more than that. In the case of regulating monopoly (including oligopoly or asymmetric competition), the agencies are implementing pricing principles under conditions of imperfect knowledge. In the process, most agencies must address social as well as economic concerns, explicitly or otherwise. They must use rules of thumb, assumptions and understanding gained through experience to bridge the gaps in available detailed and documentable knowledge.66

Determining cost methodologies and other benchmarks, as well as regulation for social objectives, makes the legitimate exercise of judgment a profoundly important complement to sufficient expertise. Without adequate legitimacy for the exercise of judgment, the regulatory authority faces the likelihood that it’s decisions will be regularly appealed to legal authorities, rendering regulation more the province of courts of law than the agency assigned to the task. Overcoming this problem requires both the “establishment of transparent and inclusive procedures for the reconciliation of conflicting interests using public-interest criteria,” and the effective communication, through public media, of the basis for regulatory decisions. Both expertise-based legitimacy and the legitimate exercise of judgment that is built upon it, are essential elements in laying the groundwork for the effective exercise of regulatory authority. Effective regulatory authority, furthermore, is contingent on the design of regulatory agencies within the broader politico-legal system of the country. This design will have a

64 Samarajiv, “Establishing the Legitimacy of New Regulatory Agencies” 65 On this problem generally, see Noll, “Telecommunications Reform in Developing Countries”, pg. 43 66 Ibid.

18

critical role to play in structuring the opportunities for establishing legitimacy by the regulatory agency. “Commitment” and “Capture” Those designing the regulatory system in Ghana must address two structural problems of poorly designed regulatory agencies that can have negative ramifications for investment and competition in telecommunications services. These two problems are “the commitment problem” and the problem of “regulatory capture”. Easier than addressing these more structural problems, is addressing more practical matters of choosing cost methodologies for pricing rules, setting interconnection policy, and promulgating the many rules that govern entry and market behavior.. The “commitment problem” in neo-liberal reform generally encompasses the need for “a set of institutional arrangements that creates powerful incentives for political leaders not to reverse a reform, and that is transparent to an outsider who then will make a long-term investment on the basis of the perceived stability of reform.”67 Investors must be assured that future regulatory decisions will not cause the expected earnings from their investments to fall below the competitive rate of return. Unless it allows investors’ to recover costs as well as competitive rates of return, pricing regulation can have the effect of expropriating investments from operators if regulated prices are set at too low a level. Moreover, the multiple methodologies for setting regulated prices (cost-of-service, price caps, benchmarking, negotiated franchise contracts, etc.) must be consistently applied in a transparent and fair manner in order to stave off investor uncertainty about future decisions. Since all regulatory processes inherently involve the conflict of multiple interests, participants will seek to influence the process to their own advantage. These competing interest groups, or individuals, may influence regulatory outcomes by selectively manipulating the information they provide to regulators or by summoning the support of political allies to intervene in the process.68 Stakeholders, and more specifically, operators, seek to be, “permanently protected against other interests that might seek low output prices, high input prices, financially unrealistic service requirements, or confiscatory taxes that, effectively, would expropriate the firm’s investments for the benefit of others.”69 As Roger Noll notes, expropriation can arise for two reasons. In the first case, user groups may be well-organized and assert an effective voice in the regulatory process to cause service to provided below costs. In the second case, an election may place political pressure on regulators to favor users over suppliers in a decision or rule-making.70 In light of some political dissatisfaction among Ghanaians with regard to structural adjustment policies over the past several years, the upcoming national election in December 2000 is apropos for assessing whether or not the commitment problem is a serious issue in Ghana. Safeguards to prevent regulatory takings, however, require, “ little more than an enforceable high law against expropriation that is enforced by an

67 Ibid., p. 11 68 Ibid., p. 42 69 Ibid. 70 Ibid., p. 43

19

independent judicial system where regulated businesses have standing.”71 In Ghana, investors can seek redress against expropriation by the government under the Ghana Investment and Promotion Act (GIPC) of 1994, which governs investment in all sectors of the economy except minerals and mining, oil and gas, and the free zones.72 Under the GIPC, investors are guaranteed protection against the expropriation or nationalization of their investments, except where, “the acquisition is in the interest of national defense, public safety, public order, public morality, public health, town and country planning, or the development or utilization of property in such a manner as to promote public benefit.”73 In the event of nationalization, provisions must be made for “the prompt payment of fair and adequate compensation.”74 There has been, however, no expropriatory action in Ghana in recent times and there appears to be little likelihood of it in the future given Ghana’s dependency on maintaining positive relations with international financial institutions and investors. Moreover, investments that may suffer more subtle expropriation through pricing regulations, rather than outright nationalization, are entitled to appeal to the judiciary which has not hesitated in recent cases to rule against the government in property rights disputes.75 It must be noted, however, that courts in Ghana are slow in disposing of cases partly due to “institutional inadequacies.”76 In addition to the problem of “commitment”, is the structural problem of “regulatory capture” that has actually proved to be the more common one. Capture occurs where regulators are “especially solicitous to the regulated firm, allowing it to charge high prices, earn high profits, and provide low quality service.”77 Capture can arise largely because the firm may be well organized and effectively represented in the regulatory process while users are not. This can allow operators, most likely the incumbent, to earn excess profits at the expense of consumers. The sort of unbalanced influence exercised by telecommunications operators in the regulatory process is a product of the “representation bias”78 that arises in all policymaking. Regulation bias occurs because those who are better organized to participate in the policy process are more likely to have their interests taken into consideration in making decisions. Both expropriation (the commitment problem) and capture, have representation bias as their basic source. The sources of regulation bias, however, are: 1. incomplete information on the part of the regulator who must rely on data from expert

sources in conjunction with private data from operators who have an incentive to manipulate their information to their advantage. Costing and pricing methodologies that the regulator will use to set tariff rates must rely on the data that operators themselves provide. Hence, regulation bias results from the inability of regulators to

71 Ibid., p. 45 72 US Embassy, Accra, “FY 1999 Commercial Guide: Ghana” 73 Ibid. 74 Ibid. 75 Ibid. 76 Ibid. 77 Ibid., p. 42 78 Ibid.

20

independently obtain unbiased or perfectly informed estimates of costs and other relevant information.79

2. A second source of representation bias is the fact that not all interests groups are able

or willing to apply pressure on political officials to intervene in the regulatory process on their behalf. This form of political pressure has substantial relevance in the Ghanaian context since urban workers and residents exercise disproportionate influence in policy matters generally. Despite the fact that the majority of the Ghanaian population lives in rural areas, urban residents have historically played a central role in dictating the terms of Ghana’s political economy. 80 Urban residents are typically better organized than rural residents and more responsive to policy decisions that affect their interests.81 This could have a very important effect on how “universal access” policies are designed, legitimized and implemented. If urban consumers exercise disproportionate political influence, then cross-subsidy or tax-based methods of balancing loop costs may be unpopular, and therefore, unlikely policy options.

3. The third source of regulatory bias is the interests and biases of the regulators. These

biases usually arise because regulatory agencies aren’t staffed by actors who are representative of interest groups. Agency staff may reflect the current party in power and their political ideology toward different interest groups. Moreover, agency staff may also be biased towards certain operators out of efforts to secure future employment following the end of their regulatory tenure.

To safeguard against the problems of “commitment” and “capture”, Ghanaian legislators and the Minister of Transport and Communications should include three basic elements in regulatory design. First, the personnel of the regulatory agency should be heterogeneous and stable and not subject to whimsical change based upon short-term political swings.82 The staff, moreover, should be sufficiently remunerated so as to reduce self-interested calculations in policy-making. Second, the regulatory agency should be given the independent authority to generate information relevant to decision-making and resources to represent excluded interests. Ghana may face serious obstacles in this area since it is presently experiencing difficulty assembling any regulatory staff given the limited supply of competent professionals. Third, the agency can be subject to “openness requirements”83 that require it to conduct all business in public and to refrain from secret contacts with interested parties or political officials. Moreover, the agency should make publicly available “all relevant information pertaining to a decision as well 79 Ibid. 80 See Robert Bates, Markets and States in Tropical Africa (Berkeley: University of California Press, 1981) and Jeffrey Herbst, “Labor and City-Dwellers in Ghana under Structural Adjustment: The Politics of Acquiescence”, in Donald Rothchild (ed) Ghana: The Political Economy of Reform (Boulder: Lynne Rienner, 1991) 81 Herbst, Ibid. 82 Noll, “Telecommunications Reform in Developing Countries”, p. 43 83 Ibid.

21

as a preliminary indication of the decision it is likely to make before the actual decision is made.”84 This would allow affected parties to offer input before regulatory decisions take effect. Once these structural problems of regulatory design have been addressed, regulators must then begin to confront competition policy issues such as establishing and managing rules of interconnection, the adoption of methodologies for determining access charges, policies relating to non-discrimination and equal access, and universal access. For Ghana, resolving these policy matters will be central to moving it’s incipient telecommunications market to a more competitive structure. Conclusion Looking at Ghana’s reform of it’s telecommunications sector reveals right-minded objectives, but unfortunately, wrongly implemented strategies. The lack of a regulatory authority has clearly had negative implications for the structure and performance of Ghana’s telecommunications market. Designing a regulatory agency for Ghana will involve the establishment of both expertise-based and judgment “legitimacy” that overcomes the structural political problems of “commitment” and “capture”. The upcoming December 2000 election will serve as a referendum on neo-liberal reform in Ghana, sending signals to international investors whether long-term investments will be secure from expropriation. Newly elected political leaders will play a decisive role in shaping telecommunications policy in Ghana and determining the destiny of competition. What issues will factor into the design of the National Communications Authority and it’s staffing are going to be the critical determinants of whether or not Ghana develops a burgeoning telecommunications services market, or whether it continues to stumble ahead.

84 Ibid.