Last month, the Ethiopian parliament approved the Communication Service Proclamation (“Proclamation”) which, for the first time, liberalizes the telecom sector in the country. Article 54 of the Proclamation declares that ‘telecommunications services, including ownership of a Telecommunications Operator or a Telecommunications Network, shall be open without limitation to private investors including both domestic investors and foreign investors.” This provision signifies a policy breakthrough on the telecom sector by introducing private ownership of either or both of the telecom infrastructure and services. The Proclamation further introduces the establishment of an independent, transparent, and accountable institution that will regulate all players in the sector. In this issue of our legal update, we present to our readers a summary of the main features of the Proclamation with some observations at the end.

1. Introduction

The Telecommunication sector has been regulated by Telecommunication Proclamation No. 49/1996 and 281/2002 (amendment) and Regulation No 47/1996. Under these laws, Ethio-telecom, the state-owned telecom monopoly, was made the sole telecommunication service provider in Ethiopia. Further, the Investment Proclamation No 769/2012 had reserved telecommunication service provision as a sector reserved only for joint-venture with the government. In practice, however, this was not implemented and Ethio-telecom has remained a government monopoly to date.

2. Objective and Scope

The Proclamation aims at restructuring the telecommunication market and introducing competition in the provision of telecommunication services and enhance the social and economic development of the country. As opposed to the previous approach of regulating the communication sector through several pieces of legislations, the Proclamation creates a single comprehensive legislation to regulate the communication services in general. Communication service is defined as “a service offered to the public consisting of the dissemination or interchange of audio, video or data content using telecommunications media, and of physical content using postal service, but does not include broadcasting.”

3. The Regulator

The Proclamation establishes the Ethiopian Communication Authority (“Authority”), and makes it accountable to the Prime Minister. The Authority’s three basic objectives are to promote:

i. the development of high quality, efficient, reliable and affordable communication services;
ii. a competitive market for the achievement of the first objective; and
iii. accessibility and interest of consumers.

In order to be able to pursue these objectives, the Authority is vested with a number of powers including, among others:

The Authority is led by a policy level Board of Management and an executive level Director General. Although the Proclamation does not create clear linkages, the Authority is likely to maintain a close relation with the Ministry of Innovation and Technology; as the latter is given the power to formulate policy for the communication sector.

Providing and operating communication services without acquiring a valid license from the Authority is prohibited. In issuing licenses, the Authority is obligated to maintain principles of transparency, fairness, non-discrimination, the need to promote fair competition and investment in the communication industry, and the need to provide modern, quality, affordable and readily available communication services in all parts of Ethiopia.

4. Technical Regulation

The Proclamation empowers the Authority to regulate technical standards such as:

5. Economic Regulation

The other important aspect of the Proclamation lies in the power of the Regulator to undertake economic regulation. The economic regulation consists of;

  1. Interconnection: Based on the law and the negotiation of parties, when the telecommunication Operator has received request for interconnection from another Operator, the former has the obligation to provide interconnection. The interconnection agreement shall be made in writing and in compliance with the law. Even though the agreement is to be concluded between the parties themselves, the Authority may be involved to ensure public interest, the compliance of the law, and to help parties reach at a consensus.
  2. Collocation and infrastructure sharing: a telecommunication Operator that has a significant market power has the duty to accommodate the collocation request of another Operator as long as it is technically feasible based on the negotiation of the parties. The Proclamation unequivocally encourages Operators to share both active and passive telecommunication infrastructure. It introduces mandatory and consensual sharing of infrastructure. It is mandatory when an Operator with a significant market power is required to share both passive and active infrastructure upon request. It is optional for an Operator with non-significant market power to share infrastructures to another similar operator.
  3. Tariff: The Authority may review, control tariffs and determine the lawfulness of the imposed tariff. The tariff to be charged by the Operators is required to be just, reasonable, and not unduly discriminatory among users or classes of users. It is presumed that the tariff charged by an Operator with no significant market power is lawful and does not require filing to the Authority for approval while an Operator with significant market power is required to publish its tariff.
  4. Universal Access Service: The Authority has the power to develop annual objectives for Universal Access to communication services in Ethiopia, to give access to the largest number of users possible, particularly in rural and remote areas of Ethiopia. Universal access fund that shall be used to support universal access to communication services in Ethiopia is established by the Proclamation, and the details will be determined by Regulation to be enacted by the Council of Ministers.
  5. Market Competition and Consumer Protection: Setting aside existing competition laws and institutional frameworks, the Proclamation grants the Authority an exclusive competence to determine and decide on matters of competition relating to the Ethiopian communication service market. The Authority has also the power to require Operators to establish a code of conduct that specifies the rights of consumers.

6. Operation and Decision-Making Process of the Regulator

Public and Stakeholder Consultation

The Authority has the mandate to initiate and conduct a public hearing, based on its own motion or on a written request by other parties, in the course of undertaking its activities. In case when the Authority is considering to take actions that will affect the rights of any party or the public, the Authority is obliged to undertake public consultation. On the basis of the outcome of the consultation, the Authority may be required to amend, repeal, or adopt any directive or to take or refrain from taking action or to propose recommendation for the enactment of legislation. In addition, the Proclamation expressly requires the Authority to conduct adequate stakeholder consultation while enacting directives and establishing the procedures for application, issuance and renewal of a licenses.

All the rule making process within the Authority with respect to adoption, amendment, repeal or enforcement of directives is required to be transparent and prior notice must be given to the public, consumers and others. Decisions of the Authority, granting or denying any action or relief, must be made in writing and must be published. A party aggrieved by the decision of the Authority may request the Authority for review of its decision. In such cases, the Authority shall issue a public notice informing the public that the decision is under review. It is the Authority’s mandate to allow or deny the review of decision in whole or in part by giving sufficient reasons.

The Proclamation establishes an independent Appeals Tribunal, with three members, to be appointed by the Prime Minister for a term of three years. The period of appeal is 30 days from the effective date of the decision. The decision of the Tribunal is further appealable to Federal High Court within 60 days and the court’s decision shall be final. This, however, does not prohibit any party to lodge its application to the cassation division of the Federal Supreme Court, where there is a fundamental error of law.

7. Use of Land and Buildings for Telecommunication Lines

The building and installation of wire, cable, tower, mast, antenna, pole or any other apparatus is considered as a telecommunication line. Licensed Operators are given the right to build, pass under, over, along, and across the land and building any facilities necessary to provide the service with the consent of the owner or the possessor or the lessee of the land or building including a local authority or government institution. The Operator may only cause the minimum and unavoidable damages to the land or building or the environment and shall pay adequate and fair compensation to the lessee or the possessor or the owner of the land and building for any resulting damage or loss.

8. National Registry

The Operators have the obligation to take reasonable steps to ensure the confidentiality of the customer’s communication unless the court of competent jurisdiction requires or allows for duly authorized agent of the government to access the communication. National subscribers’ registry will be established by the Authority to register SIM cards containing subscribers’ information. The Authority is mandated to enforce and monitor compliance with the Proclamation, regulation or directives or its decision in collaboration with law enforcement authorities. It has also the power to asses and provide proportionate, non-discriminatory and transparent remedies for violations including fine and restitutions or sanctions up to revocation of a license.

9. Observations

The Proclamation ushers a new era for the telecommunication sector in Ethiopia. While setting forth fresh opportunities for foreign and domestic investors to invest in telecommunication infrastructures and services, the law would presumably help consumers receive more affordable and better-quality services. The following observations are worth noting:

  1. The Authority will need to design and implement additional regulations and directives that will further provide guidance on the detailed rules and regulations. The Proclamation provides for an overall framework and the timing and quality of the secondary and tertiary level detailed regulatory and guiding legal instruments (Regulations, Directives, etc.) are critical for its effective implementation.
  2. The Proclamation lacks adequate provisions on the regulation of passive telecommunication providers which play significant role in the current telecom service provision. For instance, one of these passive providers are tower companies that provide infrastructure services (tower, mast, power, shelter, etc.) for active telecom Operators. This will need to be addressed through secondary legislations.
  3. The Authority has exclusive jurisdiction to determine anti-competitive behavior with regard to communication services and take appropriate measures. Stretching the capabilities of this new Authority by giving it the responsibility of regulating both competition and communication services may affect its efficiency as both the competition and communication services regulation are highly technical and professionally demanding. Leaving the competition part in communication services to be regulated by the already existing Trade Competition and Consumer Protection Authority and enhancing its capacity thereof would have been a more efficient approach.
  4. The Authority’s power to regulate tariff set by an Operator with significant market share is not sufficiently and clearly articulated. Given that there are no detail rules in the Proclamation on how this issue is implemented, it may be subject to discretionary interpretation to attribute the Authority with the power to set price. It is recommended that this be more articulated in secondary legislations.
  5. The accountability structure of the Authority compromises the independence of the institution. The fact that the Authority is accountable to the Prime Minister creates a delicate situation where on the one hand, government, after the privatization, will maintain 51% stake in one of the Operators and on the other hand, controls the regulator. So long as government remains to hold a higher stake in the Operator, a better approach would have been to make the Authority accountable to the Federal parliament or somehow make it independent in any other accountability modality.