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Regulatory barriers to cross-border telecoms

Lifting Regulatory Barriers to Cross-Border Telecoms in Africa to Promote Integration

Africa has been steadily working its way towards integration, with a view to promoting economic development. Telecommunications services play a significant part in supporting integration. Indeed, they narrow the digital divide and enable connectivity, as well as cross-border communication and trade. This has been especially the case since the pandemic. The latter triggered a wave of digital innovation fostering remote connection and online financial transactions, among other solutions. However, telecom operators are limited in their activities due to the fragmented, unnecessarily complex, and often outdated regulatory framework that governs the sector. Regulatory barriers to cross-border telecoms therefore need to come down to drive the continent’s integration agenda.

Telecommunications in Africa: Bringing people and countries together

Africa is a massive continent home to 54 countries and to great cultural, economic, and political diversity. Although diversity is to be embraced, it nevertheless represents a challenge as regards the stimulation of the continent’s socioeconomic development. That is why regional and continental integration is a development priority. This shows in the sheer number of initiatives aiming to support the free movement of people, as well as free trade and digital innovation. These include the African Union (AU), the African Continental Free Trade Area (AfCFTA) and the African Digital Single Market, as well as no fewer than eight regional communities.

The road to integration in Africa relies heavily on telecommunications. Through interconnection, telecoms enable cross-border exchanges between countries. The disruption caused by the pandemic highlighted the telecoms’ capacity to keep people connected. The sector’s dynamism and innovation enabled users to keep on talking, transacting, and learning despite the physical restrictions. But the pandemic aside, telecom networks support the services that enable communication and trade between the different African countries. For example, without telecom operators, there would be no Internet and no digital financial services such as Mobile Money.

The importance of telecommunications is reflected in the creation of Smart Africa’s flagship initiative, the One Africa Network (OAN) Project. The main goal of the OAN is to make secure, affordable, good-quality cross-border communications available to the member states. The project also highlights the need for a clear and harmonized regulatory framework to support the achievement of this goal.

However, this framework is still a work in progress. Despite the current focus on integration, there is still significant heterogeneity on the continent. As a result, regulatory barriers to cross-border telecoms limit the telecom operators in the creation of solutions supporting integration.

Regulatory barriers to cross-border telecoms in Africa

This section looks at three different challenges that African telecom operators face due to the fragmented regulatory framework.

The first one is cost. The tariffs related to international calls, roaming and digital payments remain prohibitive. A working paper by Southern Africa–Towards Inclusive Economic Development (SA-TIED) indicates that regulation in the telecom industry plays an important role in offering affordable retail rates to the users at national level. However, at the regional and international levels interconnection and roaming rates remain high. Expensive rates also affect cross-border payments, a pillar of economic integration in Africa. Cross-border payments in Africa are indeed among the most expensive in the world, with an average cost of 8.9% of the transaction value in 2020, compared to the global average of 6.8%.

Let’s now look at interoperability. Interoperability is crucial in cross-border telecom operations, as it allows users of a given network to communicate with people on a different network or using a different device. However, the lack of regulatory harmonization among African countries impairs efforts to optimize interoperability. Digital instant payments are a telling example of the impact of a fragmented regulatory framework. Even though this industry has grown significantly in Africa in recent years, many of the platforms are not interoperable with each other at national level, let alone at international level, says Telecom Review Africa.

Data security is the third challenge. Data security is key to ensuring the seamless flow of data across borders, which is itself essential to integration on the continent. However, inconsistencies between the different national data protection laws existing in Africa restrict cross-border data flows. True, data protection laws usually support these flows. However, differing standards and interpretations create a complex regulatory landscape that can make compliance challenging.

Telecom regulatory sandboxes in Africa: one step closer to integration

Appropriate regulations must take into account the needs of the governments and regulators, as well as the needs of individuals and businesses. Overly strict or complex regulations tend to stifle innovation. This is certainly detrimental to a sector like the telecoms, which owes its dynamism and performance to technological progress. However, if the regulations are too weak, they may not sufficiently protect the consumers and the industry. The key is therefore to strike a balance between the development opportunities the telecom sector presents and effective risk management.

Regulatory sandboxes have proven to be a very useful tool for regulators aiming to find this happy medium. Indeed, they provide them with an evidence-based approach to regulation and help them protect the consumers’ rights. And at the same time, they support technological innovation and foster market growth by lifting restricting regulations. A few African countries, including Sierra Leone, Kenya, Rwanda, Ghana, and Nigeria, have already set up regulatory sandboxes in their respective fintech sector.

Still, the 2023 Transform Africa Summit highlighted the urgent need for more telecom regulatory sandboxes on the continent. Sandboxes would allow for the testing of new products and services, including those enabling cross-border operations, such as instant digital payments. This is especially relevant in the context of the AfCFTA, which Africa has now fully ratified. Furthermore, it is expected that they would help build trust as regards the cross-border flow of data, which is of paramount importance to foster integration.

Cross-border telecom operations play a crucial role in achieving economic integration in Africa. However, the patchwork of regulations that characterizes the telecom sector undermines their positive impact, by driving high costs, limiting interoperability, and restricting international data flows. As a result, harmonizing and modernizing the telecom regulatory framework would not only lift regulatory barriers to cross-border telecoms, but also bring Africa a step closer to integration.

Click here to read more about regulatory sandboxes in Africa.