http://www.worldbank.org/ #competition4dev GUIDE FOR POLICY-MAKERS PRO-COMPETITION MARKET SOLUTIONS TO ADDRESS KEY BOTTLENECKS IN SENEGAL’S TELECOMMUNICATIONS SERVICES1 The TELECOMMUNICATIONS SECTOR has been identified as a crucial pillar of future growth by the Government of SENEGAL. This note highlights how Senegal can benefit from TACKLING BOTTLENECKS TO COMPETITION along upstream and downstream wholesale telecommunications markets to unleash its full potential. It provides POLICY RECOMMENDATIONS for pro-competition reforms, that if implemented, could address some of the main challenges affecting the performance of the sector. FIGURE 1: Senegal telecommunications sector – key bottlenecks and recommendations Upstream Downstream Retail Wholesale Markets Wholesale Markets Markets International National Backhaul Last mile Consumer connectivity backbone Weak framework and enforcement to Weak framework and enforcement to promote entry by encourage entry and level playing field facilities-based competitors between service-based competitors Pro-competition market solutions: ▪ Identify services where regulation can allow for facilities-based competition or support Pro-competition market solutions: services-based competition ▪ Focus regulation on markets that need it: regulated ▪ Evaluate developing a framework for broadband support that prevents negative effects on private markets should meet three criteria test investment ▪ Refocus ex ante regulation on SMP operators and ▪ Prevent cross-subsidization between competitive and non-competitive market segments. Identify PSOs. alleviate the regulatory burden that falls on ▪ Consider implementing principles of the “Ladder of investment” to accompany the entry of new players operators without SMP ▪ Clarify the regulatory regime applicable to State-owned infrastructure to facilitate access ▪ Analyze effective competition to declare SMP: ▪ Consider regulating Sonatel’s passive infrastructure under open access principles considering eliminating in the Telecommunications Code 25% market-share presumption of dominance Spectrum management ▪ Ensure the technical independence of ARTP. Pro-competition market solutions: Undertake a functional review of ARTP to identify ▪ Design a spectrum management policy so to facilitate the access to spectrum of those operators areas to make its mandate more effective that will use spectrum in the most efficient way and considering technology neutrality ▪ Adopt the bylaws necessary to ensure the ▪ Design and adopt open competitive tenders for spectrum assignment, with provisions to allow effectiveness of the Telecommunications Code to for new entry open markets to competition ▪ Review and reform spectrum pricing principles to incentivize efficient use of spectrum ▪ Strengthen powers to investigate and sanction ▪ Design a framework for unlicensed spectrum that can address the challenges posed by new anticompetitive conduct technological developments (e.g. Internet of Things) ▪ Promote a clarification or a change in regional rules ▪ Design a package of measures and launch a process to allow for entry of a fourth mobile 4G operator regarding the competences of Senegal’s authorities with powers to enforce the national competition rules Restrictions in competition between last mile providers e.g. ISPs and MVNOs ▪ Develop mechanisms of collaboration both at the Pro-competition market solutions: regional level (National Competition Commission ▪ Rationalize administrative control of entry for ISPs and MVNOs, namely by setting a general (NCC)/ARTP with the WAEMU Commission), and at the authorization regime with minimal requirements national level (NCC, ARTP, other sectoral regulators) ▪ Only scarce resources should require calls for tenders ▪ Ensure coordination between ARTP and the Commission with Government representatives ▪ There should be no decision on the number of market players when no scarce resources Source: Authors’ elaboration (spectrum) are involved SENEGAL’S TELECOMMUNICATIONS SECTOR: POLICY OBJECTIVES PROCOMPETITION INTERVENTIONS are important to achieve Senegal’s goals for the FIGURE 2: Stratégie Sénégal Numérique 2025 telecommunications sector – an important direct LAUNCHING contributor to GDP (6.3% in 2014) and enabler of other 1 4G SERVICES 2 INFRASTRUCTURE sectors. Pro-competition policies in the telecom sector can help Senegal participate in the digital economy: 70% of population covered within next 5 years, Private telecommunications operators to contribute deploying Information and Communications Technologies (ICT) and benefiting consumers through 90% covered by 2025 73% of total financing required over next 8 years LOWER TARIFFS and IMPROVED QUALITY OF SERVICE. Senegal’s ICT strategy, the Stratégie Sénégal Numérique 2025 (Stratégie), includes key objectives for the telecommunications sector (Figure 2), and is aligned with the Plan Sénégal Emergent 2014 (PSE), the REGULATORY country’s overall development blueprint. The Stratégie SENEGAL 3 FRAMEWORK calls for MORE INNOVATION, with the private sector EMERGENT Regulatory measures to as a key driver for the development and growth of Senegal’s telecommunications sector. This, however, boost price competition and requires a STRONG REGULATORY AND ensure effective regulation INSTITUTIONAL FRAMEWORK that fosters Source: Government of Senegal (2016). Authors’ elaboration competition and enables sustainable sector growth. SENEGAL’S TELECOMMUNICATIONS SECTOR HAS EXPANDED RAPIDLY IN THE LAST YEARS BUT HAS NOT YET FULLY ACHIEVED ITS POTENTIAL Despite sector growth and increasing penetration, Senegal FIGURE 3: Senegal telecommunications sector performance could improve its performance on the affordability of Active mobile broadband subscriptions telecommunications services per 100 inhabitants: 52.2 World avg. 26.1 in Senegal, 22.9 in Africa, Fixed-broadband and penetration of broadband subscriptions access to Internet (Figure 3). per 100 inhabitants: Senegal could take advantage of its well-developed 0.6 in Senegal, 0.4 in Africa, 12.4 World avg. Percentage of backbone infrastructure to individuals using increase connectivity, deliver services more efficiently and the Internet: Senegal ranks 130 out of 138 encourage use. 25.7% in Senegal, 19.9% in Africa, 45.9% World avg. in terms of affordability of telecommunications services (NRI) LIMITED AFFORDABILITY OF MOBILE SERVICES AND 1422017 out of 176 in the ITU ICT Senegal ranks low on FIXED BROADBAND MIGHT ICT access (138 out of 176), Development EXPLAIN THE LOW LEVELS use (138 out of 176), and Index (IDI) ICT ACCESS AND USAGE skills (158 out of 176) (IDI) (Figure 2). Internet penetration International Telecommunication Union - ITU (2017), Measuring the Information Society 2017; World remains relatively low, with Economic Forum (2016), Global Information Technology Report Note: 2016 figures or latest available. internet access in Senegal being below Ghana, Cote d’Ivoire and Kenya (Figure 4, panel A) and fixed-broadband being very limited (0.6 subscriptions per 100 inhabitants). Broadband prices are close to the median after recent price reductions, but higher than countries in the region, such as The Gambia and Cote d’Ivoire (Figure 4, panel B). However, download speeds (Figure 4, panel C) are on the low side and international internet bandwidth per Internet user is less than one tenth of the average for Africa, affecting the quality of connectivity. Limited affordability of mobile services and fixed broadband BROADBAND PRICES ARE CLOSE TO THE MEDIAN after might explain the low levels ICT access and usage (Figure 2). recent price reductions, but higher than countries in the region INTERNET PENETRATION REMAINS RELATIVELY LOW, with such as Gambia and Cote d’Ivoire (Figure 4, panel B). However, internet access in Senegal being below Ghana, Cote d’Ivoire and DOWNLOAD SPEEDS (Figure 4, panel C) ARE ON THE LOW SIDE Kenya (Figure 4, panel A) and FIXEDBROADBAND BEING and international internet bandwidth per Internet user is less than one VERY LIMITED (0.6 subscriptions per 100 inhabitants). tenth of the average for Africa,2 affecting the quality of connectivity. FIGURE 4: Market outcomes in the telecom sector in Africa: Senegal and other countries A. Internet penetration B. Fixed broadband (USD/month) (Percentage of individuals using the internet) $180 Morocco $160 South Africa Mauritius $140 Cape Verde $120 Tunisia Gabon $100 Algeria $80 Egypt $60 Botswana Ghana $40 Namibia $20 Swaziland São Tomé and Príncipe $0 Swaziland Zimbabwe Mali Sierra Leone Tanzania Gabon Seychelles Djibouti Angola Kenya Nigeria Mozambique Cameroon Ethiopia Senegal Gambia Mauritania South Africa Libya Côte d’Ivoire Morocco Mauritius Sudan Algeria Tunisia Egypt Botswana Benin Sudan Côte d’Ivoire Kenya Nigeria Senegal Zambia Source: Broadband Pricing League, Sonatel Note: Figures as of Sep/Oct 2017; May 2018 for Senegal Cameroon Equatorial Guinea C. Fixed broadband download speed (Mbps) Zimbabwe Uganda 25 Rwanda Gambia 20 Mauritania Ethiopia 15 Burkina Faso Angola 10 Tanzania 2010 Benin 5 2016 Mali Guinea 0 d’ s An e m ibia Et e Ni ia Se eria Tu l sia ya Al t ria a M ya M cco Ta la Na nia Congo (Republic) ga yp te tiu an ir bw op go n Lib ge Ivo ni a Eg ne Ke Cô ri o m Gh g nz ba hi au or 0% 10% 20% 30% 40% 50% 60% Zi Source: ITU Statistics; ITU (2017) Measuring the Information Society Report 2017 Source: Speedtest Global Index Note: As of June 6, 2018 COMPETITION ALONG TELECOMMUNICATION VALUE CHAINS IS IMPORTANT TO ACHIEVE POLICY OBJECTIVES Opening mobile and international calling markets to more competition can have an important impact on access, usage and prices (Figure 5) and help Senegal achieve the PSE’s objectives. FIGURE 5: Benefits of opening telecommunications markets to competition In a sample of 40 African countries entry of an additional operator led to a Opening up international calling Opening up international calling services to competition can increase services to competition can 57% increase in mobile subscriptions (2002, Gebreab) call volumes by up to 104% reduce prices by up to 90% (2012, GSMA) (2012, GSMA) Sources: Gebreab 2002, Groupe Spéciale Mobile Association (GSMA) 2012 THE AFFORDABILITY AND QUALITY OF SERVICES DELIVERED TO CONSUMERS DEPEND ON THE FUNCTIONING OF VARIOUS MARKETS ALONG TELECOMMUNICATIONS’ VALUE CHAINS Senegal’s value chain for telecommunications (both service and facilities-based), and the key market players along the value chain are summarized in Figure 6. The telecommunications value chain has 3 key segments consisting of different interconnected markets: FIGURE 6: Senegal telecommunications value chain and key players  UPSTREAM 2 DOWNSTREAM 3 RETAIL WHOLESALE MARKETS WHOLESALE MARKETS MARKETS a. INTERNATIONAL CONNECTIVITY: a. BACKHAUL: segment of a telecommunications These are the final the network that provides network carrying data from the last mile (i.e. from a services used by connection of a national network local network base station/cell tower) to the consumers in daily to global networks. core/backbone network. activities including markets such as b. NATIONAL BACKBONE: b. LAST MILE: portion of telecommunications fixed telephony, transmission path that carries data network chain that physically reaches the broadband gathered from the landing point of end-user’s premises. The last mile carries data from Internet access, international communications the customer to a local network base station. Two and mobile infrastructure or a node in the main technologies are available for broadband telephony. national networks to nodes for access: (i) fixed services associated with a physical smaller local/regional networks location, and (ii) mobile services which can be used Fixed services within the country, and vice versa. from any location with coverage (2G, 3G, 4G, etc.) § Sonatel network International National § Expresso Backhaul Last mile § Hayo Telecom (Matam connectivity backbone region) Companies with Companies with fiber Internet Service Providers (ISP): Fixed services access to international optic networks: § Sonatel § Sonatel network Mobile Network Operators connectivity: § Sonatel § Waaw Sa § Expresso (MNO): § Sonatel § Expresso § Africa Access § Hayo Telecom (Matam region) § Sonatel (only 4G license) § Expresso § AIDE § Arc Informatique § Tigo Mobile Network Operators (MNO): § Expresso network Source: Authors’ elaboration § Sonatel (only 4G license) § Hayo Telecom (Matam § Tigo region) § Expresso network A functioning telecommunications value chain would require dynamic § Hayo Telecom (Matam region) Mobile Virtual Network market conditions and pro-competition regulation at all levels, that Mobile Virtual Network Operators (MVNO): respond to each market’s characteristics that make it more prone to Operators (MVNO): § You Mobile (Sonatel significant market power by an operator and potential anticompetitive network) § You Mobile (Sonatel network) practices. The telecommunications sector is characterized by disruptive § Sirius Telecoms Afrique (Tigo § Sirius Telecoms Afrique technology and continues to evolve at a fast pace. Technology changes (Tigo network) network) lead to constant innovation and evolution of services and markets, § Orgines SA (Expresso § Orgines SA (Expresso network) network) which creates new rivals and shifts the economic strength of existing rivals. Therefore, the boundaries of telecommunications markets need to Internet Service Providers (ISP): be reassessed periodically. Telecommunications markets are § Sonatel characterized by significant fixed costs and sunk investments, economies § Waaw Sa of scale and scope, essential facilities and network bottlenecks, and a § Africa Access reliance on scarce resources, including spectrum. Entrants in some § Arc Informatique segments face high fixed costs due to upfront investments in infrastructure, as well as commercial investments in sales and distribution channels. These high initial fixed costs, particularly in upstream segments, give incumbents a strategic advantage over new entrants, because the latter have fewer clients to spread their fixed costs. Furthermore, some infrastructure cannot be economically replicable and is essential in allowing for competition in downstream markets. Regulators can respond to these characteristics in several ways. CHARACTERISTICS AND MARKET DYNAMICS OF SENEGAL’S TELECOMMUNICATIONS SECTOR Market outcomes are the result of the Although concentration in mobile markets has declined over time, it is still relatively high interaction between market players under a compared to other countries. The Herfindahl-Hirschman Indices (HHI) for Senegalese given regulatory framework. The extent to mobile markets are comparatively high5 (Figures 8, 9 and 10). These HHI numbers are also which rules prevent entry, expansion and high compared to peer countries (Figure 11). While it is not unusual for certain telecom competition on a level playing field contributes market segments to be concentrated, some segments in Senegal have become more to suboptimal outcomes. Senegal places in the concentrated over time. For example, whilst in the late 1990s there were more than 15 bottom half of comparator countries according internet service providers (ISPs), only four are in the market today. This is primarily because, to product market regulation (PMR) indicators3 until 2017, ISPs were subject to a cumbersome licensing regime that capped their number, (Figure 7). This score is in part a reflection of and were not allowed to deploy their own infrastructure, thus having to rent Sonatel’s restrictions on entry, lack of clear rules that infrastructure for excessive prices, which inevitably led to market foreclosure, and low strengthen the governance of companies with quality of service (Figure 12). The licensing of three new ISPs can certainly boost government shareholding and ensure competition although these ISPs do not compete in the same geographic area. competitive neutrality, and high concentration levels. In addition, the regulatory framework FIGURE 8: Market shares of Mobile Operators as of December 2016 has not contributed to boosting service and infrastructure-based competition (e.g. no pro-competitive radio spectrum management 9% 22% 19% Sonatel and weak access regulation framework). HHI: HHI: 26% HHI: 3864 52% 4254 4982 Tigo 23% 58% FIGURE 7: Restrictions in the 26% 63% Telecommunications Sector by Country Expresso Top 5 Average Market shares for mobile Market shares for mobile Market shares for mobile telephony by subscribers telephony by value internetbased on value Brazil Source: ARTP (2016) and authors’ estimations based on World Bank Survey Colombia Dominican Republic FIGURE 9: Evolution of market concentration (HHI) and ARPU levels El Salvador in the mobile phone market OECD Average 10000 18 ARPD Mobile Total (USD) HHI Mobile Total Chile Herfindahl-Hirschman Index 16 HHI Mobile Prepaid HHI Mobile Contract Mexico 8000 14 Philippines 12 6000 10 USD Peru 5488 5384 8 Turkey 4000 4634 4991 4603 4199 4229 4207 3924 3913 3887 6 Ukraine 4 2000 Nicaragua 2 Panama 0 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Argentina Notes: The HHI is calculated based on market shares over the number of mobile connections (subscription lines). Overtime, around 99 percent of Jamaica the connections are prepaid. Recently after 2017, the share of prepaid connection slightly falls below such figure to 98.8 percent. Source: GSMA intelligence Honduras SENEGAL Senegal 1.85 FIGURE 10: Market share distribution among operators and South Africa market concentration index in the mobile phone market Kenya 100% 10000 China 25.62% 25.70% 26.29% 26.98% 26.28% HHI 80% 8000 Bolivia Market Share (%) 9.49% 9.91% 9.74% 9.06% 8.81% India Tigo 60% 6000 4957 4903 4878 4902 4982 HHI Tunisia Egypt 40% 4000 Expresso Costa Rica 64.89% 64.38% 63.97% 63.97% 64.91% 20% 2000 0 1 2 3 4 Orange Source: Markets and Competition OECD-WBG PMR (2017) 0% 0 Note: the top 5 performers are the United Kingdom, the United States, Dec 2015 Mar 2016 Jun 2016 Sep 2016 Dec 2016 Malta, Poland and Italy Source: ARTP (2016) According to Senegal’s FIGURE 11: Mobile market concentration in selected countries telecommunications regulator— (HHI based on subscribers) Autorité de Régulation des 6000 Télécommunications et des Postes (ARTP)—Sonatel holds significant market power in relevant markets in the fixed telephony segment 5000 (Figure 13), and also dominates all SENEGAL relevant markets in the mobile 3864 telephony segment (Figure 5). 4000 In terms of access to the internet via fixed fiber network, Sonatel remains the only supplier, but three network-based ISPs have 3000 obtained licenses to operate in 3 distinct geographical regions. In this market segment, it holds 100 2000 percent of high and low speed Ni Ta ia Gh nia Ga a Ug ia So da Be Afr M J o mb M n Eg co Ca Bu roo Tu a F Za ia Rw ia Se da Bo ga Zi ana M abw Ke Internet access (ADSL). m oz or ali ge nz rd iqu ni as ni ica m ny ut yp m rk n tsw l m an an ne an b oc s a a n in a b e h r b a t Nevertheless, according to ARTP’s e Internet Observatory, most users o e access Internet through mobile Source: ITU (2017) networks (98.5 percent against 1.5 percent via fixed networks), which FIGURE 12: Average download speeds in selected countries confirms the near absence of fixed Internet connections in Senegal. 25 Mobile Fixed Low levels of contestability 20 coupled with lack of adequate rules to access scarce resources 15 managed by the government may also hinder the incentives and ability for market players to roll-out 10 improved technologies. For instance, while 32 African 5 countries had already developed next generation 4G networks in 2016, including neighboring 0 Ghana Senegal Tanzania Nigeria Egypt Kenya Jordan Morocco Tunisia countries such as Cote D’Ivoire, Source: ITU Ghana, Gambia, Benin (Figure 14), Senegal is still awaiting the full development of its own 4G FIGURE 13: Fixed Voice Telecommunications FIGURE 14: Deployment of 4G networks network. By 2016, 74 4G networks Market Shares as of December 2016 in Africa (2016) were available in 32 African countries, compared to only 1 country in 2011, a trend largely missed by Senegal. Spectrum that 3% can be used for 4G is still available in Senegal—and a plan to assign this spectrum under a process that can promote competition will be HHI: key for the effectiveness of 4G 9456 network deployment. Functional 4G networks 97% 4G networks projects/pilots Sonatel Non-attributed 4G licenses Expresso Source: ARTP (2016) Source: https://opensignal.com/reports/2016/02/state-of-lte-q4-2015/ PROCOMPETITION POLICY RECOMMENDATIONS TO UNLEASH THE POTENTIAL OF SENEGAL’S TELECOMMUNICATIONS SECTOR A variety of constraints affect outcomes along the telecommunication value chain and Senegal’s ICT connectivity at wholesale (international connectivity, national backbone, backhaul, last mile) and retail levels. These include gaps in the framework to encourage entry and level playing field between service-based competitors, weaknesses of the framework to promote entry by facilities-based competitors, restrictions in competition between last-mile providers, and inadequate spectrum management (Figure 15). FIGURE 15: Key bottlenecks and restrictions to competition in Senegal’s telecommunications value chain Upstream Downstream Retail Markets Wholesale Markets Wholesale Markets International National Backhaul Last mile Consumer connectivity backbone Weak framework and enforcement to encourage entry and level playing field between service-based competitors Weak framework and enforcement to promote entry by facilities-based competitors Restrictions in competition between last mile providers e.g. ISPs and MVNOs Spectrum management Source: Authors’ elaboration 1 Framework to encourage entry and level playing field between SERVICESBASED COMPETITORS Senegal’s telecommunications regulatory framework is ARTP (at the national level), nor by the West African Economic and characterized both by an underdeveloped ex ante regulation Monetary Union (WAEMU) at the regional level. 5 which is typically needed to facilitate market entry, and by an overly burdensome regulation of operators without real market Although Sonatel does not hold a legal monopoly over international power (Figure 16). During the initial phase of opening to data transmission, it controls access to the main international competition, regulation is pro-active and asymmetric, as it must gateway. Unclear rules to setup international gateways or landing put into place conditions for viable entry of new operators that are stations and the lack of regulation for accessing the international capable of competing with the historical incumbent in the long gateway has the effect of strengthening the incumbent’s run. This phase is characterized by a focus on regulation of dominant position in the market and is likely to contribute to the wholesale tariffs and conditions (i.e. for access to network high cost of international calls and data transmission in Senegal. infrastructure and call termination services) on operators with Countries such as Singapore have successfully regulated access to significant market power (incumbents). Asymmetric regulation is international gateways impacting connectivity. needed to prevent abuses by those operators. ARTP has yet to develop rules to encourage MVNOs entry and Sonatel’s position as the only operator of fixed network for internet contribution to greater access to telecom services. Rules on access stemmed from the 2011 Telecommunications Code setting adequate charges for MVNOs and establishing asymmetric licensing regime, which capped the number of ISPs until 2017, and obligations of non-discrimination and transparency, together with from ineffective significant market power (SMP) regulation potential obligations for operators with SMP could be considered. capable of ensuring market entry. Despite having considered that Senegal could also follow the example of countries where MVNOs Sonatel had SMP across 12 wholesale markets, ARTP has not yet have developed successfully under less-intrusive regulation. Generally, imposed obligations to grant fair, transparent and non-discrimina- entry of MVNOs is subject to commercial agreements and proportion- tory access to the non-replicable infrastructure and assets owned ate authorization regimes; tenders for MVNO licenses are uncommon. by Sonatel (including civil engineering, such as ducts and poles). The recent award of three licenses through tender was subject to Moreover, the failures of SMP regulation have not been compen- approval by MNOs (MVNOs licenses awarded to Groupe Futurs sated for by an effective ex post competition law enforcement by Médias (GfM), which uses the brand You Mobile (Sonatel network), the National Competition Commission (NCC) or by the regulator Sirius Télécoms (Tigo network) and Origines SA (Expresso network). Although ARTP has implemented a procedure for number portability number transfer.6 ARTP is expected to lower the termination rates to in accordance with international best practices, the results have been mitigate the club effects which currently favor Sonatel’s network and modest so far, indicating further regulatory challenges. This is mainly increase the risks of anticompetitive behavior. Going forward, it will related to the high cost (10 USD) associated with number portability, be important that these policy changes be disseminated to make which deters telecommunications operators from encouraging them truly effective. FIGURE 16: Lack of framework to encourage entry and level playing field between service-based competitors across Senegal’s telecommunication sector Upstream Downstream Retail Markets Wholesale Markets Wholesale Markets International National Backhaul Last mile Consumer connectivity backbone Weak framework and enforcement to encourage entry and level playing field between service-based competitors § Lack of well-defined approach based on identifying essential facilities (non-replicable assets) and allowing for access to those assets by competitors on a fair and non-discriminatory basis § Sonatel’s current Reference Interconnection Offer (RIO) not aligned with competition principles across the 12 markets where it has significant market power § Lack of cost-based access pricing and procedures to ensure incumbent providers of essential facilities do not discriminate against 3rd parties § High cross connect for international § Obligation for operators § Asymmetric mobile interconnection charges connectivity (up to 3 times other countries) to host MVNOs at fair recently established in RIO but not § Although 2 alternative options for cost regardless of SMP cost-based and thought to be high = club international data transmission, conditions of § MVNO entry subject effects & on/off net discrimination service highly influenced by Sonatel to tender and § High number portability cost approval from MNO Source: Authors’ elaboration Recommendations to develop a framework to encourage entry and level the playing field between services-based competitors are summarized in Figure 17. FIGURE 17: Pro-competition market recommendations to encourage entry and level playing field between services-based competitors Recommendations to encourage entry and level playing field between services-based competitors Responsibility Priority Focus regulation on markets that need it. Markets should meet the ‘three criteria test’: (1) high and non-transitory Government & High barriers to entry; (2) market structure does not tend towards effective competition; (3) inadequacy of competition law Parliament to tackle market failure. Refocus ex ante regulation on SMP operators. Alleviate the regulatory burden that falls on operators without SMP. ARTP High ARTP could consider imposing obligations on operators with SMP to grant fair, transparent and non-discriminatory access to the non-replicable infrastructure and assets it owns (including civil engineering, such as ducts and poles); and (ii) continuing its policy of setting-up lower termination rates to mitigate the club effects which currently favor Sonatel’s network and increase the risks of anticompetitive behavior. Analyze effective competition to declare SMP. Considering eliminating in the Telecommunications Code Government & Medium 25-percent-market-share presumption of dominance or replacing it by a rebuttable presumption of 40%. Parliament Ensure the technical independence of ARTP. Undertake a functional review of ARTP to identify areas for making its Government & High mandates more effective. Ensure check and balances and implement a transparent and technical selection process to Parliament appoint Board members and the Director. Involve the President of the Republic in the selection of all Board members. Adopt the bylaws necessary to ensure the effectiveness of the Telecommunications Code to open markets to Ministry of Post and High competition (e.g. applicable costs to termination rates and charges for access to infrastructure, spectrum assignment Telecommunications rules and fees, integrate asymmetric regulation principle). (MPT) Strenghten powers to investigate and sanction anticompetitive conduct (e.g. margin squeeze, refusal to deal) ARTP with support Low of MTP Promote a clarification or a change in regional rules regarding the competences of Senegal’s authorities with Government & High powers to enforce the national competition rules (notably, the National Competition Commission and the ARTP in Parliament the telecom sector) vis-à-vis the WAEMU Commission. Develop mechanisms of collaboration both at the regional level (National Competition Commission ARTP, NCC, ARMP, High (NCC)/ARTP with the WAEMU Commission), and at the national level (NCC, ARTP, other sectoral regulators). CRSE and WAEMU This collaboration could involve memoranda of understanding (MoUs) on how these bodies will exercise their functions Commission when dealing with issues involving the enforcement of competition rules, exchange of information, development and exchanging of skills ad expertise, etc. Source: Authors’ elaboration 2 Framework to promote entry by FACILITIESBASED COMPETITORS The Senegalese telecommunications regulatory framework lacks a well-defined approach for regulating wholesale markets in Code is unclear about the applicable procedure (or the cost) for setting up a cable landing station or accessing a submarine such a way to encourage entry of operators that progressively cable. Hence, although Sonatel does not have a legal monopoly develop their own infrastructure (Figure 18) and the licensing over the operation of a submarine cable landing station, the procedures have restricted entry in the past. The amendments of absence of a clear regulatory framework in this regard increases the Telecommunications Code are a step in the right direction to uncertainty, thus limiting entry, and potentially reinforcing the allow for entry of facilities-based ISP; nonetheless, further incumbent’s position. The use of government backbone development is needed to streamline the process for granting an infrastructure by private operators would also help operators to authorization for ISPs . Strengthening the regulatory framework build a national (virtual) network for data transmission services. further requires equipping ARTP with the adequate tools for In fact, the current regulatory framework lacks clarity regarding identifying essential facilities (non-replicable assets) and for the possibility of regulating access to State-owned infrastructure allowing for regulated access to those assets by competitors on a under the Telecommunications Code, which has led to unused fair and non-discriminatory basis. Even though Sonatel has been digital spare capacity. In this respect, the Government and declared a dominant operator, ARTP has not imposed conditions Agence de l’Informatique de l’Etat (ADIE) have adopted an Arrêté on (passive) infrastructure sharing. The Telecommunications establishing a Committee to handle this topic. FIGURE 18: Lack of framework to promote entry by facilities-based competitors across Senegal’s telecommunications sector Upstream Downstream Retail Markets Wholesale Markets Wholesale Markets International National Backhaul Last mile Consumer connectivity backbone Weak framework and enforcement to promote entry by facilities-based competitors § Lack of effectiveframework for using infrastructure sharing as a tool to promote infrastructure deployment § Sonatel’s passive infrastructure not classified as essential facilities § No conditions imposed by ARTP on infrastructure sharing, though the current legal framework allows for this Lack of clarity on Procedures to allow network operators to enter the market and lay fiber are not clear enough license or authorization to land a submarine Refusal or delays in the provision of access to towers from incumbent or prohibitive fees proposed cable (e.g. procedure and fees) Lack of clarity/framework on using State-owned infrastructure spare capacity to offer backhaul services to private operators (e.g. the ADIE network) Source: Authors’ elaboration Recommendations to develop a framework to promote entry by facilities-based competitors are summarized in Figure 19. FIGURE 19: Pro-competition market solutions to promote entry by facilities-based competitors in Senegal’s telecommunications markets Recommendations to promote entry by facilities-based competitors Responsibility Priority Identify services where regulation can allow for facilities-based competition or support services-based MPT High competition. Evaluate developing a framework for broadband support that prevents negative effects on private investment. ARTP High Prevent cross-subsidization between competitive and non-competitive market segments. Identify public service ARTP High obligations. Consider implementing principles of the “Ladder of investment” to accompany the entry of new players, notably ARTP Medium ISPs, MVNO. Clarify the regulatory regime applicable to State-owned infrastructure to facilitate access (e.g. network of the ADIE). ARTP Medium Consider regulating Sonatel’s passive infrastructure under open access principles (considering essential facilities). ARTP Medium Source: Authors’ elaboration 3 Restrictions in competition between LAST MILE PROVIDERS FIGURE 20: Restrictions to competition in Senegal’s downstream wholesale markets Although the licensing regime has been amended Downstream and some absolute restrictions on entry have been Wholesale Markets lifted, the procedure is not as open and streamlined as in various other jurisdictions (Figure 20). All telecommunications networks and services open to BACKHAUL LAST MILE the public, that are based on scarce resources or use § Terrestrial fiber § Fixed: xDSL, Wimax the public domain, are subject to a licensing regime § Microwave § Satellite, 4G, 5G, fiber under the Telecommunications Code.7 Even though § Satellite § Mobile: 2G, 3G, 4G Law 2017–13 from 20 January 2017 replaced the licensing regime for ISP by an authorization regime, which allows operators to deploy and operate their Restrictions in competition between last mile providers own infrastructure, the way in which this regime is e.g. ISPs and MVNOs designed may still limit entry. Furthermore, as it § Lack of clarity on the form of entry regime stands, the scope of the licensing regime is still overly § Call for tenders are launched for MVNOs broad, imposing the adoption of a tender and a cumbersome procedural regime for activities that could be subject to a mere authorization regime, Spectrum notably for the MVNOs. management § 4G not assigned on a competitive basis that encourages new entry Recommendations to boost competition between last § Direct negotiation between GoS and Sonatel to assign a 17 year 4G license mile providers are summarized in Figure 21. (1.5GHz and 800Mhz) for CFA 32bn § Remaining incumbents are now negotiating their 4G licenses § Basis for level of fees is not clear and incumbents have noted that they are high relative to other countries in the region (e.g., Morocco) § No market mechanisms that could encourage a more efficient use of spectrum (e.g. leasing and trading; license flexibility that avoids technological lock-in) § Lack of safeguards against spectrum concentration, and of provisions promoting entry by new operators § Absence of a framework for unlicensed spectrum Source: Authors’ elaboration FIGURE 21: Pro-competition market solutions to boost competition in Senegal’s downstream wholesale telecommunications markets Recommendations on boosting competition between last mile providers e.g., ISPs/MVNOs Responsibility Priority Rationalize administrative control of entry for ISPs MPT and ARTP High and MVNOs. § The scope of the authorization regime should be broadened so that it applies to all administrative procedures where no scarce resources, such as frequencies, are involved. Market entry by MVNOs should only be subject to a general authorization regime. § Continue the process of streamlining entry by setting a general authorization regime with minimal requirements at any time for the facilities-based or services-based operators without quantitative limitations, geographical restrictions and undue technology restrictions. § Only scarce resources (e.g. frequencies), some infrastructure segments and some areas (low density) (which would be identified by ARTP after in-depth specific analysis) require calls for tenders. § There should be no decision on the number of market players when no scarce resources (spectrum) are involved. § Ensure a technical and agile coordination between ARTP and the Commission with representatives from the Government and the President of the Republic. Source: Authors’ elaboration 4 Inadequate SPECTRUM MANAGEMENT Senegal has not yet deployed a full 4G network, despite there market entry and limit the risks of MNOs passing-on the costs being adequate radio spectrum, and has not assigned radio incurred to consumers. Safeguarding against concentration of frequencies competitively. So far, only Sonatel, has been awarded spectrum in the hands of a few players would also allow for a frequency rights to deploy a 4G network. This assignment more efficient use of spectrum. No spectrum licenses have been resulted from a direct negotiation between the Government and assigned to newcomers, but given available spectrum, Senegal Sonatel concerning the renewal of its global license (fixed and could benefit from reassessing its spectrum management policy mobile) in 2016 following a failed attempt to assign spectrum and optimize its use for the delivery of current and future competitively. The awarding of rights to deploy a 4G network services. In tandem, Senegal could also benefit from the through direct negotiation with the incumbents can lead to introduction of market-based mechanisms that could encourage inefficient outcomes since it can strengthen the main operator’s a more efficient use of spectrum, namely by opening the market power and weaken its competitors. Granting access to possibility for spectrum trading and leasing, subject to ARTP’s spectrum to those operators that will use spectrum in the most monitoring, and by increasing the flexibility of ARTP’s licenses by efficient way is important to benefit from wireless broadband not locking them to a specific technology, unless necessary for technologies. For this, it is important to ensure a competitive interference reasons. Furthermore, in light of recent technological selection process that minimizes potential negative effects on developments, such as the Internet of Things, which rely on competition either by granting a first-mover advantage to an unlicensed spectrum, it is increasingly important to assess the operator or applying methods that can alter the competitive introduction of a framework governing unlicensed spectrum. environment and reinforce dominance. It is also important that spectrum fees are clearly calculated, and that their value is Recommendations to strengthen spectrum management in aligned with other countries from the region, in order to foster Senegal’s last mile services are included in Figure 22. FIGURE 22: Pro-competition market solutions to strengthen spectrum management in Senegal’s downstream wholesale telecommunications markets Recommendations on strengthening spectrum management Responsibility Priority Design a spectrum management policy so to facilitate the access to spectrum to those operators that will use MPT and ARTP High spectrum in the most efficient way and considering technology neutrality. Design and adopt open competitive tenders for spectrum assignment, with provisions to allow for new entry. ARTP and spectrum High management agency (MPT) Review and reform spectrum pricing principles to incentivize efficient use of spectrum – including separating management ARTP and spectrum High fees (based on administrative costs) from usage fees (based on either market-determined or administratively-calculated management agency economic value); allowing for spectrum trading and leasing subject to ARTP’s monitoring; and adopt more flexible spectrum (MPT) licenses that do not lock operators into a particular technology (unless justified by interference reasons). Develop a framework for unlicensed spectrum that can address the challenges posed by new technological developments ARTP and spectrum Medium (e.g. Internet of Things). management agency (MPT) Design a package of measures and launch a process to allow for entry of a fourth mobile 4G+ operator. ARTP and spectrum Medium management agency (MPT) Source: Authors’ elaboration 1 This note was prepared by Georgiana Pop (Senior Economist), Tania Begazo (Senior Economist), Philana Mugyenyi (Private Sector Specialist), and Gonçalo Coelho (Consultant). The note summarizes key findings and recommendations of a World Bank Group Report: Senegal: Better Markets for All through Competition Policy (July 2018) authored by Georgiana Pop (Senior Economist), Sara Nyman (Economist), Gonçalo Coelho (Consultant), Julian Koschorke (Consultant) and Marta Camiñas Mora (Consultant) from the Markets and Competition Policy Team. 2 4,977 bit/second in Senegal versus 51,000 bit/second in Africa. Source: ITU (2017).  Product Market Regulation (PMR) methodology was developed by the OECD. PMR indicators form a comprehensive and internationally-comparable set of indicators that measure the degree to which policies promote or inhibit competition in areas of the product market where competition is viable. PMR indicators are useful to monitor the regulatory achievements of monitored countries and to evaluate the effectiveness of policies introduced throughout the years. The PMR indicators are focused on enacted policies and not on outcomes, implying that they are ‘objective,’ in that they are not based on opinion surveys. Finally, PMR indicators focus on regulatory measures that affect the economy at large and can therefore be considered as comprehensive measures of regulatory restrictiveness. Their advantages notwithstanding, PMR indicators are not designed to capture informal regulatory practices nor the effective enforcement of regulations, since they are only concerned with formal compliance with a number of criteria as they are on the books; PMR data for Senegal were collected in 2017 and reflect the status of regulations as of June 2017. 4 Based on the HHI, the concentration levels are classified as follows: 1) Unconcentrated Markets: HHI below 1,500, 2) Moderately Concentrated Markets: HHI between 1,500 and 2,500, 3) Highly Concentrated Markets: HHI above 2,500 (Horizontal Merger Guidelines 2010; U.S. Department of Justice and Federal Trade Commission). 5 The NCC has lost national enforcement powers in favor of the WAEMU Commission in 2000. Since then the NCC may only conduct preliminary investigations and market analyses subject to the WAEMU Commissions’ instructions. 6 ARTP. 2017. http://www.artpsenegal.net/index.php?option=com_content&view=article&id=304:communique-de-presse-la-portabilite-un-an-apres&catid=9:infos-flash&Itemid=162 7 Licenses are assigned by Government decree.