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Opinions of Thursday, 23 April 2009

Columnist: Asem, Anita

Are Telecom Operators Taking Undue Advantage of Ghanaians?

by Anita Asem

The pressure of competition within Ghana’s telecommunication industry has compelled telecom service providers to adopt strategies they deem appropriate to stake their share of the market. The industry is now busy and tense as Vodafone is feverishly preparing itself by embarking on a series of re-branding processes whiles its technical and engineering aspects of service is already set for takeoff. Meanwhile, Glo is patiently holding on for its final documentation before it unleashes its heavily packed products. The fact is, these are indeed interesting times for the telecom industry in Ghana, thanks to deregulation.

In a deregulated market, as it pertains to the telecom sector in Ghana, there is intense competition as each operator positions itself to gain significant share of the market. The pressure of competition ensures efficiency, cheaper prices and improved quality of service through the power of choice wielded by consumers. Competition must, however, be encouraged at all levels of the product delivery chain for the consumer to benefit significantly. With respect to prices, it is now obvious that consumers can enjoy further price reductions if competition is enforced.

A close monitoring and investigation conducted on operations of these telecom operators revealed that they have devised a grand scheme solely aimed at restricting or preventing consumers from purchasing products below their dictated prices. Though some of their dealers are ready to compete and even beat down prices further, the operators have devised punitive measures to sanction dealers who make such trade. Notably among such operators are MTN, TIGO and One Touch/ Vodafone.

Dealers are sanctioned for selling products they purchased from these operators below certain given price level though the operator does not suffer any direct loss. For instance if a dealer buys a recharge card from an operator for GHc 7.2, the operator will dictate to the dealer at what price they can sell that recharge card, and they CANNOT sell it below that price. If the dealer is expected to sell the recharge card at say GHc 7.5 and he sells it at GHc 7.3 to the consumer, the operator sanctions such a dealer for being “too considerate” to the consumer. These sanctions can be as severe as a total loss of the dealership rights. The operators have virtually become big brothers bullying the dealers to the detriment of the consumer.

The current pace of competition is forcing some dealers to price their goods competitively and some are brazenly defying these rules to their own detriment. The fact is, it is not because they care so much for us the consumers that they decided to sell at reduced prices, it is because they have realized they can make quick turnovers and stay in business through that strategy instead of religiously adhering to the rules outlined by the operators. To the consumer, the beneficiaries of lower prices, they may be heroes, but to the operator they are market destroyers.

The question we, the Ghanaian consumer, must ask is: “if we the owners of the airwaves, the spectrum in which the operators do business, have opened up our market to allow them (the operators) to come and do business and make a profit, what right do they have to force higher prices down our throats?”. We the Ghanaian consumer must determine the price based on what we are willing to pay not what the operators want us to pay!

I think these operators should bear in mind they are operating in a deregulated market and must as well permit deregulation in their own arrangement with their dealers. Whiles they are enjoying the deregulation, they are secretly binding their dealers with rules and regulations which could eventually affect the consumers unfavourably.

Deregulation as I understand is the process through which government’s control over businesses is reduced or eliminated. The reduction or elimination of government power in a particular industry is usually enacted to create more competition within the industry. It is this process that has brought about this massive growth we are witnessing in the telecom industry and these operators are beneficiaries. They, being wiser, are now devising measures to stifle further competition and prevent dealers from reaching to us the consumers at a more affordable price even though lower prices to the consumer does not directly affect their gross revenues. Their behavior suggests that they think they are smarter than our government. While our government is giving them free reign over their operations, they are killing competition by punishing dealers willing to beat down prices to stir up competition. Consumers must watch out because the operators are keen on regulating the prices of their products. Any dealer who sells at a price favorable to consumers is severely punished.

MTN, TIGO and Vodafone must allow us, the consumers, to enjoy the full benefits of the deregulated market and stop this big brother bullying tactics they are using to scare their dealers. Sometimes one is tempted to say it is because they are non-Ghanaian that they are keen on doing anything to prevent us Ghanaians from enjoying further reductions as the dealers are ready and willing to do.

This price controlling rules of telecom operators in the country and their double standards is in contravention of the International Telecommunication Union’s (ITU) focus to which Ghana as well as some of the operators are signatories.

With 191 member states and over 700 sector members, the ITU puts great emphasis on its accountability and transparency. It is its main task to ensure that people around the world can communicate with each other in an efficient, safe, easy and AFFORDABLE manner. All the elements of ITU’s work are centred around the goal of putting every human being within easy and affordable reach of information and communication and to contribute significantly towards economic and social development of all people. Not only that, but ITU considers it as a responsibility to be proactive about what the world might need in the future, not just what it needs right now.

It is clear that telecom operators in the country are not as transparent as they would like us to believe. Their price-fixing behavior is certainly at odds with the vision of ITU. As members of ITU, operating in a member nation, Ghana, it is amazing that these operators go to the extent of punishing their dealers willing and ready to make communication more affordable to Ghanaians. In addition to the inconsiderate pricing tactics of these operators, they have begun a whole marketing strategy aimed at creating monopolies in our deregulated telecommunication industry. These companies have assigned exclusive territories to their dealers which obviously have the tendency to encourage monopolistic behaviour. I learnt the story is the same with other multinational companies dealing in beverages and other consumables, however, my concern is with the telecom sector because that is one area most Ghanaians are affected and the industry that has gone through an elaborate deregulation to stir up competition.

Can you imagine a situation where my area, Adabraka, is assigned to NOKOFIO company to supply TIGO, MTN or Vodaphone products to customers and all other clients in that area? Can you foresee the enormous power that NOKOFIO will wield over the territory knowing that it is the only company supposed to trade within the vicinity? Under this circumstance, NOKOFIO can manipulate its dealings which will in effect have adverse effect on the final consumer. There is an absolute absence of competition through which the final consumer can benefit. In this case, NOKOFIO becomes a price maker and has considerable control over the price because it can control the quantity supplied and can therefore maintain the dictated price of the operator. In an effort to maintain a semblance of price stability, perhaps for the benefit of their stockholders overseas, telecom operators are bent on making communication unaffordable for us, the consumers, and the earlier they are monitored the better it will be for us.

From the above it is obvious they have surreptitiously formed a cartel working underground. Cartel members may agree on such matters as price fixing, total industry output, market shares, allocation of customers, allocation of territories, establishment of common sales agencies, and the division of profits or combination of these. The aim of such collusion is to increase individual members' profits by reducing competition. That is where Ghana’s “deregulated” telecommunication industry is heading to, if not already there, because as at now, price fixing is ongoing and allocation of territories has already commenced. What else are we waiting for to call this a cartel when dealers are punished for dealing below a fixed price level with no due regards to us the final consumers?

I do not believe National Communications Authority (NCA) is unaware of this development. It took me, an individual with limited resources, a few days to monitor all these traces and get this feedback. With the resources at NCA, the regulatory agency expected to check these operators, how long does it have to take? I pray and hope this whole agenda is not a grand scheme of collusion. This behaviour would certainly be criminal in the home markets of these operators and for good reason. Why do we tolerate it here? Confirming the above reports, some officials of the telecom operators claim the price regulation mechanism helps them to maintain some sort of sanity in the market since dealers, through undercutting, could disrupt the flow of their products on the market. According to them, when some dealers undercut with respect to the price, the dealers who can’t stand the competition will be out of business and this will have an impact on the operators’ output. Also, they don’t believe the final consumer always benefits from that because retailers pass on the products without a reflection of any reduction in price. With this defense, it is now clear that telecom operators in this country are only concerned with protecting their interest and gains. Their major concern is disruptions in flow of their products and not the consumer. Our investigations have shown that in the past when dealers have brazenly defied the pricing rules of the operators, consumers have enjoyed much lower prices especially in Ashanti and some other markets remote from Accra. In Accra, because all the operators have their headquarters in town, their monitoring schemes are very functional so dealers are scared to sell at reduced prices for us consumers. They can easily be traced, tracked and sanctioned in Accra, but in a place like Kumasi in the Ashanti Region, the monitoring isn’t as tough as in Accra so smart and considerate dealers sell at prices that consumers are more willing and ready to purchase. I hope the National Communication Authority (NCA) does something about this before the cartel grows. NCA’s position on this will be the next focus of this article then the Consumers Association will take up this agenda. Other actions under consideration may include filing a complaint with the Office of The Attorney General of Ghana, as well as a report to the United Kingdom Office of Fair Trading (OFT), Federal Trade Commission (FTC) of the US and the Office of Competition and Consumer Protection (OCCP) of the EU. The operators, by virtue of their domicile, or call termination and other agreements in the UK, EU and the US may be subject to some regulation under anti-trust laws of the UK, EU and the US. Meanwhile, government should critically look at the implications of these regulations and come clear on it. Our leniency as a nation should not be taken for granted to the extent that these foreign companies come in and make rules to run industries for their parochial interests to the detriment of us, Ghanaians.