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Mauritius: Cyber-Island Strategy
AfricaFocus Bulletin
Jun 26, 2008 (080826)
(Reposted from sources cited below)
Editor's Note
"Mauritius remains unique in its region in having identified ICT as
a fifth pillar of its economy alongside sugar, textiles, tourism
and financial services. However, it not only described a
compelling vision but it went out and put it into practice. ... the
need for cheaper bandwidth became an essential part of delivering
this vision." - Russell Southwood
While Mauritius has a number of advantages not open to most other
African countries - including a population that is well-educated
and bilingual in English and French - their strategy does have
significant lessons for a number of other countries that are
considering making such a bid for building ICT into their
development strategies. Taking advantage of cheaper bandwidth and
available human resources, a number of African countries may able
to complete not only in call center provision and other lower-end
business process outsourcing projects, but also "moving up the
value chain" to provide software programming and other higher-end
services. Countries with potential in this regard include Ghana,
Kenya, Senegal, and Rwanda, as well as South Africa.
This AfricaFocus Bulletin contains excerpts from a newly released
case study on Mauritius written by Russell Southwood for the
Association for Progressive Communications. Southwood is a leading
analyst of the African ICT market and editor of the weekly
Balancing Act News Update (http://www.balancingact-africa.com).
For previous AfricaFocus Bulletins on information and communication
technology, including earlier reports from Balancing Act Africa,
and a custom search of sites specialized in ICT in Africa, visit
http://www.africafocus.org/ictexp.php
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The Case for "Open Access" in Africa: Mauritius case study
by Russell Southwood
Association for Progressive Communications (APC)
Commissioned by the Association for Progressive Communications
(APC)
Conducted with support from the Social Science Research Council's
(SSRC) 'Collaborative Grants in Media and Communications'.
Creative Commons Attribution-Noncommercial-Sharealike 3.0 Licence
[Russell Southwood is a leading analyst of the African ICT market.
He is a specialist of internet, telecommunications, and media
developments on the continent.]
[excerpts only:full text available at
http://www.apc.org/en/pubs/research]
Introduction
This case study looks at the relationship between international
bandwidth prices in Mauritius and the impact of its Cyber Island
strategy. Whilst other countries along the SAT3/SAFE cable have
struggled to find ways to address the high costs of monopoly
international bandwidth on this cable, Mauritius has used a price
determination to address the issue. Interestingly, once the process
was announced, the incumbent Mauritius Telecom itself decided to
lower prices ahead of the determination.
The example of Mauritius perhaps has lessons for other countries in
Africa that want to find ways of changing the basis of their
economies so that they can add "smart exports" alongside raw
materials extraction, agriculture and tourism. Whilst it is always
hard to draw direct causal links between bandwidth prices and wider
changes in the economy, it is clear that Mauritius' call centre /
Business Process Outsourcing (BPO) sector began to get significant
growth in the years when the international bandwidth prices came
down.
The nature of "smart exports" - where countries use brain-power to
add value to basic tasks - may change in the coming period.
Although multinational companies have been driven to reduce their
operating costs, they are also reflecting on the successes and
failures of outsourcing. But there will also be new waves of
outsourcing: for example, Lucas Films (responsible for the Star
Wars movies) has set up a major new operation in Asia to do
animation and specials effects. But whatever happens next,
competitive international bandwidth will be essential to any
country that wants to get this kind of work in the future.
Background
The process of liberalisation in Mauritius has in some ways been
different from elsewhere in Africa. Mauritius Telecom's mobile
subsidiary Cellplus launched in 1996 and was followed by Emtel
which launched in 1998. Two years later in 2000 the Government
privatised Mauritius Telecom by selling 40% to France Telecom for
US$261 million.
Although other telco operators and ISPs have been licensed, most
have remained small alongside Mauritius Telecoms' operations in
these fields. However, unusually the regulator, the ICT Authority
(ICTA) licensed a couple of VoIP service providers whose primary
purpose was to offer cheaper international calling rates.
The telecoms sector in Mauritius currently has seven main
companies: Mauritius Telecom (40% owned by France Telecom), MTML
(Indian-owned Mahanagar Telephone Mauritius Ltd); Emtel (a joint
venture between local owners, Currimjee Jeewanjee & Co Ltd and
Millicom); NOMAD (owned by Dubai-based Galana); DCL (Data
Communications Ltd), Outremar Telecom (French-owned) and Hotlink Co
Ltd.
Of these, three have licences to offer mobile services (Emtel,
Cellplus - recently rebranded as Orange - and MTML) and two have
licences for fixed services, Mauritius Telecom and MTML. The latter
offers a fixed wireless product to customers. At the end of 2007,
there were 843,791 mobile subscribers and 361,319 fixed line
subscribers. Unusually Mauritius Telecom is still adding fixed line
customers. Cellplus has a 60% share and Emtel a 40% share of the
mobile market. MTML's share is still currently negligible.
Although estimates vary, there seem to be about 50-60,000 Internet
subscribers. Of these, Mauritius Telecom has 32,000 DSL subscribers
and it has launched a Triple Play service offering television and
Video downloads.
Emtel introduced High-Speed Downlink Packet Access (HSDPA), [a
mobile technology with speeds of up to 1.8 mbps] in 2007 in some
area and offers a USB modem for the service with packages costing
as little as US$12 per month. These services are available in all
the main locations on the island, including Cybercity. It also
introduced data services in the same year through its own Wi-MAX
network. Currently it runs a microwave backbone but by October 2008
will have built its own fibre backbone.
NOMAD was created after a local ISP called Network Plus was taken
over by the current owners, African Digital Bridges Networks Ltd,
which is in turn owned by Galana. DCL specialised in international
Internet telephony (with its VoIP Easicall product) and on
providing services to the BPO and call centre sector. Hotlink also
offers international Internet telephony under the brand name of
Yello International Call Carrier and has a partnership with an
international wholesaler. Outremar Telecom is owned by a company of
the same name in France that built its reputation on offering cheap
international calls and is doing the same in Mauritius.
The combination of liberalisation and VoIP have considerably
reduced international calling prices with even mobile rates falling
to as little as 16 cents a minute for major destinations.
The ICT Act of 2001, it Amendment Act of 2002 and the
Telecommunications Directive No 1 of 2008 are the key pieces of
framing legislation for the sector. The first of these acts set up
the regulator ICTA. Also in the same period, the Mauritius
Government set up many of the enabling agencies that have played a
part in the changes described below. These included the National
Computer Board and the Board of Investment and other bodies
covering among other things business parks (responsible for
Cybercity), the Freeport and the export processing zone.
The Government realised that in a shifting global economy the
economic significance of commodity exports like sugar would
diminish in value and that Mauritius would have to carve itself a
new vision to be part of this changing world. It wanted to move
into the "smart" exports sector where people's brain work added
value to basic tasks.
Mauritius remains unique in its region in having identified ICT as
a fifth pillar of its economy alongside sugar, textiles, tourism
and financial services. However, it not only described a
compelling vision but it went out and put it into practice. As
demonstrated later, the need for cheaper bandwidth became an
essential part of delivering this vision. Mauritius was connected
to the SAFE cable in 2000 just at the beginning of this process.
The vision had a number of strands: firstly, Mauritius wanted to
attract call centres, business process outsourcing (BPO) and
computer software programming; secondly, it wanted to take
advantage of the bilingual capability of its citizens who speak
both French and English; and thirdly, it wanted to attract computer
assembly work.
Its Cybercity project was launched in Ebene, 15 kilometres south of
the capital, in November 2001. The "anchor tenant" was a 12 storey
double tower block to attract companies who could take advantage of
a number of existing corporate incentives including low company
taxes (15%), free repatriation of profits and exemption from
customs duties and raw materials. To address ICT skills shortages
it allowed international professionals to come and work with a new
Green Card.
Mauritius also wanted to take advantage of its geographic location
between Asia and Africa and make this an advantage companies would
find attractive: the new SAFE cable gave it the means of
communications to make this point a practical reality.
Although there was a considerable level of scepticism that the
strategy would actually deliver change and fears that the
Government-constructed double-tower in Ebene would become a "white
elephant", the strategy has in the main been delivered.
Why and how Mauritius tackled the issue of fibre prices
With the Mauritian Government deeply committed to the idea of
developing the country as a "cyber island", it made little or no
sense if the price of the international private leased circuits was
too high. For the price of the international fibre would be a
significant obstacle to the overall goal of attracting more
outsourcing jobs.
In early 2006, Mauritius Telecom was charging US$12,600 for an E1
[high-speed international circuit]: in other words, US$6,300 per
mbps per month. US$6,300 per mbps per month. These high prices for
international bandwidth became seen as one of the obstacles to
developing the country's cyber-island strategy. As one of the major
shareholders in Mauritius Telecom, the Government was in a position
to take action on this issue. ...
In the event, the price determination gave an overall reduction of
around 25%. The new price for an E1 was US$7,900 and there was a
five tier volume discount with a 25% discount on the E1 price for
over ten E1s and above. The latter was only likely to be of
relevance to two to three customers on the island. The highest
level of discount represented a 47% decrease on the original price
... Mauritius Telecom made a further 20% cut on these rates in
November 2007.
Mauritius Telecom has issued a paper giving its response to
accusations of over- charging and this worth quoting at some length
to give an insight into their position. It points out that the
shift from satellite only access for the island to fibre
represented a drop in costs:
"The monthly rental of a 2mbps Full Circuit IPLC link from
Mauritius to Paris, for example, was around US$39,000 on satellite
medium in 2001, prior to the entry into operation of the SAFE
cable. After the cable was put into service in 2002, this price was
reduced to US$22,000, representing a reduction of 43.5%".
Furthermore it points out that in order to assist the bid to
promote the BPO and call centre sector, it took the initiative of
installing a POP in Paris in 2003. This allowed it to reduce
tariffs to US$12,300, a further drop of 43%. The determination took
this down to US$7,900 and it further reduced its tariff in
September 2007 to US$6,300.
It went on to make a number of global comparisons some of which are
valid and others of which are less so. It states that the cost of
a 2mbps full circuit including backhaul and last mile from Morocco3
is US$11,375. Furthermore, it says that its US$6,300 compares
favourably with US$6,110 from Bangalore to London for backhaul,
restoration and last mile. The former is a monopoly provider on its
international route and the latter (if distance-based charging has
any meaning) is surely much cheaper than the Mauritius Telecom
equivalent.
...
[An additional cable is one way that prices might be further
reduced.] There are three potential international cable operators
that might add a second cable to the island's connectivity: EASSy,
Seacom and the NEPAD-sponsored Uhurunet. The latter has largely
been overtaken by the existence of the two other cables.
The Government has taken the position that a second cable is
desirable but that it is not in a position to fund any part of it,
leaving the industry to work out how it will meet future demand.
The estimated cost of a second cable is put at US$25 million.
Lower prices have meant that Mauritius Telecom took up its option
to upgrade its capacity on the SAFE cable in February 2007 but
anticipating future demand, it would still like to add more
additional capacity. Mauritius Telecom along with Orange Madagascar
and their parent company France Telecom say they are investing in
a second cable called Lion. It will connect Mauritius to Toamasina
on Madagascar and from there onwards on to one of the new east
coast cable systems and the companies involved claim that it will
be completed by July 2009.
The regulator believes that the impact of a second cable not
associated directly with the incumbent would be lower prices and
its existence would provide a paradigm shift in the fundamentals of
pricing. A number of operators also said privately that they would
prefer an independent second cable would not speak publicly for
fear of upsetting their existing relationship with Mauritius
Telecom. Inevitably, Mauritius Telecom will match the price offered
by others and perhaps anticipating competition it has instituted a
loyalty scheme that rewards customers with one month's free rental
after 24 and 36 months.
...
The impact of lower fibre prices
Lower fibre prices have meant increased traffic volumes. Two sets
of price reductions - one caused by the regulator's determination
and the other made by Mauritius Telecom itself - have since July
2006 have almost halved prices from their 2003 levels.
In 2006, Mauritius Telecom was using 440 mbps of international
bandwidth and after the price cuts this figure rose to 1,603 mbps
in 2007 ... Mauritius Telecom has begun the switch from a "high
price, low volume" strategy to one of "low price, high volume".
In 2003 the call centre/BPO sector on the most optimistic estimates
employed around 2,000 people. The more honest at that point would
admit that the island was struggling to find a foothold in this
brave new world and was scrabbling around for low-value
telemarketing work.
In 2008, the more pessimistic estimates indicate that this figure
has at least doubled from five years ago. It is now attracting a
much broader range of work including being the Help Desk function
for Orange serving France and several other countries.
Now the ambition as Pratima Sewpal of the Mauritius Board of
Investment puts it is for the sector to "move up the value chain".
It has now targeted things like high-end finance work,
architectural design and hospitality.
More ambitiously, the next phase involves pitching the island as a
place to put data centres for business continuity and disaster
recover. The one drawback is that with only one fibre optic cable,
there is no redundancy if the cable is broken. The Mauritius Board
of Investment says it has an investor that would come to the island
if that issue be overcome.
The other targeted sector is to develop the media and entertainment
sectors but this needs more bandwidth for the activities envisaged
that include production; animation and games, and production
studios.
With the reduction in fibre prices, the cost of connectivity has
moved from first to second place for most in the call centre/BPO
sector. The biggest challenge is the quality and quantity of
available human resources, something the Government hopes to
address through the setting up of the Human Resource Development
Council and empowerment programmes that address the unemployed.
According to Francois de Grivel, Chair, OTAM7, the association of
call centre and BPO providers:"The number one challenge now is
human resources. Local people are bi-lingual in French and English.
The market is largely European focused on France, UK and Germany
with a small amount of work from the USA, particularly
telemarketing. Costs have to be lower than for European companies
which generally seem to be between 8-12 euros per hour".
"People work hard but the turnover of people is quite high,
somewhere between 15-35%. It's difficult to retain people. We
recruit staff from people who have done Higher School Certificate
and they are trained on-site in the company but there is still a
skills problem".
OTAM is involved in creating an ICT Academy with the Government to
train people. Students would do their Higher School Certificate and
then come to the Academy, where they would be offered vocationally
focused courses. It wants a public-private partnership with the
University of Technology of Mauritius that would also offer
training to people in Reunion and Madagascar. It would be
Government funded but much more oriented to the private sector.
But beyond the challenge of getting enough of the right people, the
cost of bandwidth has become the second most important issue.
Benchmark countries for BPO/call centres in Mauritius on the French
speaking side are North Africa, Senegal and probably in future
Madagascar. On the English-speaking side they are India, China,
Kenya and Uganda in future. Interestingly, South Africa is not seen
as a competitor because its bandwidth costs are higher. ...
According to Grivel:"We are negotiating with the Government and
Mauritius Telecom to get a better rate (on the fibre). There is
also the question of security of communications as there is no
redundancy on the route. If there is down-time on the SAFE cable,
we have to go to satellite and that is not very satisfactory. There
is also the issue of the high inter-communication costs between
Mauritius Telecom and private service providers. Latter want prices
that are not so high and we are also negotiating on these costs".
There have been cable breaks, most notably during the Tsunami.
So why are bandwidth prices not lowered further?:"ICTA can't take
decisions independently of Government and there is pressure from
Government not to liberalise too quickly. The Government is
protecting the incumbent. You have to open the market to newcomers
and the competition will be very strong". However, Mauritius
Telecom has another decrease planned for the end of 2008 and a
further decrease in Q3 2009. The latter it believes will double
bandwidth demand.
The main complaint beyond price that was voiced both by the
telecoms industry and the call centre/BPO sector was that the fibre
access was sometimes slow and that this factor was acting as a
damper on further expansion. The call centre/BPO sector is a major
bandwidth customer: for example, one of the larger operations is
buying 1.5 mbps for voice and 2 mbps for data.
One of the largest local companies is Rogers Outsourcing which
started as Rogers.com in 2001. In 2005 it formed a joint venture
with a large insurance company to create Axa Assistance. It covers
the full range of services: inbound calls, telemarketing, BPO, IT
Help Desk - levels 1 and 2 and does all this in three different
languages.
It employs 306 different people and is currently recruiting for new
business that it has acquired that will take the staff complement
up to 400-420. The ambition is to run a company that probably will
not exceed 500 employees. The manpower pool in Mauritius is too
small to support a larger staff than this and it is possible at
this level to be profitable. It offers clients a fully transparent
service so that everything that goes on in the company's offices
can be seen online by the client and they have real time access,
again something that requires reliable bandwidth.
But for all the successes, there's still some was to go. Three
years after the Mauritius Government launched its first online
services, the National Computer Board reckons that a large part of
the population remains reluctant to use the online application
forms put in place by the administration. The organisation argues
that this slow adoption is partly due to the fact that only 24% of
the 350,0000 Mauritian household have computers.
...
AfricaFocus Bulletin is an independent electronic publication
providing reposted commentary and analysis on African issues, with
a particular focus on U.S. and international policies. AfricaFocus
Bulletin is edited by William Minter.
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