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Cablegate: Telecommunication in Sierra Leone: Myopic Policy

VZCZCXRO6476
PP RUEHMA RUEHPA
DE RUEHFN #0071/01 0561520
ZNR UUUUU ZZH
P 251520Z FEB 08
FM AMEMBASSY FREETOWN
TO RUEHC/SECSTATE WASHDC PRIORITY 1719
INFO RUEHZK/ECOWAS COLLECTIVE

UNCLAS SECTION 01 OF 02 FREETOWN 000071

SIPDIS

SENSITIVE
SIPDIS

DEPARTMENT FOR EEB/CIP/BA

E.O. 12958: N/A
TAGS: AORC ECPS EINT SL
SUBJECT: TELECOMMUNICATION IN SIERRA LEONE: MYOPIC POLICY
AND LIMITED CAPACITY

REF: STATE 9659

1.(U) SUMMARY: While there is great potential in Sierra Leone
to expand the existing telecommunications sector, government
policy, particularly related to the nascent internet provider
industry, is creating hurdles that may prove insurmountable
for small businesses. High fees excised by the government,
coupled with unreliable electricity and the difficulty
obtaining additional bandwidth, are serious impediments to
the growth of the telecommunications sector in Sierra Leone
and are indicative of the obstacles the country must overcome
for Millennium Challenge Eligibility. END SUMMARY.

2. (U) Discussions between the econoff, economic assistant,
and representatives from various telecommunications companies
revealed a common complaint - the sunk costs related to
starting and maintaining an enterprise in the sector are
extremely high. Leasing land from the government,
constructing or leasing communications towers, and purchasing
and maintaining generators for a constant power supply are
all expensive ventures, making it hard for new companies to
break into a market exhibiting growing demand. For internet
service providers (ISPs), additional costs related to
purchasing and increasing bandwidth are also high.

3. (U) Cell phone companies are plentiful in Sierra Leone,
and while the start-up costs are high, many turn a profit in
short order. Celtel, Comium, Tigo, and Africel command the
market, though new cell companies are entering the market on
a regular basis. Sierratel, which is the international
gateway operator and sole provider of land-line telephone
service, will be expanding into cellular service shortly. The
company received loans from partners in India and China to
allow it to replace equipment and train staff, which will
prepare Sierratel for the establishment of the Code Division
Multiple Access (CDMA) wireless network (Note: Sierra Leone
currently does not have a CDMA network, and its arrival will
likely greatly improve the quality of cell service in the
country. End note.).

4. (SBU) ISPs, while also facing high costs related to Sierra
Leone's limited infrastructure, have additional burdens that
make it challenging to start and expand their businesses. New
companies must pay high leasing fees to use existing towers,
and companies seeking to grow are unable to access the
bandwidth they need from established sources (Note: As the
international gateway operator, Sierratel should be providing
additional bandwidth at companies' request. Contacts,
however, stated that Sierratel lacks the capacity to support
this need. When such companies then contract other satellite
systems, they must pay an additional fee to the Government of
Sierra Leone (GoSL). Thus, small and growing businesses are
hampered by the lack of infrastructure to provide for their
bandwidth needs, and feel that they are unfairly penalized
when they procure those services independently. End note.).
Also, the National Telecommunication Commission (NATCOM) sent
a letter to all ISPs on February 14, stating that they must
pay
nearly $40,000 in new fees by March 1, or their companies
will be shut down. Only one company, Comium, is sufficiently
diversified in other ventures to afford these additional
fees. As one small ISP business representative indicated,
paying these new fees will result in a higher cost to the
consumer (Note: Regular customers already pay between $70 and
$295 per month, depending on the speed of the connection.
End note.), and will also prevent companies from expanding
into new services or regions beyond Freetown and its
surrounds.

5. (SBU) NATCOM, a quasi-governmental office, has control
over bandwidth, licensing, and all government-assessed fees.
This is a relatively new body, having been formed in 2006
following the passage of the Telecommunications Act.
Businesses in the sector, particularly ISPs, feel that NATCOM
has little understanding of the realities of the business
world, and seemingly no vested interest in seeing companies
succeed. The opinion was also expressed that NATCOM is taking
a myopic policy stance by levying more fees on companies that
have only just begun to break even, especially if they make
good on their promise to close those that cannot pay the new
fees and essentially create a monopolistic market (Comment:
There are currently no indications that the new fees were
created as a result of political collusion between NATCOM and
specific companies. Given the dire fiscal straits the GoSL is
currently experiencing, it is likely that NATCOM is assessing
additional charges on a sector they know to be growing and
assume to be profitable to boost government revenue. End
comment.).


FREETOWN 00000071 002 OF 002


6. (SBU) COMMENT: While there are a number of opportunities
for growth in the telecommunications sector, particularly
with regard to the provision of internet services, current
policies are posing significant challenges to any expansion.
The limited capacity in the country, including the lack of
regular electricity and needed bandwidth, places financial
and technological burdens on new and established companies
alike. Assessing fees that put infant enterprises in a
fledgling sector in jeopardy runs counter to President
Koroma's pro-business stance, but is unsurprising given the
GoSL's desperate need for revenue. Bureaucratic obstacles are
symptomatic of the business climate and, at present, hinder
government's prospects for Millennium Challenge eligibility
desired by Sierra Leone's leadership. Balancing the desire to
support long-term business and technological development
against the need to provide basic services to the population
will be a challenge in both the short- and long-term for this
administration. END COMMENT.
PERRY

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