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Cablegate: Ethiopia: Telecommunications Sector Update - Part I of Ii -

VZCZCXRO7489
RR RUEHROV
DE RUEHDS #3485/01 3440800
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R 100800Z DEC 07
FM AMEMBASSY ADDIS ABABA
TO RUEHC/SECSTATE WASHDC 8786
INFO RUCNIAD/IGAD COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 ADDIS ABABA 003485

SIPDIS

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E.O. 12958: N/A
TAGS: ECPS ECON ETRD EINV ET

SUBJECT: ETHIOPIA: TELECOMMUNICATIONS SECTOR UPDATE - PART I OF II -
INFRASTRUCTURE

SUMMARY
-------

1. This is part one of a two part cable on the Ethiopian
telecommunications sector. Part one covers current infrastructure
and future plans while part two covers policy matters. Meetings
with Ethiopian telecommunications officials reveal a
telecommunications and information and communication technology
(ICT) sector that languishes in a monopoly state. Ethiopia's closed
telecom and ICT sector remain underdeveloped, even in comparison to
other countries in sub-Saharan Africa. While ambitious efforts to
upgrade infrastructure are underway, government policies (septel)
are likely to keep the sector underdeveloped.

2. Ethiopia's telecom and ICT sectors lag behind the rest of the
world, including neighbors in sub-Saharan Africa. According to
International Telecommunication Union (ITU) statistics for 2006,
Ethiopia has 2.01 total telephone subscribers and 1.09 mobile phone
subscribers per 100 people, the lowest in Africa. In contrast,
Kenya has 19.31 total subscribers and 18.47 mobile subscribers per
100. Even Somalia, suffering from decades of anarchy, outpaces
Ethiopia on phone penetration with 7.29 total and 6.08 mobile
subscribers per 100 people. Similarly, Ethiopia has fewer internet
subscribers (0.03 per 100 people) than Kenya (0.53) or Somalia
(0.11). END SUMMARY.

TELECOMMUNICATIONS INFRASTRUCTURE AND FUTURE PLANS
---------------------------------------------
3. Mobile and Fixed Telephony: The Ethiopian Telecommunications
Corporation (ETC) reports a current subscriber base of 3 million
fixed and mobile accounts. Most customers are in Addis Ababa and
other major cities. The mobile phone system has experienced growing
pains, with widespread service outages occurring twice in the two
week period while Chinese company Zhong Xing Telecommunication
Equipment Company Limited (ZTE) was launching 1.2 million phone
lines added for the Ethiopian Millennium in September. ETC mobile
users consistently experience "network busy" messages and dropped
calls.

4. SMS messaging, which was discontinued in the wake of the disputed
2005 elections, was restored for the Ethiopian Millennium
celebrations in September. (NOTE: Although ETC Director General
Amare Amsalu stated that SMS was cut off in 2005 for purely
technical reasons, messaging was discontinued in a time of civil
unrest. Most observers believe that the Ethiopian Government (GoE)
shut off text messaging to prevent its use in organizing
demonstrations. END NOTE.) An infrastructure project currently
underway with ZTE is expected to provide GSM mobile coverage to 85%
of the country The GSM expansion is part of a 1.5 billion USD
overhaul of Ethiopia's telecommunications (see septel) and is
expected to be completed by 2010. ETC reports that provision of
third generation CDMA mobile service will begin soon. Among other
features, third generation will allow transmission of video over
mobile phones. Extensive expansion of fixed line service is not
anticipated.

5. ETC views expanding telecommunications to the rural population as
its primary mandate. Rural telecommunications is being expanded via
fixed wireless service at the village, or woreda level. ETC's goal
is universal coverage, which it defines as one phone within 5km
walking distance. Of the 15,000 village-level units targeted for
such fixed wireless service, 7,200 now have coverage in place. Each
woreda has at least one dedicated line each for use by health,
agriculture and education workers as well as one for public use.

6. VOIP: Voice over Internet Protocol (VOIP) calls are illegal in
Etihopia, but a large number (estimated at over 100) of internet
cafes in Addis Ababa currently offer clandestine VOIP service. VOIP
service is popular for international calls because of reduced costs.
According to ETC and its regulator the Ethiopian Telecommunications
Authority (ETA), VOIP is prohibited because of a lack of bandwidth.
With ETC charging 0.23 USD per minute to terminate an
international call, VOIP clearly represents potentially significant
lost revenue for the GoE. Recent reports indicate that entities are
illegally terminating calls in Somalia and the Democratic Republic
of the Congo, costing ETC up to 80 million birr (nearly 9 million
USD) per year in revenue.

7. Internet: ETC is the sole provider of internet service in
Ethiopia. Licenses have been granted for "virtual internet service
providers" which will buy bandwidth from ETC and re-sell service.
These providers are not yet operative due to bandwidth constraints,
but ETC Chairman Amare is optimistic that they will begin offering
service in Addis Ababa within a few months. Ethiopia has 0.03
internet subscribers per 100 people, one of the lowest in the world.
Most access is provided in internet cafes at a cost of 0.15-0.20
birr per minute. Nearly all internet cafes and private users have
dial-up access at 56k bps.

ADDIS ABAB 00003485 002 OF 002

8. Broadband access, while available, is prohibitively expensive,
with a set-up cost of over 10,000 USD and monthly charges of over
5,000 USD for a 2MB leased line (compared to 17 USD installation and
7 USD monthly for dial-up). Moreover, Ethiopia's broadband is
described as "fractured" and provides speeds only marginally faster
than a dial-up connection. U.S. company Cisco announced in August
that it would replace, for free, Ethiopia's broadband connection
with a ring net fiber optic solution. ETC expects the upgraded
broadband to come online in summer 2008. In the wake of the 2005
elections, users reported that many websites including
opposition-oriented sites and blogs were inaccessible using ETC.
Pro-opposition blogs and websites continue to be inaccessible in
Ethiopia. Although ETC denies any blocking, the sites were (and
continue to be) accessible by using anonymizer websites and proxy
servers.

9. Fiber Optic: There are currently 4,000 kilometers of fiber optic
cables laid throughout Ethiopia, with another 24,000 kilometers of
fiber in the country awaiting installation. Ethiopia's fiber
network connects at the Sudanese border to the submarine cable
landing at Port Sudan, which is part of the Fiber Optic Link Around
the Globe. There are plans for additional connections to submarine
cables. One, a project by U.S. company SEACOM, would land at the
Somaliland Port of Berbera. Another, the East African Submarine
Cable System (EASSy) would land in Mombassa, Kenya and Djibouti.
Both the ETC Board Chairman Debretsion and ETC Managing Director
Amare indicated that negotiations are progressing with SEACOM, and
that project is likely to come online well before EASSy. According
to Amare, however, security at Berbera port is a concern.


ICT INFRASTRUCTURE AND PLANS
----------------------------

10. The Ethiopian ICT Development Agency (EICTDA) Head Ato
Debretsion (who is also the ETC Board Chairman and former Deputy
Director of the National Intelligence and Security Service)
highlighted current e-government applications. Woreda Net is
designed to provide ICT services such as video conferencing,
directory services, mail services, voice services, and Internet
connectivity to the federal-level, regional-level and Woreda-level
(county-equivalent) government entities. Ato Debretsion highlighted
Woreda Net's use in conducting court hearings from rural areas via
video conferencing. Additional planned e-government applications
include agricultural marketing, health and education programs.
Additionally, EICTDA has preliminary plans to develop an IT park
where companies can develop software and other applications.
Debretsion sees potential for Ethiopia to become an outsourcing
center similar to India. While the Council of Ministers has agreed
that ICT is a sector that deserves attention and incentives, the
details of any incentive package for investors are to be
determined.

COMMENT
-------

11. The Ethiopian Government's tight controls and insistence on
being the sole provider of telecommunications and ICT infrastructure
and service has left the country's telecommunications system is
woefully underdeveloped. The low telecommunications penetration
rate has had had a stunting effect on achieving broader economic
growth, particularly in rural areas. With its highly rural,
scattered and agriculturally-based population, the GoE recognizes
the need to expand telecommunications to the far reaches of its vast
territory but insists on maintaining control of modalities for
implementation. Currently telecommunications services reach only a
fraction of the country's 80 million citizens, and most of them are
in urban areas. The GoE is undertaking ambitious activities to
quickly expand coverage, which, if successful, will offer new
opportunities for economic growth and development, especially in
rural areas, but without engaging the private sector, progress will
remain slow in coming. END COMMENT.

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