These redundant ZTE manufactured DSL equipment could have helped to nurture the growth of the internet industry in Ghana

Ghana can be proud to be the first sub-Saharan African country to connect to the World Wide Web in the early 1990s but the entrepreneurs who hooked the country to the internet for the first time seem to have now given up on the industry they helped to nurture.

The first businessmen that ventured into setting up and providing residential internet services have almost all moved on to different sectors or to more elaborate IT applications and systems. Internet Service Providers (ISPs) were those companies that offered customers access to the internet for a fee. Those still in business have seen the profitability and viability of their businesses weaken as the months go by. Nonetheless, there has been a sudden emergence of new players as the fathers of the industry make their exits.

Ghana’s first internet entrepreneurs include men such as Nii Kwaku Quaynor, Mawuli Tse and Leslie Tamakloe. Dr. Quaynor, whose contribution was recognised in 2007 with the Internet Society’s prestigious Jonathan Postel
Service Award, has since moved on from providing internet service to homes and offices to focusing on cloud computing – an industry buzzword which describes the development of virtual servers.

Mr. Tse, the first Chief Executive Officer (CEO) of Africa Online Ghana, which debuted in 1996, also left the internet industry to focus his energies on iBasis – a leading firm in international voice, mobile data and pre-paid services.

Mr. Tamakloe is credited as the first ISP that allowed people digital access to the Internet. Before he achieved this in 1996, Internet users in Ghana connected to the web through a dial-up IP service to Pipex International.
Tamakloe, as current CEO of Internet Ghana, is one of the only early ISP entrepreneurs left in the industry and he surmises that he may not last much longer.

His pessimism is due to a perceived failure on the part of the industry regulator and the government to protect the business interests of local ISPs.

As the early internet entrepreneurs fizzle out, some new entrants are also already contemplating their exit because of what they describe as the “bad and frustrating experiences” they suffer due to a lack of support and protection from the National Communication Authority (NCA), the industry regulator.

“I trained a lot of engineers and we achieved great things for Africa in those pioneering years from 1993 to 2003 and that ensured that Africa had a part in this new information economy,” says Dr. Quaynor. “The world recognised this contribution and honoured me with the Internet Society’s prestigious Jonathan Postel Service Award in 2007. That was the good experience,” Quarnor continued.

“The bad experience has been to watch the initiative get destroyed along the way by those who did not understand technology, by power to control and by politics without any protection for local entrepreneurs, thus fulfilling the prophecy that a prophet is not recognised in his homeland,” he said.

Dr. Quaynor founded Network Computer Systems (NCS) in 1988, grew it from a two-person staff to a staff of 87 by 2003, making US$2.3 million in turnover. The company was the first to establish a global internet gateway with full connectivity in Ghana, and became the top-level administrator for the Ghanaian domain name (.gh). This feat made NCS the only ISP operating in Ghana prior to the entry of new players in the sector in 1996 and they built the initial networks of many organisations in the country including Ghana Telecom, now Vodafone Ghana.

However, the company’s services were abruptly terminated when its assets were seized in November 2003 in a land dispute between UTC Estates and NCS, which according to Dr. Quaynor, speeded up the collapse of his company as a major ISP.  “The regulator provided no public infrastructure protections. The case is still in court unresolved after nearly 6 years, which in computer time is two generations and for internet time light years…This could remain a clear scar in the face of internet in Africa,” he said.

The near extinction of local ISPs has resulted in Ghana losing out as one of the most internet savvy countries in sub-Saharan Africa. Sadly, Ghana now records a penetration rate of only 5.3% which is far below Africa’s average of 10.9%.

This is in spite of the fact that now the level of the usage of the internet is much higher than a decade ago, which has been boosted by peoples’ understanding of the importance of the internet and how to apply it to business, commerce, entertainment and education. The International Telecommunication Union (ITU) estimates that as of the end of 2009, there were 1.3 million internet users among Ghana’s estimated population of 24 million. In 1999, the number of internet users in Ghana was estimated by the ITU to be around 20,000.

“We now understand what the internet means much more than before…that the usage of the internet has boomed thanks to the pioneering efforts of Dr. Quaynor. So, why isn’t he the ‘MTN’ [the biggest mobile phone network in Ghana in terms of subscribers] of Ghana’s [internet market] today? Tamakloe queried.

“I don’t necessarily know the answer. Maybe Dr. Quaynor will be the best person to say so. But for me it tells me that from a policy angle, political angle, economic angle, and from the governance angle we have failed. There has been consistent failure throughout the entire period since we started [using] internet in this country.”

“And in failing, we have failed Ghanaians as an entity and replaced [Ghanaian talent] with another force and that force is foreign,” said Tamakloe.

According to the NCA, there are currently 149 licensed ISPs in Ghana. However, only about 30 are in operation. And out of the latter number less than 10 of them are fully owned by Ghanaians.

Additionally, the top residential internet access providers are also the biggest telephony firms in the country. They serve as both wholesalers and retailers of international bandwidth.
For instance, until Glo1 and Main One Cable landed their international fibre optic cables on the shores of Ghana a year ago, Vodafone (then Ghana Telecom), was the sole provider of international bandwidth capacity to local ISPs through the operations of the South Atlantic Telecom Cable (SAT 3) system.

At the same time, Vodafone established a subsidiary called Broadband4U to provide internet services to homes, making it a force powerful enough to ward-off competition from rival ISPs.

“In spite of NCA laws about anti-competitive pricing, fair trade and monopoly, indeed Broadband4U is a monopoly. We, at Internet Ghana, like to think that [it represents] the biggest abuse of an incumbency that I believe has taken place on the continent of Africa.”

“That is what will explain why Vodafone can say they have
broadband internet users of 30,000 or more and Internet Ghana can only lay claim to about 50. But the issue surrounding Vodafone’s anti-competitive practices is in court and I cannot
talk much about that,” said Mr. Tamakloe.

Dr. Quaynor, shares this position and explains that the threat of mediocre competition in Ghana’s internet industry has persisted over the years with the principal issue being regulation or lack thereof.

He claims “the access portion of the ISP has become largely dominated by telecommunication companies (telcos) that can raise huge amounts of capital and are granted market subsidies
to the exclusion of small operators.”

“As an example, good regulation would have prevented telcos from cross-subsidising their internet service operations. Similarly, regulation would have separated international fibre cable service from other services. Regulation would also have ensured that a wholesaler does not become a retailer and kill the competition,” Dr. Quaynor said.

However, events over the years have shown that local ISPs have been conscious of technological changes and have positioned themselves to be at the forefront of technological advancement.

As an ISP what will be my economic driver to set up in the northern part of the country which is the most underserved region? I wouldn’t even get people to pay me for the cost of extending my services there.

But because of the involvement of blue-chip multinational telecom companies in the internet sector, the revenue flow to local ISPs to upgrade their technological infrastructure has reduced drastically.

“I’m not incompetent in internet technologies. I am only incapacitated,” Mr. Tamakloe said.

Moreover, ISPs are beleaguered with the cost of providing internet access. And if they want to expand to other parts of the country in order to create an additional niche market share for themselves, the licensing and regulation fees are sufficient disincentive against moving to other parts of the country. Currently, the NCA requires US$50,000 as regulation fees from ISPs servicing a single region of the country. To cover all 10 administrative regions of Ghana, an ISP would be required to pay half a million US dollars a year irrespective of the region’s population density.

Considering the statistics on potential users of the internet in Ghana, the Greater Accra region is the most lucrative. All the ISPs have concentrated their services in the capital as a result and left possible internet business opportunities in the rest of the country unexploited.

This raises questions about the strategic development agenda of the NCA in putting together its registration fee model for the provision of internet services in the country as a whole. “As an ISP what will be my economic driver to set up in the northern part of the country which is the most underserved region? I wouldn’t even get people to pay me for the cost of extending my services there. I haven’t spoken about other costs
including technology, antenna masts and base stations,” said Mr. Tamakloe.

Industry experts say to be able to provide internet services throughout the country, one would need about US$2-3 million dollars in equipment and the local firms do not have the financial muscle to do that especially when bank interest rates hover around 30%. But Mawuli Tse, is of the opinion that the internet sector has declined over the past few years because of lack of local content on the web, which if unresolved will continue to hurt the country’s internet fortunes.

He believes industry players have become complacent and companies are only interested in milking the consumer. “There is a problem of uniformly bad service in the industry. Don’t forget that the market is still small. So if you have a few customers and you can milk them dry, you do it. To the consumers, they are getting the service from ISPs, but what they do not know is that they are getting bad, expensive and unreliable service,” he said.

“Government is a potentially large consumer that can drive down prices if it wants. If the government agencies come together and buy bandwidth as a block, they can farm out part of it to three or more companies that they are competing with for the service.

That way, it will give companies the stability to reduce their prices. So, in my view, I see the role of government as a major customer and not as much as a facilitator,” he added.

Tse played down people’s expectation that the entry of new international bandwidth providers like Main One and Glo1 would drive down the cost at which local ISPs buy from Vodafone’s SAT 3, which currently costs about US$2,500 for 2 megabytes of bandwidth. Operators of Glo1 and  Main One have said that they will be selling the same capacity of 2 megawatts to ISPs at between US$600 and US$900.

However, Mr. Mawuli Tse said since no ISP has signed a contract with the new entrants, customers should not be over-confident that prices of bandwidth will drop.

“Over time, competition may bring prices down; but for now, unless the new operator is completely stupid, it is not going to price its product [too far] down from the incumbent.” Ghana’s internet sector has come a long way since the journey began 16 years ago when 64 kilobytes of bandwidth cost about US$17,000 a month. Entrepreneurs at the time survived and grew the country’s internet industry to a point where 2MB (EI) of internet bandwidth costs between US$1,050 and US$2,500.

But, as Ghana sees off its pioneer internet entrepreneurs and welcomes new ones, it is important to recognise that the industry is still overwhelmed by the politicisation of the sector by the government. Additionally, the country’s legal system seems to be too slow in adjudicating on ICT cases. This raises the larger issue of Ghana’s e-readiness as well as whether adequate technical capacity exists in the courts.

The story of Ghana’s first internet entrepreneurs is one that initially speaks to the failure of the regulatory and business operating environment. Ultimately, however it has become a story of how certain people successfully shifted from providing basic internet access to homes and offices to developing more elaborate technology-driven ventures.

As the original internet pioneers continue to seek alternative means of livelihood, it is to be hoped that the few existing local ISPs will not also say adieu to the sector but stay to build upon the foundation they laid.