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Uganda's plan to nationalise internet exchange will hurt investment -industry players

Credit: REUTERS/Thomas Mukoya

Uganda's plan to nationalise its internet data exchange service will result in poorer quality services and discourage investment in one of East Africa's most thriving information and communications technology (ICT) sectors, industry players say.

By Elias Biryabarema

KAMPALA, July 2 (Reuters) - Uganda's plan to nationalise its internet data exchange service will result in poorer quality services and discourage investment in one of East Africa's most thriving information and communications technology (ICT) sectors, industry players say.

Internet exchanges are platforms on which internet service providers and network operators exchange data traffic.

Uganda's ICT sector is booming thanks to a fast-growing online community and few restrictions on foreign investment, and its potential has wooed global giants like Facebook FB.O and Google GOOGL.O.

According to a plan published last month by the sector regulator Uganda Communications Commission (UCC), the government intends to establish a national internet exchange point that will effectively replace existing private players offering the same service.

UCC says the plan is still a proposal and it intends to consult industry stakeholders before implementing it.

Kyle Spencer, executive director of Uganda Internet Exchange Point (UIXP), one of the private players that stands to lose business, said turning the exchange into a monopoly would lower service quality, keep data prices high and make investment in the sector less attractive.

"It (the move) will substantially increase the perceived risk of doing business in Uganda, and the creation of a monopoly would eliminate opportunities for private investment," Spencer told Reuters in an interview.

"International experience demonstrates that monopolies in our industry always lead to high prices and poor service quality, as they have no natural incentive to innovate."

The move to nationalise the internet exchange service follows the introduction last year of a tax on access to key social media platforms that critics said would increase already high data costs and hurt Uganda's digital economy.

Government officials say the social media tax raises much- needed revenue to finance public infrastructure, but critics of the tax say it is aimed at curbing social media use and online criticism of the government.

Internet service providers in Uganda only allow users who have paid the social media tax access to more than a dozen social media platforms like Facebook, Twitter, WhatsApp, Google Hangouts, YouTube and Skype.

Last year the government also introduced a new national broadband policy that some critics say will force new investors in telecommunications services to rent capacity from an existing government-owned fibre optic cable.

Spencer said the government's move to control the internet exchange business mirrored a broader plan to exert tighter control of the wider internet eco-system, a charge the government denies.

Albert Mucunguzi, chairman of the ICT Association of Uganda (ICTAU), which represents industry players, told Reuters the government's plan to create an internet exchange monopoly would mean "artificially high prices and poor service quality. That will have a direct consequence for consumers."

About 40% of Uganda's 40 million people use the internet, according to data from UCC.

A unit of South Africa's MTN Group MTNJ.J and a subsidiary of India's Bharti Airtel BRTI.NS are the dominant telecommunications service providers in Uganda.

(Reporting by Elias Biryabarema; Editing by Susan Fenton)

((Email:elias.biryabarema@thomsonreuters.com; Tel. +254 20 499 1232; Reuters Messaging: elias.biryabarema.thomsonreuters.com@reuters.net))

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