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Addisfortune.com: Subscribers to broadband services of the Ethiopian Telecommunications Corporation (ETC) may feel that they could have 20 times more speed than the dialup connection. However, a random check by Tesfaye Kidan, This e-mail address is being protected from spambots. You need JavaScript enabled to view it , revealed that the speed could go as low as 60kB per second, which is only a little faster than the cheapest dial-up connection. This deprivation of efficient and reliable service by a state monopoly touches upon a crucial issue where the country is left out of the information technology revolution, and robbed off its global competitiveness, argues Tesfaye.

Economic theory posits that uncertainties, regardless of their type or source, discourage investment. In Ethiopia, we have all sorts of uncertainties, manmade and natural.

Information technology (IT), which includes telecom services, has played a significant role in the growth and development process of our world. Specifically, the 1990s IT revolution changed the life of millions in a positive way in both the developed and developing world. It led to the creation of the multibillion dollar companies such as Yahoo! and Google, which transformed the online world for the better.

In the case of the developing world such as India, it led to the creation of many call centres and IT firms, which pay higher relative wage rates and provide better working environments than many jobs. The IT revolution has also changed the lives of many poor African farmers by providing a platform for up-to-date agricultural price information through mobile phones and other media outlets.

It seems that we have not yet reaped many benefits of the IT revolution here. There are some initiatives, such as Woreda-Net and School-Net, that aim to benefit rural farmers and students through the use of IT. The Ethiopian Commodity Exchange (ECX) is also another example that works to give current agricultural price information to rural farmers using advanced IT services. However, the contribution of this handful of examples is insignificant when compared to all the other potential benefits of the IT revolution.

Many potential investment projects that have high economic returns are sacrificed either due to the unavailability of necessary IT services or the uncertainty of the existing IT service quality.

In the case of Ethiopia, lack of reasonably priced broadband Internet service shatters opportunities in many online businesses such as call-centres and real-time troubleshooting. It also makes international business cooperation very costly as it leads to expensive international telephone calls due to the bandwidth limiting cheaper voice over Internet protocol (VOIP) services, a type of service restricted by the Ethiopian Telecom Agency (ETA). Even if one passes all these hurdles and sets up a profitable IT based company, the unreliability of the telecom services poses a significant uncertainty factor.

To its credit, the Ethiopian Telecommunications Corporation (ETC) has done a remarkable job in widening access to many IT services. The expansion of the mobile phone network, wireless fixed telephones, dialup Internet, and wireless Internet services are some of the notable achievements. The fall in telecom service prices is another commendable work of the corporation. But these achievements are so insignificant, either in comparison to what should be done, or in terms of their impact on the welfare of the society. I still consider them remarkable achievements for a state company.

These achievements are dwarfed when the telecom service quality is considered over time. Improvement in service quality is accompanied by falling prices in the telecom industry in general, yet the ETC is an outlier in this phenomenon. Any user of telecom services in Ethiopia, particularly mobile phone subscribers, should understand what I mean.

The ETC's service quality has been unreliable and has shown little or no improvement over time. Good examples that should be familiar to many mobile phone users include frequent call drops, erroneous network replies, and charges for unsuccessful calls. The unreliability of the service quality gets worse with distance from main cities. Though users' complaints have not abated, those managing the corporation claim improvement in its services.

Take, for instance, the ETC's wireless Internet services. Time series data since August 2009 reveals that the corporation introduced prepaid code division multiple access (CDMA) 1X and evolution data optimised (EVDO) wireless Internet services in 2009. Some tech-savvies question the technological choice given that the alternative third generation (3G) based high-speed downlink packet access (HSDPA) wireless Internet technology provides higher speeds compared to CDMA based service (with a theoretical maximum speed of 14MB per second as opposed to 3.1MB per second.

I presume that since the corporation runs both 3G and CDMA technologies, its push for the CDMA technology may be based on cost considerations given that the CDMA network cost is lower than the alternative. This could be the case. The service attracted many users due to its prepaid nature, its high-speed (compared to dialup Internet), and the accessibility of the service without the need for a fixed telephone line.

The costs on CDMA 1x wireless Internet service, including value-added tax (VAT), is 0.115 cents per minute while the EVDO service costs 460 Br per month for an upper limit of two gigabytes of total data transfer, and when exceeding the monthly 460 Br quota of two gigabytes, the service costs 0.46/MB thereafter.

In terms of the speed, EVDO is superior to CDMA 1x, as its theoretical maximum download speed is about 20 times higher than that of CDMA 1x (3.1MB per second versus 0.153MB per second). Speed matters for many online business opportunities.

A simple test using www.speedtest.net during the period between August 2009 to January 2010 reveals that EVDO's average download speed is around 500kB per second, exhibiting a high variation from its maximum speed of around 1,500kB per second and minimum speed of 143kB per second. The average speed for CDMA 1x is around 60kB per second. With an average speed of 500kB per second, many online activities that require relatively low bandwidth can be feasible.

For instance, IT experts can work in software development without worrying much about transferring big files back and forth, online orders can be made easily, and product promotional videos can be downloaded and uploaded with relative ease. Such tasks can be carried out much more easily during off-peak hours when the EVDO network is less crowded. During the off-peak hours, bandwidth hungry video conferencing may also be possible.

At the speed of an average 500kB per second, many IT based business ideas can be implemented successfully, assuming that the cost of the service is not prohibitively high. These businesses can be undertaken with the expectation that speed will improve based on the global experience of a rising trend in Internet speed over time.

Unfortunately, contrary to the global trend, the ETC's EVDO service quality is deteriorating of late. The average speed from February 1 to February 27, 2010, dropped by almost half to 260kB per second. The most recent tests, on March 3, 2010, showed an even lower speed of 67kB per second. Given the crippling drop in speed, many viable business ideas would turn out to be unfeasible to implement. The falling trend would also cast uncertainty on both current and potential investors.

All investors downwardly adjust their expectations of future service quality in such cases, but those in IT based areas should decline significantly. This would be exacerbated by the risk averse nature of start-up IT firms, which leads to attaching a high-risk premium even when slight service quality deterioration is observed.

It is understandable that service quality deterioration may arise due to some technical factors. In such cases, it is necessary to communicate with the service subscribers about the conditions and the possible dates that the service will come back to normal. This reassures subscribers of future service quality.

Managers at the corporation do not, however, seem to recognise that there is service quality deterioration. The ETC has not yet communicated the problem on its website or in any public media. This adds to the uncertainty of service quality, which in turn makes business planning quite difficult.

ETC is, thus, playing its part in creating uncertainty in the IT business environment, which is already frustrated by poor Internet infrastructure and the resulting high cost of Internet service. With the ETC's failure to transform itself to match global trends in service quality, benefits from the IT revolution will remain untapped. This would be too much of a loss to bear for a country such as Ethiopia, which is struggling to modernise itself.

Given that the telecom sector is closed off from the private sector and remains the exclusive domain of the state, the government is fully responsible for guaranteeing the efficiency, reliability, and affordability of telecom services.

The ETA is mandated for this task. However, it does not seem to do the job. It has yet to take any regulatory measure against the lone operator in the events of deteriorating service quality. Its failing to safeguard the interests of subscribers if not the money they have no other choice but to spend, illustrates ETA's failure to do its job right and make its very existence relevant.

Nonetheless, I would attribute this failure to the inherent conflict of interest between state ownership of the operator and state supervision of telecom services. However, the leniency of ETA in exercising its administrative power is against the public's interest and, hence, not justifiable.

It is thus essential for the government to strengthen the supervisory role of the regulatory agency in order to ensure the provision of efficient, reliable, and affordable telecom services. So long as allowing private operators remains off the policy menu, the Ethiopian Telecommunications Corporation should be treated in the same way as a private company and subjected to the appropriate degree of supervision to guarantee acceptable service quality. This would reduce the uncertainty in service quality and encourage investment in the IT sector.