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http://www.nytimes.com/2003/07/05/business/worldbusiness/05VOIC.html

New York Times

July 5, 2003

Searching for a Dial Tone in Africa

By G. Pascal Zachary

ACCRA, Ghana, July 3 -- The Internet bubble has long since
popped in the United States, Europe and Asia. But in parts
of Africa the Internet is serving as a powerful force for
change, primarily by allowing companies and individuals to
make international telephone calls far less expensively than
through conventional channels.

Calls in and out of sub-Saharan Africa have long been among
the world's most costly, strangling business opportunities
and burdening ordinary people. Services have been tightly
controlled by government-owned telephone companies, many of
which are rife with corruption and incompetence. Governments
also imposed high tariffs on international calls, seeing it
as a lucrative source of revenue.

But now, thanks to what is called voice-over-Internet, phone
alternatives are flourishing, sharply lowering costs and
expanding opportunities for business and consumers in some
of the poorest places on earth -- even as they pose a
competitive threat to government-sanctioned telephone
companies.

Sending telephone calls over the Internet is gaining ground
in Africa because it makes possible a range of new services,
linking the sub-Saharan to the world's major industrial
centers in ways unimaginable only a few years ago. And
better digital connections, mostly via satellite, are
raising the hope that Ghana -- the most peaceful country in
a West African region besieged by civil wars and ethnic
strife -- may become the regional hub for an
information-technology industry.

"As Ghana improves its connectivity to the outside world, it
has the potential to become for Africa what Bangalore became
for India," said Paul Maritz, a former senior executive at
Microsoft who recently visited Accra to survey the nascent
high-tech scene here.

Last Thursday, at a United Nations conference in New York,
the secretary general, Kofi Annan, delivered a message that
developing countries also need to include wireless access,
known as Wi-Fi, in building an Internet system.

"It is precisely in places where no infrastructure exists
that Wi-Fi can be particularly effective," Mr. Annan said,
"helping countries to leapfrog generations of
telecommunications technology and empower their people."

As the movement advances, though, many government-owned
telephone companies, which dominate wired service in most
African countries, are fighting a rear-guard action.

Internet telephony "is presented as the salvation for
business and society in Africa," said Oystein Bjorge, chief
executive of Ghana's national telephone carrier. "It is
not."

Mr. Bjorge, a Norwegian telecommunications consultant hired
recently to do battle against the Internet telephone
services, said it wreaks havoc with the economics of phone
companies. Here in Ghana, the national phone company is
waging a sporadic campaign against its own citizens who use
the Internet to make or receive telephone calls from America
and Europe, periodically turning off the lines of those
suspected of doing so.

Three years ago, the government even jailed the heads of
some of Ghana's leading Internet providers. Though later
exonerated by a court, the dissidents fear another
crackdown. "Internet telephony is changing the whole power
structure," said Francis Quartey, chief technology officer
of Intercom Data Network and one of those jailed. "The
dangerous thing is that the power elite is responding out of
fear and ignorance."

Despite this opposition, American companies are
experimenting with new ventures in Ghana, seeing if
enthusiasm for Internet telephony can transform local
technology entrepreneurs into a force for genuine economic
advancement.

For example, Rising Data Solutions, which is based in
Gaithersburg, Md., introduced a call center here last month,
where a dozen Ghanaians -- trained in American-style English
-- are trying to sign up customers in the northeastern
United States on behalf of a wireless phone company. At
least three other call centers are expected to open in Accra
later this year, all relying on Internet telephony instead
of telephone carriers.

Internet telephony also aids companies like Newmont Mining,
which is searching for gold in Ghana, the second-largest
gold producer on the continent, after South Africa. To help
manage its operation, Newmont plans to link its operations
within Ghana to the wider world through the Internet.

Acquiring reliable phone service is essential, foreign
investors say, which is why they bypass the government-owned
telephone company. Ghana Telecom has an order backlog of
more than 300,000 lines; bribery is the fastest -- indeed,
usually the only -- way to obtain new service. Even those
with service suffer from frequent failures and inaccurate
bills. Roughly every other call results in a busy signal, an
indicator of what Ghana Telecom calls "network congestion."

Under the circumstances, Internet telephony -- which has
failed so far to make serious inroads into the American
telephone market because of lower voice quality -- seems
positively fabulous to many weaned on Africa's creaky
systems.

"Internet gives me control over my destiny," said Sambou
Makalou, chief executive of Rising Data. "My business needs
to be up 24-7; we can't get a busy signal."

Busy signals are common in Ghana because the public phone
networks are overloaded. As recently as four years ago, a
dial tone was among the scarcest resources in the country,
which had fewer than 200,000 phone lines in a nation of 19
million.

Few people realized how much demand for phone service was
waiting to explode until Ghana's most successful wireless
company, Spacefon, was introduced in 1996. Before it
started, executives thought the potential customer base was
probably 3,000 people, at most 12,000. Seven years later,
Spacefon has more than 300,000 subscribers.

The country's total phone lines are now approaching 750,000,
roughly two-thirds of them wireless. But completing a call
is still difficult, especially between rival networks (there
are five), and neither Ghana Telecom, nor the country's
legal wireless operators offer a reliable connection to the
Internet.

In response to these limitations, private businesses have
built scores of data networks, relying on satellite- and
radio-based Internet-access systems.

But telephone service became appealing because of the high
network costs: Companies typically pay from $2,000 to $5,000
a month for a robust connection to the Internet, an enormous
sum when economic output per person is only about $400 a
year.

"I'm paying $2,000 a month for Internet access, so I want to
use the technology to the fullest," said Austin Addo, chief
information officer of Ghana Link Network Services.

Mr. Addo's company, which began operations here early this
year, helps the government calculate duties on goods
imported into the country, relying on frequent updates, via
the Internet, of product values. The company's partner is
based in Madrid, so Mr. Addo uses a standard device to make
international calls over his computer network. He is not
billed for the calls, which would otherwise cost him roughly
75 cents a minute, including the cost of line.

His telephone calls are not really free, since he pays
$2,000 a month for Internet access. But he is still saving
lots of money because he can speak as long as he wants
without worrying about the cost. "Five years ago to get this
level of communication," he said, "I'd have to fly to Spain
-- several times a week."

Such productivity gains have been a cause for celebration
almost everywhere in the world. But official anxiety over
Internet telephony is widespread throughout Africa and
particularly rife in Ghana. At a public meeting in May, held
at the largest Internet cafe in Accra, a regulator defended
the government's latest campaign against those who use the
Internet to bypass authorized telephone providers. "The
players have been apprehended or will be apprehended soon,"
said Bernard Forson, deputy director of the National
Communications Authority of Ghana.

The government is not opposed to any particular technology,
Mr. Forson explained, but merely wants "regulated entities
to provide telephone service," not unlicensed and untaxed
wildcatters.

Other African countries face a similar quandary, aware of
the appeal of Internet voice service but fearful of its
damage to the state-owned telephone company.

Neighboring Togo, for instance, allowed Internet telephony
until the end of last year, when the government cracked down
on behalf of Togo Telecom. So many foreign calls in tiny
Togo were being routed over the Internet that a small "com"
center -- ubiquitous in Africa, offering calls for a fee --
took in $10,000 a month from just two phones.

But some African countries have embraced Internet telephony
as a way to end decades of frustration. In Nigeria, for
example, the government has not officially approved
telephoning over the Internet but looks the other way,
partly to ease congestion on its authorized networks.

Still, the legal confusion surrounding Internet telephony
has prompted some to avoid it. Affiliated Computer Services,
which is based in Dallas, set up shop in Accra two years
ago, relying on a private satellite connection to the
Internet that supports both a data and a telephone network.
Today, it is one of Ghana's largest private employers, with
1,200 people and plans to hire another 700.

While the company runs call centers in Jamaica, Mexico and
India, it does not intend to do such telephone work in
Ghana. "We can't use satellite lines" because of the brief
delay in hearing a response, said Tom Blodgett, the
executive who started the Ghana operation. And for now, he
adds, "there is no suitable wired alternative." A legal one,
anyway.

But for all their efforts to restrain the movement, African
telecom companies are probably fighting a losing battle.

"Periodically the police confiscate equipment or the telco
turns off phone lines," said Russell Southwood, a
London-based consultant and publisher of a weekly newsletter
on Africa's telecom scene, Balancing Act's News Update. "But
it's about as hopeless as Canute trying to turn back the
tide."

Copyright (c) 2003 The New York Times Company.
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