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330 Diagnosing Corruption in Ethiopia
A range of stakeholders are involved (figure 8.1). The government establishes
regulatory policy for the sector, and an independent regulator oversees
the adherence to these regulations and grants licenses. In competitive environments,
the government (or the independent regulator) will grant a
license to one or more telecoms network operators (which can be either a
government or private sector organization or company) to own or operate
all or part of the network. The network operator will typically purchase
equipment and services from telecoms suppliers. The telecoms suppliers are
normally major international companies that design, manufacture, supply,
and install their own specialist equipment. This equipment and the services
may include transmission and receiving equipment, mobile telephone
masts, software, cables, satellite services, and telephone handsets. The network
operator arranges for contractors to carry out the necessary civil and
building works, such as foundations for mobile phone masts, access roads
and buildings, and the laying of cables. Once the network infrastructure is
in place, the operator then sells telecoms services such as telephone and
Internet services to business, individual, or business consumers.
Corruption Risks in Any Telecoms Sector
In common with some other industries or utilities, the telecoms sector in
many countries is regulated by government, requires major investment in
infrastructure, and generates significant revenues. As such, the following
factors make it prone to corruption risks:
• High revenues. Telecommunications is a high-volume, high-value business.
A well-run telecoms network can be exceptionally profitable,
producing large revenue streams for many years. A bribe of millions of
dollars for a license or reduced regulatory controls may be only a fraction
of the profit achieved by a private sector network operator if it
can, as a result, obtain market entry or improve its market share.
• High research and development costs. Telecoms equipment suppliers
invest millions in research and development of new products in the
expectation of recovering that investment by winning high-value contracts.
Therefore, they are under considerable pressure to win such contracts,
which may induce some to engage in corrupt practices.
• High costs and significant risks of market entry. The installation of the
basic infrastructure needed for a telecoms network can represent a
significant investment—most notably in the case of satellites and
cables (particularly undersea) 2 as well as with secondary mast-based