Going from shortage to abundance – strategies to target Africa’s broadband consumers

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2011 is the year that broadband will finally come into its own for Africa’s long-starved Internet users. Operators will need to have a complete mind-shift if they are to come out on top of the new market and it offers interesting opportunities for insurgent challengers. Russell Southwood looks at what operators will need to do to succeed in a changing market.

In almost every country connected to an international fibre connection in Africa in 2010, the speed of the connection increased and prices fell. Our own personal experiences from travelling extensively across the continent confirm what we know from the data that comes to us from other sources. Ookla’s latest Net Index statistics which shows which ISPs in South Africa give the best broadband speeds gives the clearest sense of this shift. According to the results from 184,442 Speedtest.net tests between 14 November 2010 and 13 December 2010, Cell C is the best service provider with an average download speed of 4.62 Mbps. Web Africa is second with 2.81 Mbps and Telkom third with 2.54 Mbps. Mybroadband.co.za has published a table with the top ISPs. To access it click here 2-4 mbps download speeds? Who would have believed that five years ago?

Almost as interestingly, Main One has been running a test site offering free, high capacity bandwidth in the Palms Shopping Mall in Lagos’ Lekki district which is operational until 9 January. According to a blog by Olunyi Ajao who went to try it:” I was more excited with the potential speed, than it being a freebie. You see, Main One is a submarine cable system that carries gigabytes of data from Europe to West Africa and so, I expected their connectivity (without going through MTN or another ISPs that use them) to be an extreme experience. In plain English, Main One is an ISP’s ISP. So, I went to the mall with very high expectations”.

“The speed met my expectations. I commenced downloading all the stuff I had always differed…. I was able to download content at a steady speed of 2 MB/s (with two other downloads in progress) on Main One’s wi-fi but the maximum (unsteady) speed I can get downloading via MTN’s 3.5G service is about 0.48 MB/s”.

“Just to be triple sure, I initiated a video call to a friend in Malaysia via Skype. Though we could not talk much due to the noise around me, he confirmed the video was very smooth. Youtube videos (including HD versions) streamed smoothly for me today”.

His main irritation?:”My Blackberry and (later) my Nokia 5800 XM could not detect MainOne’s wi-fi signal. Consequently, I could not experience the broadband on my smartphones. I was initially able to download some a podcast on the 5800 XM but that started failing after I upgraded the Operating System on the smartphone.The connection went off every hour or there about, and I had to always reconnect via my browser. I reckon this was their lame method of enforcing their “2 hour limit”.

Nevertheless, he concluded “the speed was worth the trouble”. And his not too startling conclusion?:”The ISPs necessarily need to invest in better last mile technologies or improve their existing networks so consumers can enjoy the real broadband that is possible via MainOne. I know of Mobitel‘s 4G and Swift‘s WiMax but both have limited coverage”. For the full blog click here

So now the moment has arrived for broadband Internet in Africa, all operators need to get focused on selling it to individual consumers. For if they don’t, there will be an awful lot of unsold international bandwidth on their balance sheets for years to come.

Currently, there are three broad types of operators who are in this market: firstly, Africa’s traditional independent ISPs who have lived largely on corporate subscribers and a small number of wealthy individual; the mobile operators who have come in and expanded the market with mobile Internet; and alternative insurgent challengers like Wananchi with its Zuku brand. The African consumer broadband market is still just being born so no-one has yet got a full grip on the market. Consumers are fickle and go where price and bandwidth seem most advantageous.

In the interests of creating a strong and vibrant African broadband consumer market, here are our seven tips on making this market work:

1. Be honest and straightforward

When it’s not price wars (which are easy to understand), Africa’s operators seem to offer a baffling array of different tactical marketing offers. Using the techniques pioneered in selling voice, mobile operators offer their customers short-term, tactical financial advantage. The result? Customers game the system about as thoroughly as consumers anywhere in the world. If it’s cheaper at 3pm in the morning, they’ll be awake and using it. Privately, most operators will admit that this is no way to change their market share but seem obsessed by the monthly percentage changes tactical marketing brings.

Operators have also sought to “slice-and-dice” the sale of their bandwidth capacity in so many different ways that it’s hard to know what you’re buying. How many Internet consumers know what a 4 Mb download capacity means? How do you know what you’re getting during a hour’s worth of Internet? What does unlimited subject to a “fair use” clause actually mean? Cyber-café and WiFi hot-spot operators continue to dilute bandwidth even though a great deal more is available at cheaper prices: old habits die hard. Take your profit while you can seems to be the unspoken mantra.

The operator that is consistently honest and straightforward has every chance of winning this game. If you say to your customers, you have two choices, price and bandwidth speed: which do you want? For those budget customers, set a much higher provisioning (2 mbps as a minimum) but clearly indicate that this speed may be considerably less during busy periods. For those who need higher speeds, charge more and give them a demonstrably better service (perhaps 8 mbps as a minimum). Set up bandwidth speed comparison tests internally first and then allow your customers to use them. Use the information gathered to drive out bottlenecks at the national and local level.

For the alternative insurgent challenger, there’s the perfect opportunity to arrive as “Honest John” amongst those who seem to speak less than straightforwardly. The challenger can be clear about what it’s offering and that it’s seeking to get all of its customers the best deal possible.

2. Service – Making things work

The mass broadband market in Africa needs to work on a “plug-and-play” basis. The household consumer needs to be able to open the box, plug in a limited number of cables and then follow the on-screen prompts to get things working. Household broadband needs to be cheap, well-supported and reliable equipment so that CPE costs are kept as low as possible.

When things do go wrong, companies need to have service back-up that can deal quickly and efficiently with complaints. Companies need to analyse where breakdowns and other complaints occur and figure out ways of dealing with them as quickly as possible. They need to encourage user forums where customers can compare notes and find ways of overcoming some of the issues themselves.

Two contradictory things are in play: firstly, in order to deliver the best broadband service at the cheapest price, it has to “get-up-and-go” at the cheapest possibly cost; secondly, consumers will become more demanding as speeds and performance increase. On the second, the absence of bandwidth suddenly seems like a “life-and-death” issue, not some minor irritation to be taken with the usual African patience when almost anything doesn’t work. So how to resolve these contradictory pressures? Educate users to pay for service contracts. At the bottom end, the amount charged will be very small but at the top end it will be much larger and contain time-based response clauses. Within this framework, be absolutely rigorous about providing friendly and response service.

3. Branding, character and use

When they took off, African mobile operators were selling aspiration. If you had a phone, you were somebody. Back then, it was all new but now there’s not an African city that doesn’t have billboards showing desirable young models smirking their way through conversations on mobile phones. With the introduction of mobile Internet, these same aspirational images have been simply transferred over. Can you tell the difference between the images used? OK, so the colours and the name are different but what else?

Africa’s broadband Internet brands desperately need some “character”, something that will mark them out and make their customers smile and remember them. They need to be able to convey a different version of the aspiration message. There won’t be necessarily the same level of Internet users so the aspiration message has to be more finely honed.

All the soft, aspirational branding constructs have to translate into “uses”. 99% of potential African broadband customers will not care about the technical attributes of the service, only what it can do for them. The young professional will want to put his social life together on Facebook. The parent will want to know that he or she can get education materials that will help their children in school. Grandmas will want to know how to access family photos on Flikr and use Skype to talk to their children. The taxi driver will want access to maps showing street locations, and so on. Too little broadband marketing translates into both selling these uses and identifying new uses to sell.

4. Encouraging maximum use by offering maximum capacity

The African operator that thinks it’s really smart starts by offering a broadband service at the highest price it can get away with and then slowly cascades the price down to a much level. The problem with this approach is that it fails to grasp that the overall market objective must be to create the largest possible “critical mass” of Internet users as quickly as possible.

Unlike voice, where everyone wants to have access, selling broadband Internet is a much harder sell. It relies on getting the mass of current users (the young, educated) to persuade others (the old, educated; staff like child-minders and drivers) to use it as a primary means of communication.

The strongest way to promote the largest “critical mass” is not by dealing it out in “penny packets” but by offering the maximum available capacity at prices that will encourage young and old to do the kind of things on the Internet that people do the world over: things like social media (Facebook, Facebook and Facebook), Twitter and You Tube are giving some idea of where things can go. If there were 1.7 million Nigerian Facebook users in August 2010, imagine how many more there will be in a year’s time.

5. Expanding the potential market

SMS is really just e-mail in budget clothes, the only difference is the character count and the ease of tee-ing up the browser. SMS-to-e-mail workarounds from companies like ForgetMeNot Africa show the potential for transition to full e-mail. And those that currently use SMS with some facility are all potentially on an upward escalator to a wider range of Internet services.

If you imagine the current handset market as a pyramid, the broad base of the pyramid is made up of extremely basic handsets with very little functionality. At the top of the pyramid is a tiny sharp point representing smartphones and the next band down is feature-rich phones. In most markets, these will be barely 5% of the overall market.

To expand the potential market, you need to expand the number of devices that can handle interesting Internet applications. You need to be offering ever-cheaper smartphones with the prize going to the first to offer one for US$50. You need to offer even cheaper feature-rich phones (with a i-Phone-style interface from someone like Snaptu) to the less well-off at below this price point. In this way, the existing basic phones in the market will shrink and the number of customers with Internet access will increase.

6. Building the device pyramid

The mobile is Africa’s tech device of choice and the one that reaches the maximum number of customers. But building an African broadband market requires operators to understand another pyramid.

This second pyramid is about all the tech devices an African broadband consumer might own. The broad base of this pyramid is composed of feature-rich phones, followed further up by smart-phones. Then there are net-books, followed by tablets (like iPad) and at the top of the pyramid lap-tops and PCs.

The challenge with this device ownership pyramid is the same as for the handset pyramid. Mobile phones that can access the Internet are a great thing but they have their limitations. Therefore how do you get all those people who might have access to a PC at work and/or have a feature rich phone to get some sort of wider PC usability? (The main barrier to greater use is size and use of keyboard functions but there are other issues.) Somewhere around the netbook/tablet area is a device that long-term may cost between US$75-100 that will broaden this part of the pyramid and give PC-like abilities to a much wider number of broadband users.

For the ambition must be to create a world in which there is the ability to do things using broadband almost wherever you are: the bar, the home, the hotel and the school.

7. Spreading everyday usage

The lesson of the success of Facebook is obvious in hindsight. The average African professional organizing his or her social life on a Friday afternoon is the “human equivalent of Facebook”. So the insight is really a very obvious one for operators. They need to introduce apps and services that drive everyday use. These might come from elsewhere but in time there will be local variants. In places like India and Brazil, the local variants stamped out their own ground by not being in English. Watch for local variants and see whether they can be marketed successfully to create new, local social media.

Think about the insights from something like M-Pesa, again so clear in hindsight but not when they were struggling to gain traction. It took something that was a major barrier (carrying and pay most things in cash) and challenged engrained habits. So look at other potential areas. What about finding your way round Africa’s cities? How many times have I witnessed the giving of directions that are of the “go past the third flower seller on the right” variety? Of course, there’s Google but how many people will use it? So somewhere between the “human Google” (phoning a friend or fellow taxi driver) and Google sits a much simpler app to help people find where they’re going.

Operators need to keep coming up with ways to weave the Internet into everyday use so that it becomes as natural as….well, picking up your mobile to make a call.

For more insights on the new Internet market, go to Balancing Act’s Web TV channel:click here

Clips include:

* Jessica Verrilli on Twitter’s African strategy.
* Sean d’Arcy, Opera Software on the use of its mobile browser in Africa.
* Reg Sawrt, Fundamo on M-Money Services
* Herman Heunis on social networking with MXit
* Jeremy George, COO, ForgetMeNot Africa on its SMS to e-mail service.

There are 49 clips in both English and French that contain news and information that does not appear in our e-letter or on our web site.

Broadband and Economic Growth in Africa

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Introduction

In the Ghanaian capital Accra, a government minister takes questions from citizens via Facebook. A journalist in Kenya uses his smart phone to e-mail breaking news instantly from a corporate press conference; the announcements move shares on the Nairobi Stock Exchange. Technology is rapidly changing Africa and at the forefront of the impact of that change is access to broadband Internet. Broadband would be to an economy in the 21st century what electricity was in the 19th century. Empirical evidence has established a correlation between broadband and gross domestic product (GDP) and the growth effects of telecommunications.

In 2009, the World Bank released its Information and Communications for Development report that showed access to broadband boosts economic growth in all countries, but most especially in developing ones. The study showed that in developing countries, for every 10 percentage points of broadband penetration, their economies grew by 1.38 percent. The report, conducted in 120 countries between 1980 to 2006, developed countries’ economies grew by 1.21 percent. Broadband access is key for economic growth and even more vital in developing countries.[1]. Africans are seizing the opportunity that it offers to move their economies forward.

Definition

Broadband is usually defined as any always-on, high-speed connection to the Internet, whether from a computer, television, cellphone or other mobile technology. The Organization for Economic Cooperation and Development (OECD) specifies a download speed of 256 kilobits per second or higher as constituting broadband. But recent studies have redefined broadband as an “ecosystem” that ranges from the networks, to the services the networks carry to the applications they deliver and the users.[2]

GDP Growth

Africa has sustained economic growth above 5 percent since the beginning of the 21st century with a peak in 2007 at 6.1percent. Growth declined slightly in 2008 and 2009 due to the global financial and economic crisis.[3]

Overall investment with private involvement represented an average 1.3 percent of Africa’s GDP between 2004 and 2007. In absolute terms, in 2004-2007 Africa attracted on average $11.5 billion, behind OECD and Central Asia with $19 billion and Latin America and the Caribbean with $13.3 billion, and slightly ahead of South Asia with $10.8 billion. East Asia and Pacific countries lagged behind with $5.3 billion.[4]

Telecommunications and GDP

McKinsey & Company estimates that “a 10 percent increase in broadband household penetration delivers a boost to a country’s GDP that ranges from 0.1 to 1.4 percent.”[5] Booz & Company also found out that “10 percent higher broadband penetration in a specific year is correlated to 1.5 percent greater labor productivity growth over the following five years.”[6]

Tunisia’s Ministry of Communication Technologies show that the ICT sector has grown by 17.8 percent in 2008. Its contribution to the country’s GDP reached 10 percent that year, against just 3.9 percent in 2001. The ministry projects growth will reach 13 percent by 2011.[7]

Source: IC4D 2009: Extending Reach and Making Impact

A World Bank report showed that between 1998 and 2008, mobile phone subscribers in Africa soared from two million voice users to 400 million with $56 billion in investment. A total of 65 percent of the African population gets mobile phone coverage, but that only covers 30 percent of the continent’s territory. And mobile phone companies make more money off African subscribers: average revenue per user is $12 each month, compared to $6 in India.[8]

There may be more people using mobile phones than have broadband access, but the table above shows broadband has a much stronger direct correlation to economic growth than access to a cellphone, landline or other Internet platforms. More broadband means faster economic growth.

Investing in broadband is an investment in economic growth and an indirect investment in development.[9] If broadband is made accessible and affordable, it would have a direct impact on health, education and standard of living; the three main indicators in the UNDP Human Development Index (HDI).


[1] http://web.si.umich.edu/tprc/papers/2005/450/L%20Waverman-%20Telecoms%20Growth%20in%20Dev.%20Countries.pdf

[2] World Bank, Building Broadband: Strategies and policies for the developing world

[3] AfDB, AU, UNECA, African Statistical Year Book 2009

[4] Telecommunications Investments with Private Participation (PPI) in Africa, World Bank PPI Database, 2007

[5] McKinsey & Company, Mobile broadband for the masses, February 2009

[6] Booz & Company, Digital Highways: The Role of Government In 21st-Century Infrastructure, 2009, p.5

[7] http://www.tunisiaonlinenews.com/2009/05/15/tunisia-ict-sector-contributes-10-of-countrys-gdp/

[8] World Bank, Opportunities and Challenges for Connecting Africa by Philippe Dongier

[9] http://ipcommunications.tmcnet.com/news/2009/06/17/4231817.htm

ICT Policy and Technology Innovation in Africa

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In this presentation that i made to the Africa Grantmakers Affinity Group (http://www.africagrantmakers.organd Grantmakers in Film + Electronic Media  http://gfem.org), I will seek to describe how the African continent has been able to become connected to the Internet in a relatively short period of time, tracing some of the successes as well as obstacles to more robust connectivity. I will highlight some of the current efforts to further connect the Continent to itself and the world.  It is my belief that there are a number of these “homegrown” African efforts using mobile and Internet technology that should not be overlooked as resources by those concerned with African development and investment.

 

The deregulation of the telecommunications sector in the early 1990’s under the World Bank’s Structural Adjustment Program led to (a) the general de-monopolization of the industry and (b) the creation of Second National Operators (SNOs). Significantly, most of these SNO’s failed due to the lack of an effective regulator.

 

These developments led to:

·      the establishment of national-level regulatory institutions like the National Communications Authority in Ghana.

·      the liberalization of the air waves and the move beyond government-run media to the establishment of private radio, television, and newspapers

·      the creation of the Internet sector in the form of value-added service providers

·      the establishment of Mobile Operators in early the late nineties

 

Mobile penetration is currently about 30% across the continent, and Web is 5%.

 

The growth of mobile has been due to unique policy and market factors:

·      the general lack of landlines and the challenge to get them even if “available” from the incumbents

·      some regulators’ ability to establish interconnection between them, which was already a national policy in some countries

·      mobiles are cheaper to buy and use – and mobility is just cool!

·      some of the biggest mobile companies have come out of Africa, like Celtel/Zain and MTN, each in over 21 African countries

 

Mobile is now the platform on which the most dynamic innovations are taking place:

·     M-Pesa  – air time as money for transfer and purchasing

·     Ushahidi  – combination of sms and web for inditification of “troubled areas” during the Kenyan elections  (David Kobia will expand more on this)

·     Tradenet – combination of sms and web for farmers and market information exchange

·     African Election Portal – combination of sms and web for election information and certified results

 

Broadband, or high speed Internet access is mainly delivered through wireless connectivity using mobile, licensed frequency and wifi. While it is Internet Service Providers (ISP’s) that have taken the lead in broadband provisioning, mobile phone operators with GPRS, EDGE, 3G and other technologies are joining in speedily.

 

Africa pays 40 times what the developed world pays for broadband. This is due to some factors, which are being addressed by the African Internet Service Providers Association (AfrISPA) and other institutions:

·      Most prominent is the fact that Africans communicate with each other through 3rd parties, which cost a “capital flight” of about $500m USD, according to 2002 estimates.

·      AfrISPA has being working with countries to establish Internet eXchange Points (IXP’s), which ensure local communication is kept local. There are 22 IXP’s on the continent now.

·      Under AfrISPA’s African Internet eXchange System (AXIS), we seek to build an IXP in every country and to also connect the countries through cross-border terrestrial connectivity.

 

Much of Africa’s international connectivity has being through satellite (VSAT), which is very expensive.  For example, a 2MB connection costs between $5000 and $7000 per month.

There is a lot of effort underway to build terrestrial fiber connections, which are incredibly robust delivery systems for Broadband – in some cases converting existing fiber on the power pylons (the large vertical steel towers supporting high-tension power lines). This is going to have a significant impact on Broadband connectivity and cost.

 

Currently, there are about a dozen undersea cables for Broadband delivery that are proposed to be built, apart from SAT3 on the West and Southern coast of Africa. There are five of these that I am confident will happen:

1.     The East African Marine Systems (TEAMS) which is planned, fully funded and due to come online by June 2009 to cover East Africa and now has TEAMS 2 going down to South Africa.

2.     Sea Communication (SEACOM) also planned, fully funded and due to come online by June 2009 to cover South, East and North Africa.

3.     East Africa Submarine System (EASSy), which was supposed to be the first rolled out, but due to a change in model, it is now set to come online in 2010 to cover East and Southern Africa. Also fully funded.

4.     GLO -1, which is an undersea cable, built by Globacom, the largest mobile operator in Nigeria. It is being built from London to Nigeria and countries it has operations in like Benin and Ghana. Part of the cable is built and there is a planned extension to the US from London.

5.     MainOne, which is also planned and about to close the financing, is due to go from Portugal to Nigeria and Ghana where they have a license and landing rights. It is also planned to go down south, providing competition to SAT3, which has rather increased the cost of broadband in that part of the world instead of reducing.

 

As mentioned, currently broadband costs are very high in Africa – a 2MB connection costs between $5000 and $7000 per month.

 

At a recent meeting in Malawi we tried to get the cable operators to give us an idea of their actual cost to market:

       TEAMS is proposing 2MB at $500 per month.

       The other cable companies are indicating their ability to compete at that level and even get cheaper, so we do expect Broadband to get significantly cheaper in Africa over the next 3 years.

 

With broadband getting cheaper due to the developments above and growth in PC access due to the lowering of PC prices combined with entry of low end laptops like the “One Laptop per child, EeePC, etc, there is going to be an exponential growth in Internet subscribers over the next three to five years.

 

This would combine with the innovation in digital technology, which is gaining root very quickly in Africa as indicated above. There would be mushrooming of new business, which would grow to become SMEs and eventually become the enterprises of tomorrow.

 

The uptake in technology clusters like Ghana Cyber City, a 36 acre planned technology park to be build in Accra, would set the stage for the creation of an ecosystem of interaction among these SMEs and also herald the advent of major outsourcing into the continent. The interaction between the homegrown SMEs and the outsourced business in the technology park would create a high level of output on both sides. 

A HEROE worth his TIME

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“A NATION that does not honour her HEROES, is not WORTH dying for” – the key words are “NATION, HEROES and WORTH”.

The NATION of Kenya honoured her HEROES and one of them is Brian Longwe, a GENERAL in his own RIGHT in the African ICT Fraternity.

Please join me in CONGRATULATING a Living Saint @ http://www.ictvillage.com/icthof_BrianLo…

Berkman Conversation on Africa’s Internet Infrastructure

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Tuesday, April 10, 12:30 pm
Berkman Center Conference Room
23 Everett Street, Second Floor, Cambridge, MA

Guest: Eric Osiakwan and Ethan Zuckerman
Topic: “Africa’s Internet Infrastructure”

Following up from their Luncheon Series talk from last September, Eric and Ethan will discuss current developments in Africa’s Internet and communications infrastructure. We’ll learn about exciting possibilities and innovations, as well as challenges, in connecting African communities to each other and to the global web.

Eric Osiakwan is the Executive Secretary both of the African Internet Service Providers Association (AfrISPA) and the Ghana Internet Service Providers Association (GISPA). He is also a Visiting Fellow and Scholar at the Stanford University and Reuters Foundation Digital Vision Program, and a Berkman Center affiliate. During the past four years, he has been involved in several information and communication technology (ICT) related projects and initiatives in the US, Europe and Africa for a number of Governments, companies, NGOs, and international agencies.

Ethan Zuckerman is a Berkman Center fellow, focusing on the impact of technology on the developing world. His current projects include a study of global media attention, research on the use of weblogs and other social software in the developing world, and work on a clearinghouse for software for international development. Ethan is also a co-founder of the Berkman-sponsored popular international citizen journalism project Global Voices.

AfrISPA: http://www.afrispa.org
GISPA: http://www.gispa.org.gh
Ethan’s blog: http://www.ethanzuckerman.com/blog
Last September’s Luncheon Series talk: http://blogs.law.harvard.edu/mediaberkma…

This event will be webcast live. Webcast viewers can join the discussion through IRC text chat or in the virtual world Second Life. For information about our event webcasts and remote participation, see http://cyber.law.harvard.edu/home/webcas…. If you miss the live chat, catch the podcast audio & video at MediaBerkman, at http://blogs.law.harvard.edu/mediaberkma…. Lunch is provided to those who RSVP.

Kenyans in multistakeholder owenership of national fiber network

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Folks, below is exactly what i have being chanting as a way forward in the ownership of the infrastructure;
” The Kenya Government will have a 40 per cent holding in the project, Etisalat 20% and the remaining 40% will go to investors in the East African region. The Government has said it will organise an IPO on the Kenyan Stock Exchange. Several Kenyan companies have expressed interest and one said that the Government had told them it would “guarantee their loan”. The details of the finance package have not yet been settled but it is unclear where the Kenyan Government will raise its 40% from. Will the World Bank simply shift a portion of its EASSy funding to the new project as many think likely?”
NB; From this week’s Balancing Act, full story below for your pleasure courtesy of Russell Southwood.

Thank God the Kenyans are experimenting with this approach where government owns part, private sector owns part, educational institutions should also own part, CSO owns part through IPO on the stock market.

The Kenyan government can actually raise the 40% from government bonds and am not an expert on the stock market discipline of shares or bonds but this is where the financial experts need to come out with innovative solutions that can help raise much of this money locally – it is possible.

You Kenyans are showing the way and even it it does not work you would be know for showing us how this model is not workable and then we can try another. We Africans must try new ways of doing these things and make our own mistakes and find our own solutions to our problems but learn to avoid the mistakes of the Americans, Europeans and Asians. Thank God for this BOLD move, it is commendable.

I dont mean to make my blog Kenya praise church but it is about time that we applaude bold initiatives and sing the praise of those who are making an attempt at leadership in these times.

TOP STORY: KENYA BEGINS THE COUNTDOWN TO CHEAP INTERNATIONAL FIBRE
_____________________________________________________________________

It’s like waiting for a matatu. You wait for ages and none come along. But just when you’re about to give up hope, three come along at the same time, all trying to come to a screaming halt in front of you. Kenya now has three (or more) potential international fibre projects that could be complete within 12 months. Each one is loudly proclaiming that it will
deliver cheap international bandwidth. Russell Southwood took the temperature in the market last week about what the impact of this bandwidth will be upon the market.

The Kenya Government has signed an MOU to build a fibre link to Fujairah in the UAE currently costed at Ksh5.7 billion. The construction and supply contract will be awarded early next year and the project, dubbed The East African Marine System (Teams), will be ready by November, according to a joint statement issued by both parties from Dubai. Many
in the sector believe that it will be more like 19 months or more before completion.

The Kenya Government will have a 40 per cent holding in the project, Etisalat 20% and the remaining 40% will go to investors in the East African region. The Government has said it will organise an IPO on the Kenyan Stock Exchange. Several Kenyan companies have expressed interest and one said that the Government had told them it would “guarantee their loan”. The details of the finance package have not yet been settled but it is unclear where the Kenyan Government will raise its 40% from. Will the World Bank simply shift a portion of its EASSy funding to the new
project as many think likely?

The Government’s commitment to a 12 month schedule is a bold move but one that must lay them open to a certain amount of scepticism. The tender for expressions of interest was only issued 2 weeks ago and Government timetabling is notoriously slow compared to the private sector. Apparently the Private Secretary has been telling interested
parties that the Government wants prices comparable to those to be found in India in 12 months time. This benchmark has been set in order that Kenya will be able to compete in the international outsourcing market.

Apparently a number of interested parties said that they would put up all the money to build it if they could have a monopoly and he sent them away disappointed. But more worryingly one interested party told us that it could only get involved if it also allowed Telkom Kenya to be a shareholder.

The next international fibre project is KDN’s and it has now signed its contract with Flag Telecom. Its link from Mombasa will terminate in an undersea junction in international waters off of the Yemen. It says the link will be fully operational in the first quarter of 2008, just 15 months away. The company believes that it will come to market with capacity at $500 per mbps pm but that the price of bandwidth will go up to those wanting to invest as time passes. In other words, for those who commit early prices will be lowest and for those who come in late, prices will go higher. It also stresses that its landing station at Mombasa will allow other carriers to co-locate there charging only electricity and services at cost.

So this leaves the third project EASSy looking as if it will be the third runner. NEPAD appears to have made little more progress on persuading more African Governments to sign its political protocol. And whilst the members of the EASSy consortium (that still includes KDN and Telkom Kenya) are still moving things forward, there remains a disconnect between the political and commercial ends of the project. If both of the above projects go ahead, there is clearly much less need to build the Mombasa-Djibouti section of the route and it has to be said that both of the above projects have better international connection points.

As if three were not enough, Ethiopia’s ETC has now had its international fibre connection working effectively for two months via Port Sudan and Saudi Arabia. But because it is landlocked and it had endless fruitless arguments with Djibouti Telecom over control of a possible fibre link, it wants to find a second international fibre connection. Therefore it is in serious conversations with both of Kenya’s fibre network operators about connecting to the Mombasa links when they are ready. If this goes ahead, both it and Kenya will then have two international fibre links.

Because the process of getting the international fibre to Kenya has been both confusing and “on-off”, everyone in the market (including customers) have understandably not really grasped the impact of its arrival on their businesses. Until now ISPs and satellite resellers have largely been in the businesses of living on the margin they make
between buying and selling bandwidth.

These margins have been kept high as they have concentrated on selling to comparatively few customers. Ironically it has been a high-price, low volume business where their primary commodity – bandwidth – has always been in short supply, not least because some of them increased their margin by contending it as much as possible. This has meant that bandwidth quality is often variable at best for those not paying “top dollar” for a premium service.

If you argue that international fibre prices should be low price, high volume, then the national business model changes: what’s sauce for the goose is sauce for the gander. Bandwidth becomes cheap and plentiful at a sub $1000 threshold. The margins that can then be charged make it difficult for those who are not operating at volume to stay in business.

However it does now open up opportunities for new services, content and applications that can be sold to customers who should now be paying European prices for real broadband connections (1-2 meg upwards) rather than the paltry 64 kbps they are currently receiving. There are at least 500,000 households in Kenya that are at an income level that make them potential targets for broadband. It would take only half of those households to sign up for there to be the beginnings of a very different market.

The real sign that the market has not “got it” is that some key ISPs are not passing on the information about these soon-to-be cheap prices but are seeking to protect their high margins by telling customers higher prices. A heads-up, guys. The sector is a village and news will get round quickly and we’ll encourage the circulation of this price information. The market’s about to change, get ready to change with it.

At the national level, there is now a third source of fibre capacity. Jamii Telecommunications has signed an agreement with the Kenya Light and Power Company (KPLC) to sell an STM1’s worth of its fibre capacity in Nairobi and Mombasa, with KPLC saying that it will triple its capacity shortly. Two other companies – CTN and Cable Vision – have been granted a licence to sell KPLC’s capacity and it is telling (in terms of the argument above) that both are in the video download and pay-TV business. Not so far afield, Tanzanian power utility TANESCO is currently building out fibre capacity and has invited bids to sell this capacity. Again KDN is poised to make a fibre connection to Tanzania.

However a recent ping on the Kampala-Nairobi route shows that neither KDN nor Telkom Kenya has got its fibre route operational. KDN is promising it will be operational by the end of first quarter 2007 and that prices will be 20% cheaper.

Elsewhere in the market, the new VoIP operators are finding it difficult to get interconnection agreements and to get proper service from interconnect service providers. Telkom Kenya is charging absurdly high prices but has at least reached interconnect agreements. Nevertheless the new fixed wireless operators – Flashcom and Popote – are having
difficulties: customers are unable to receive or make calls to certain countries. Apparently anyone who calls a customer number of these fixed wireless operators from Germany gets a number unobtainable.

Access Kenya’s Yello VoIP service has been aimed at corporates and has attracted 250 customers who generate 120,000 minutes a month. But it has had difficulty getting interconnection agreements with the mobile operators. It made a complaint to regulator CCK in April and became so frustrated that it said it would run an advertisement publicising the
position. Safaricom came back to the table but Celtel refuses to enter discussions, saying that it will do so in its own time.

Kenyan ISPs are under heavy pressure from all the new operators. Flashcom and Popote are taking more money from data than voice at the moment as customers are primarily signing up for cheaper Internet access. Also the introduction of EDGE services by Safaricom is eating into their high-end customers: one ISP’s CEO admitted privately that he
was losing hundreds of customers a month to these new competitors. The challenge for everyone in the market will be whether they can take the soon-to-arrive cheaper international bandwidth and use it to transform the market.

OPEN ACCESS SAT3

4

I woke up to the fluctuating sound of the power system, the generator of the hotel I was staying in had taken over from the national power grid which is loadshedding on an abitrary basis. This is Banjul, the capital of Gambia which recently hosted the African Union meeting. The day before i drove on a smooth road from the airport for about thirty minutes to my host’s office then to the hotel where i was booked to stay – a really nice place which is expanding.

I wondered for a longtime on my bed about the power problem contrary to the good road on which i drove, later i was told one of the major power units of the country had gone down hence the loadshedding which also made using of the mobile network almost impossible. My mind quickly shifted back to my challenge and the subject with which i went to bed, OPEN ACCESS and SAT3 what do they have in common or are they mutually exclusive. Same as the good road i drove on and the bad power experience, do they have anything in common or are they mutually exclusive.

Road and Power are necessary ingredients for development and they compliment each other and so i started to draw the same similitude and relationship between OPEN ACCESS and SAT3, from my bed to breakfast i carried my able assistant (the new Macbook Pro) and we outlined our thinking and considerations of the subject. Please enjoy.

Since publishing the Open Access EASSy paper @ blogs.law.harvard.edu/eric/2006/10/20/open-access-eassy (you must read it to understand this paper), I have being challenged on the viability of Open Access to SAT3 and questioned on the need to institute the same standrards for both cables though we all know that SAT3 is already established and EASSy is yet to be. In this thesis I make an attempt at upholding the same Open Access structure and principles of EASSy to SAT3 – this is possible because both cables lie in the same realm but the context of their execusion are different. This is ONLY possible because of the window of opportunity presented by the end of exclusivity by the historic operators on SAT3 in April 2007 so I also suggest a process approach.

For the records, SAT3 was established with an exclusivity period to recoup investment by the historic operators and this is due in April 2007 at which the SAT3 country governments can either entrench the exclusivity of the historic operators or consider other mechanisms such as what an proposing. SAT3 stands both as a pillar of hope and despair for the African continent; hope because it was the first cable and there is an opportunity for it to significantly change bandwidth prices based on it’s non-performance, despair because we may decide to keep things the way they are currently and continue with the incumbency and high bandwidth prices.

The reasons for the non-renewal of the exclusivity range from, the historic operators haven recouped their investment in the cable at high cost since the inception of the cable and yet made fiber bandwdith more expensive than satellite capacity. Secondly we know that the loan granted by the WorldBank to the historic operators for their contribution to the SAT3 cable was guaranteed by their respective governments hence the onus lies with the government after supporting the private interest of the historic operators to now consider the public interest of providing cheap and affordable bandwidth for socio-economic development.

If the SAT3 goverrnments and regulators collectively or individually decide to end the exclusivity in April 2007 then the question to me is, what steps should they take towards Open Accessing SAT3? I don’t hold monopoly on the steps and process because national and or regional relationships coupled with on the ground details must be taken into consideration but I would proceed to outline what I see as the larger framework of what is possible in terms of structure, principles and processes – same as for the EASSy cable. Hopefully other cables or subsequent ones would adopt or follow the same strucure, principles and process to have the desired impact.

For the records again, I applaud the work done by the Open Society Initiative for West Africa (OSIWA @ osiwa) and other institutions for not only holding two (2) workshops to discuss the SAT3 issues but bringing a community of engagement, culture of awareness of the issues at stake and channelling internal capacity within the various constituencies ie governments, regulators, private sector, educational institutions and Civil Society to understand whatever decisions they make regarding the cable. My effort in this paper is to compliment such efforts with an adoption that considers some elements and layout a general framework based on the several discussions and engagements.

Declaring SAT3 an “essential facility” would mean that it holds much in the public interest so must be treated with the public good as primary and other consideration as secondary. Private consideration would be first on the secondary ladder because that is important for the running of the public entity. Am not for once suggesting a move from an extreme private position to an extreme public consideration, but rather my suggestion is to use minimal public holding as a temporal measure to move from an exteme private interest to a balance between the private and public consideration. Open Access is about balance and consideration of the various interests.

The governments holding the essential facility in trust after declaring it so is only a temporary measure which must be seeded quickly to a multi-stakeholder institution which would work in the interest of the various constituency and ensure that there is a clear reflection of equity. Regulatory and public policy must recognise the establishment of the essenttial facility which in this case would be “infrastructure provider” – providing infrastructure for the other service providers wthin the value chain.

In some cases the regulatory and public policy environment must create the structural change from a vertical to a horizontal layering communication system and that enables the change process. Whatever the case may be, the first fundamental step is the re-alignment of the communication paradigm where there is a distinction between infrastructure and services. This means a move from the vertical to the horizontal communication system. The essential facility in this case, the SAT3 country segment would constitute the infrastructure provider which DOES NOT provide services on the value chain. Ghana, Nigeria, South Africa and Senegal has hinted that they are going to adopt this approach post April 2007. In the case of Ghana, the government has also contracted the Chinese to finalise the nationwide fiber network which was owned by the Volta River Authority called Voltacom. Voltacom would be merged with the SAT3 country segment to form an “infrastructure provider” which would provider international and national bandwidth infrastructure.

Owership of the infrastructure provider is the next consideration, enjoining a multi-stakeholder ownership model ensures that there is balance of power, money and interest. It is in the interest of the government to ensure that this happens so that they are not labeled as “corrupting” the entity. The mechanism is for the government through an initial private and or public offering to invite the private sector, educational institutions, civil society, investors, PTTs and the consumer to own a part of this entity through a transparent and neutral process. Enlisting the infrastructure provider on the stock exchange would ensure that it is subject to the dictates of that environment ensuring access and commonality on ownership.

SAT3 at this point would have adhered to Open Access in terms of the structural change below;

Within the structural framework, the cable would have differentiated “Infrastructure” from “Services” where Infrastructure is seen more in the “Ownership” realm whiles Service is seen in “Access to capacity”.
The most distinguishing feature of the Open Access approach is that, ownership of the infrastructure DOES NOT GUARANTEE any access (discriminatory or not) to capacity on the value chain for the provision of service to the market. The respective country capacity would be on the money here.

A set of principles would hold for the ownership of the cable and those principles would be different from those for access to capacity.

Infrastructure ownership principles for the SAT3 cable would include;
The ownership of the cable must be in a public private partnership involving Government, PTTs, ISPs, Educational Institutions, Civil Society and Consumers.
A fair distribution of these constituencies from the member countries in an equal sub-regional distribution leading up to the Board of Directors of the enterprise in case a regional approach is adopted like EASSy.
The same set of rules must be established to identifying the various shareholders from the various countries in the different constituencies, again this applies to regional.
For the purposes of this exercise a Special Purpose Vehicle (SPV) or a legal entity with an African wide structure and majority Africa ownership should be considered
The essential facility must have a public interest combined with a private sector approach in it’s business model in order to ensure cheap and affordable bandwidth to the end-user.

Value Chain access to capacity for service delivery principles are;
The essential facility must sell capacity to all entities who meet the legal and regulatory requirements in each country directly and non-discriminatorily.
Service Providers shall be offered Transport Infrastructure Layer access to different capacities depending on their requirements.
End Users shall be free to choose any local Service Provider connected to the National and or Regional Network.
The essential facility shall not compete with Service Providers (its customers) by offering services at the Service Layers directly to End Users.
All countries must create a regulatory structure that recognizes the essential facility.
The essential facility shall be formed, owned and operated in such a way as to facilitate competition and to foster innovation at the Services Layer, and where practical and commercially viable at all levels, with a view to maximizing usage of the network and benefits to the End Users.

Once these are in place the market structure would align such that the infrastructure cost which is almost always duplicated several times by service providers is consolidated. That reduces the barrier to uptake on the service side and makes the service providers focus on services and competition in the market place for innovation and customer service delivery at cheaper or affordable cost. Ultimately the customer benefits and the uptake of ICTs as a sector and cross sectorial enabler would be enhanced.

This sets out the framework for Open Access as it relates to the SAT3 cable but I must admit that this is not the ONLY approach in terms of process but structurally and principles wise, the above is not far from wrong. The devil as they say is always in the details, though.

NB: These principles and structure are drawn from the Open Access study conducted by Anders Comstedt, Eric Osiakwan and Russell Southwood for InfoDEV @ the WorldBank – www.infodev.org/en/Project.80.html

KENYA is RISING

3

Am sitting in my hotel lobby after a long day of work in Joburg, trying to eat some dinner whiles i deal with e-mail backlog on my laptop…..:-)

A friend walks in as he had promised to deliver a copy of the latest edition of the Computer and Communication Africa (CCA) magazine published by AITEC and Multimedia Group online @ http://new.aitecafrica.com/node/11 – with hardcopy.

You must be proud of yourselves, Kenyan was my immediate post to the KICTANET list – i just got a copy of the last edition of CCA for 2006 and the lead story is “Kenya’s drive to become ICT powerhouse” and much more on Kenya.

While i have being familiar with the momentum there i was amazed when i read the stories about the pace of engagement. In some ways this confirms my believe that Africa has pockets of excellence but what we need is SPEED to SCALE and definately you guys are on a FASTRACK. We are with you and i want to personally congratulate the level of engagement from the various constituencies and not belittling the others by singling out the exemplary leadership of the PS, Dr. Ndemo and Hon. Minister, Mutahi Kagwe.

Thanks to AITEC for throwing the spotlight @ http://new.aitecafrica.com/ and not to promote AITEC but i think we should all get copies of the hardprint….:-)

Go Kenya.

The BPO Value Proposition for Africa

4

Am on the Kenya ICT Action Network (KICTANET), a multi-stakeholder discuss list and Mr. Waudo asked “Thanks to PS Ndemo for bringing this out. As for Wafula’s question, the work force survey undertaken by the CSK earlier this year revealed that there is very little linkage between what the ICT training institutions (including Universities) are producing and the requirements of the industry either now or in the foreseeable future. Certainly there appear
to be no mechanisms to facilitate such linkage. Perhaps something could be done now before we find ourselves in India’s position?”. Below is my intervention;

We all know that one of the demons that has held back Africa’s rise is the DE-LINK between industry and academia (research) and also with governments. Prof. Ernest Wilson’s (of Maryland University) squad model makes the argument that you need a constant interaction between these constituencies for growth and innovation to take place. He argues that Silicon Valley is a clear example.

My proposition therefore as a way to answer the question above is to leverage the BPO opportunity. Most African governments are at least on board the BPO wagon so my idea is, lets establish the BPOs in the University environment given the current public policy favouring. The BPO companys can take advantage of cheap but good student labour whiles they build the real estate for their operations using university land on a “build operate and handover basis”.

The Universities then get real estate which they use for their long term expansion of physical infrastructure. The BPO companies get their work done cheaply and when they migrate in the long term, much value would have being gained. The University students get work experience for the long term job market entry and also interim cash to support their University education. This also gives the non-computer related students some basic skills and exposure and for the CS, EE etc students, they build their internal capacity not only to take calls and do word processing but more technical stuff. They would soon be writing software for those BPO companies. Mostly importantly this becomes the nucleus of the government/academia/private sector LINKINING which would grow into other areas.

Hence the value proposition of the BPO banwagon is, it gives us a foot into the door but we must move up the value chain very quickly or we would end up doing the low end jobs which would make us less competitive in the Knowledge economy.

When I proposed this to my Ghana Cyber Group friend (Yaw Owusu, leading the way with a private TechPark in Ghana) whom i have cced on this mail, he said, then the Tech Parks (BPOs + more) should be in the University/Research Environment and his example of been able to acquire land from the Ghana CSIR which is close to the University of Ghana would be a good prototype.

This is the story am going to be telling at the the first University Leaders Forum in Cape Town to which governments, academic leadership, private sector and Civil Society has being convened.

OPEN ACCESS EASSy

5

In late 2004, I was admitted to the Digital Vision Program @ Stanford University and around the same time invited by the WorldBank through its Information for Development Programme (infoDev @ www.infodev.org) to join other colleagues to conduct a study “Leveraging New Technologies and Open Access Models: Options for Improving Backbone Access in Developing Countries (with a Focus on Sub-Saharan Africa)” . The study was done under the auspices of Spintrack AB @ http://www.infodev.org/en/Document.10.as….

Recent experiences in a number of countries with “open access” models for the financing and ownership of backbone telecommunications infrastructure offer interesting insights into how new technologies, including the migration to Internet Protocol (IP) based networks, make possible new technical and business models for financing this infrastructure buildout. Africa can learn from these experiences and adapt. In this paper, I look at Open Access in relation to the East African Submarine System, known by the acronymn EASSy (see http:// www.eassy.org). In the wake of the fallout in moving this project forward, I build grounds for commonality, charting the path for re-engagement by the various constituencies.

Open Access in the context of communication (Open Communication) means that anyone, on equal conditions with a transparent relation between cost and pricing, can get access to and share communication resources on one level to provide value added services on another level in a layered communication system architecture.

The concept of Open Access to communication resources is central in the ongoing transformation of the communication market from a “vertically integrated” market with a few operators owning and operating everything between the physical medium and the end-user, to an “open horizontal market” with an abundance of actors operating on different levels and providing value added services on top of each other. Put plainly, anyone can connect to anyone in a technology-neutral framework that encourages innovative, low-cost delivery to users. It encourages market entry from smaller, local companies and seeks to ensure that no one entity can take a position of dominant market power. It requires transparency to ensure fair-trading within and between the layers based on clear, comparative information on market prices and services. It seeks to build on the characteristics of the IP network to allow devolved local solutions rather than centralized ones.

Open Access is also about broad approach to policy and regulatory issues that starts from the question: what do we want to bring about outside of purely industry sector concerns? It places an emphasis on: empowering citizens; encouraging local innovation; spurring economic growth and investment; and getting the best from public and private sector contributions. It is not simply about making micro-adjustments to the technical rules of the policy and regulatory framework but seeking to produce fundamental changes in the outcomes that can be delivered through it.

The study published in August 2005, came at an opportune time, in that it helped to inform and shape the international debate and planning for the EASSy project now in the final planning stages. infoDev then provided follow-up support for this dialogue and planning process both by supporting the coordinating role of the NEPAD e-Africa Commission relative to the EASSy project, and by supporting dialogue and joint planning among civil society groups, and other key stakeholders, seeking to promote open access approaches within Africa.

This ensured acceptance of open access by the government, incumbent PTTs, Operators, ISPs, educational institutions, private investors and more generally by civil society. However at the signing of the EASSy protocol, which is the political framework for the build-out, there has been a division among the various constituencies on how Open Access is enshrined in the protocol.

EASSy in adhering to Open Access must align with the structure and principles below;

Within the structural framework, the cable must differentiate “Infrastructure” from “Services” where Infrastructure is seen more in the “Ownership” realm whiles Service is seen in “Access to capacity”.
A set of principle would hold for the ownership of the cable and those principles would be different from those for access to capacity.

The most distinguishing feature of the Open Access approach is that, ownership of the infrastructure DOES NOT GUARANTEE any access (discriminatory or not) to capacity on the value chain for the provision of service to the market.

Infrastructure ownership principles for the cable include;
The ownership of the EASSy cable must be in a public private partnership involving Governments, PTTs, ISPs, Educational Institutions, Civil Society and Consumers.
A fair distribution of these constituencies from the member countries in an equal sub-regional distribution leading up to the Board of Directors of the enterprise.
One set of rules must be established to identify the various shareholders from the various countries in the different constituencies
For the purposes of this exercise a Special Purpose Vehicle (SPV) must be a legal entity with an African wide structure, which must must be majority African owned in order to trade in the various countries.
The SPV must have a public interest combined with a private sector approach in it’s business model in order to ensure a “regulated return on investment” to ensure cheap and affordable bandwidth to the end-user.

Value Chain access to capacity for Service delivery principles for the cable are;
The SPV must sell capacity to all entities who meet the legal and regulatory requirements in each country directly and without discrimination.
Service Providers shall be offered Transport Infrastructure Layer access to different capacities depending on their requirements.
End Users shall be free to choose any local Service Provider connected to the Regional Network.
The SPV shall not compete with Service Providers (its customers) by offering services at the Services Layer directly to End Users.
All countries must create a regulatory structure that recognizes the SPV.
The SPV shall be formed, owned and operated in such a way as to facilitate competition and to foster innovation at the Services Layer, and where practical and commercially viable at all levels, with a view to maximizing usage of the network and benefits to the End Users.

This sets out a framework for Open Access as it applies to the EASSy cable. .

NB: These principles are drawn from the Open Access study conducted by Anders Comstedt, Eric Osiakwan and Russell Southwood for InfoDEV @ the WorldBank – http://www.infodev.org/en/Project.80.htm…

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