Africa has a unique opportunity to make the transition to IP data more quickly than other continents. Using IP data will help reduce costs and could produce some of the cheapest data delivery in the world.
Russell Southwood explores how Governments and regulators could create the right conditions to help bring this about.
One day everything will be data and voice will not exist as a separate category, needing different technology. The transition in developed countries has been relatively slow. However, at the international level large amounts of calls now move through IP and MPLS based networks.
At the consumer level, every year consumer software like Skype and Viber are used by larger number of people. Increasing numbers of people use things like Facebook and What’s App to convey the kinds of messages they used to send over SMS.
The transition is slow because the industry making it ‘ the telecoms industry ‘ is caught between irresistible forces and an old business model. They don’t want to become a dumb pipe but all the underlying business logics point to the next big stage being about large ‘dumb pipe’ companies.
In terms of this transition, the position in Africa is much worse. The mobile companies know that they have to make a transition to data revenues but (with certain notable exceptions) haven’t really embraced the change.
They see the Internet and data as a capital-intensive business for which they don’t really have the networks. The returns on data are not anything like those for voice and this troubles those who lived through the ‘gold-rush’ returns of the last decade.
Data is all about content and African users have already voted in large numbers for things like Facebook, not for content products produced by mobile operators. The content deal offered to Africa’s content producers is still skewed so heavily in favor of the operators that it is impeding development of a local content ecosystem.
So why should any of this matter to Governments and regulators? Because whilst mobile voice and SMS were the first wave of the communications revolution, these cannot be used to deliver lengthier or more complicated communications. You need Internet-enabled devices to be able to make companies more efficient and public sector services like health and education more effective.
For too many countries, Internet is still seen as second fiddle to voice in terms of Government and regulatory thinking. There needs to be a focus on three things: getting Internet costs down for end-users; increasing the reliability of the Internet; and pushing out access to a much wider number of people.
These objectives need to inform the roll-out of more fibre networks and the next generation of mobile Internet, LTE. It is no longer good enough to talk about 256 kbps as broadband as video will be what users want as next generation services arrive.
What follows below is a sketch of the kind of things that Government can do to accelerate the pace of change:
Accelerate competition at all levels
Even in the more competitive countries, mobile operators with large fibre wholesale networks are hanging on to ‘rent-seeking’ wholesale pricing. In less competitive countries, the discussion about this kind of market blockage has barely started: state monopolies in places like Angola, Cameroon and Togo still rule with high prices and poor quality.
Regulators need to open up competition to utilities that have fibre assets and allow them to make their capacity available competitively in the market. They need to encourage ‘carriers’ carriers’ to roll out and offer competitive wholesale fibre networks from the private sector.
At the local level, they need to ensure that there is fair and open access for those wanting to roll out local access networks so that they can use wholesale capacity to deliver competitive prices. Insurgent challengers offering household fibre to the home and LTE should be actively encouraged through the licensing process.
These new data licences should not just focus on delivering Internet but allow this new breed of operators to get access to some part of the voice markets. MVNOs should be encouraged that operate voice services over data. Mobile operators will be shrill in opposition but the response should be: why are you not already doing this?
Where revenues make competition hard (like rural areas), network consortia should be considered. Where the smaller mobile operators are finding it hard to compete with a dominant mobile operator on network, they should be encouraged to form wholesale network consortia.
Bring prices down and get use levels up
The focus needs to be on getting Internet access costs for African end-users down. The targets adopted by the Alliance for Affordable Internet are a useful starting point. The rapid growth of African Internet users over the last five years has been in large part because prices have come down.
Information is a powerful tool in this battle. Only a handful of regulators publish Internet subscriber numbers and rates charged by operators. Regulators need not only to collect Internet user numbers from operators but to publish them. They also need to publish quarterly Internet access cost data, cross-compared to help consumers choose the best deals.
Regulators need to make annual Internet access cost price comparisons and get operators to agree to bring prices down to more affordable levels. The sceptics may rightly protest at this point: how will this occur?
The new incumbents are the mobile operators and they have become accustomed to living a certain kind of lifestyle. To produce cheaper Internet services, they either have to cut costs or the regulator can licence others who can achieve this (see above).
Spreading Internet Coverage
In the best of African countries, there is a critical mass in urban areas but it is barely available in rural areas. There has been a lot of rather warming rhetoric about spreading services to rural areas (including voice) but the sad truth is that relatively little has happened relative to the scale of the task.
Mobile operators have more or less reached the edge of what they consider are addressable markets and on this basis, they should not be allowed to stand in the way of progress. The attitude from regulators needs to be: either get in there and develop services or stand out of the way and let others get on with task. They need to be made to offer fair and transparent interconnection rates for those who tackle geographic areas they won’t move into.
Technical innovation needs to be a cornerstone to work of this kind. The newer generation of low cost base stations and the TV White Spaces pilots offer interesting ways to reduce delivery costs.
For example, the Kenyan regulator CCK should offer a proper licence to the company delivering its TV White Spaces pilot operator rather than just a permission. These signals are crucial in terms of creating an emphasis on creating a new future.
These companies in areas the mobile operators think are not addressable should be allowed to offer IP voice and data services.
Getting the cost of spectrum down
Regulators we talk to tend to see spectrum sales as a revenue raising activity without making a vital connection. If you add a high level of costs on to an operator’s operating costs, it will pass these on to its customers.
The cost of the new LTE spectrum must not be sold in such a way that it condemns use of these new services only to high-end business users in the CBD and at the airport. Licence conditions can be used that place a premium on wider roll-out and lower prices: a simple conditional, if you do this on price and roll-out, we will cut your spectrum prices.
For rural areas, LTE is significantly more efficient for delivering spectrum over distance and the regulator could reserve certain geographic areas where they would offer those willing to invest, free LTE spectrum beyond a nominal administrative charge.
Quality, Quality, Quality
There has been an impressive group of regulators who have been prepared to take on mobile operators over voice quality. The issue gets mess in places because Government has failed to deliver adequate electricity supply, which needs to be dealt with separately (see below).
Regulators should start to carry out Quality of Service tests on data services and be prepared to issue fines against those failing to meet agreed standards. The regulator should listen to the industry and help get to grips with network blockages that are slowing everyone’s service delivery down.
Vandalism remains a huge problem: it comes both from over-enthusiastic employees (the cuts are too strategic to be otherwise) and thieves looking for copper. Regulators need to carry out education campaigns about how fibre is worthless and get operators to replace of much of it as quickly as possible. Government needs to pass a law that place draconian penalties on those who cut networks.
On the question of electricity supply, mobile operators and regulators need to lobby Government to provide electricity supply: diesel is expensive and polluting. New power distribution licences should be issued to allow private operators to provide power supply to all operators.
Africa cannot afford to wait for the future to arrive at its doorstep. The World Bank is fond of pointing to the relationship between an increase in broadband penetration and increases in GDP.
This may well be true but what is required to get this increase in broadband penetration is decisive action by Government and regulators to allow investors to get on with the job. Africa now needs lean companies that can deliver Internet at prices lots of people can afford.