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African telecommunications at the crossroads: what's next

African telecommunications at the crossroads: what's next

Sub-Saharan African nations have been pioneering regulation for over ten years, opening up competition and offering communications providers to numerous individuals. Nevertheless, competitors has turned to stabilization and the new knowledge-based future poses troublesome challenges.

The interval 1994-2010 is more likely to be thought-about the golden age of regulation in sub-Saharan Africa. New regulators licensed keen buyers trying to compete with each other to become profitable in this new business. The thirst for service on the part of new cellular community operators has accelerated progress at a dizzying tempo.

It purchased new wealth for operators, businesses and authorities (via new taxes) and opened up the financial opportunities for brand spanking new social and African residents.

Jumping and working underneath the harshest circumstances of fastened know-how gave everyone the feeling that it was virtually inconceivable to accomplish

The achievements of this new market gave African nations a justifiable satisfaction in their success. Jumping in exhausting know-how and operating underneath the most troublesome circumstances gave everyone the feeling that it was virtually unimaginable. Improvements corresponding to cellular cash showed that change was potential at all levels of the financial system, even amongst the poorest citizens.

The enemy of those modifications was typically state-owned incumbents who opposed the change at each flip. Their in depth monopoly rights weren’t accompanied by an identical sense of duty for the public duties they have been purported to perform.

A stunning spectacle

However even earlier than the transition to all knowledge media came the next tectonic change in telecommunications, a stunning spectacle of just about stratospheric progress hid quite a lot of less welcome developments. The lately defeated communications regulators have been typically far from unbiased and, in lots of instances, managed the present market reality relatively than focusing on the general image of what regulation meant: offering communications providers to all citizens. As time went on, as the MNOs turned stronger, one or more of them took on the established position of a state-owned operator and tried to say their newly acquired privileges.

Now, the challenge of irreversible change in lots of highly-controlled vertical markets, together with voice and textual content messaging to the all-data platform, has put the business model of all MNOs beneath strain. A knowledge-driven future signifies that all providers can be delivered by way of the similar digital platform, including providers corresponding to financial costs (see Appendix 1).

This digital future represents a serious new funding in infrastructure capable of carrying giant quantities of knowledge. Nonetheless, lower fees than voice and SMS have given in the past. It puts the traditional MNO business mannequin – historically based mostly on voice and SMS revenues – beneath appreciable pressure.

In consequence, many markets have, amongst other elements, been consolidated. For example, Millicom's Tigo sluggish exit from sub-Saharan Africa is the most dramatic of these mergers.

Market Analysis

Sub-Saharan Africa consists of 49 nations, so it’s typically troublesome to generalize additional. broad developments. With no giant ISPs at all, normally, a relatively small variety of operators generate most of the income in each market. Alongside this, there’s the basic economic competitors assumption that more gamers in the market mean its competitiveness.

The good news is that 53% (see Observe 2) of 49 in Sub-Saharan 49. African nations have both a model of three or four cellular operators or, in the case of Ghana, five. The varied versions embrace the MNO created by licensing a former state-owned incumbent fastened network operator. State-owned MNO shouldn’t be all the time the formulation for business success, as Gamcel and lots of others present.

Even these with a wider range of operators continue to endure from things that create less than optimum market circumstances

The dangerous news is the reverse of this coin: 47% of countries still have markets with both a monopoly (four nations) or a cellular duopoly (20 nations) ). In different words, after more than 20 years of regulation, slightly below half of the continent has nothing that can be fairly thought-about a competitive market.

But even these with a broader vary of operators still endure from issues that create lower than optimum market circumstances. In two nations – Angola and Namibia – the authorities controls capital.

Two nations – Kenya and Senegal – have a clear dominant participant, and in each instances the government owns a big share of those operators. Even in the absence of a transparent case of a dominant operator, some MNOs have vital market power by having the largest fiber-optic community in the country.

Patronage Networks

In Cameroon, the state-owned incumbent Camtel has a monopoly on both wholesale networks and landing sites. Only 18 African nations have been privatized by state-owned incumbents, and lots of of them are ineffective, filled with safety, and are a source of revenue for the ruling politicians.

In addition to these formal governmental connections, there are also customer relationship networks working by means of native shareholdings granted by the authorities, regulators, and operators. Angola and Cameroon are by far the most blatant examples, although their former president seems to need to change things.

Continued business pressures are additionally more likely to make this market significantly much less aggressive. There are operators in the seven extra aggressive markets which are more likely to merge or close in the brief time period. In consequence, in lots of nations, cellular area – which accounts for the majority of voice and knowledge revenues – has turn into less competitive.

Unintended consequence

The unintended consequence of granting frequency licenses to operators at excessive costs by way of auctions or otherwise has been to create a critical barrier to entry. The price of entry, coupled with the dominance of present MNOs, undermines most makes an attempt to create new enterprise fashions. Solely an operator with large wealth and political backing, resembling the current instance of Reliance Jio in India, can create a enterprise model that suits a extra data-driven market.

The cellular operators, who typically needed to struggle tooth and claw for truthful remedy from state-owned incumbents, have now constructed a ladder behind them. Underneath the strain of the so-called over-the-top gamers, they have fought conventional victory centers for a hard firewall. As increasingly more Africans turn into day by day Web users, it’s affordable to ask whether or not cellular operators permit sufficient "air" for the new digital ecosystem (by means of revenue sharing) or whether they seek to handle these new content material and repair revenues.
, have struggled to seek out capital, and have typically had no market insight into serving a comparatively small number of company shoppers. For these unable to boost capital on the inventory market, the value of home debt remains at double digits throughout a period when the value of worldwide capital from Europe and the United States has by no means been lower.

Giant-scale Internet There are few returnees in several nations. There’s little or no progress from beginning a small community communication company and creating right into a a lot larger one. There’s also no approach to create a large number of companies of all types. As certainly one of the leaders of certainly one of the greater ISPs lately stated, “The regulator is in search of competitors via local entrepreneurs, not the bigger operators. Nevertheless, these supply extra jobs and choice for native users. “

Globally, in 2018, 67% of people have been distinctive cell phone subscribers and 47% of wi-fi Web customers. In contrast, only 45% of individuals in sub-Saharan Africa have been distinctive cellular subscribers and solely 24% have been cellular Internet customers. However even the latter figure overestimates Internet utilization: In line with service MTN knowledge, with the exception of Ghana and South Africa, solely 30-40% of its customers are lively, configured to use more than 5 MB / month. The size of this challenge of bridging the digital divide is giant and not much will happen until a better regulatory setting is created (see word three).

Knowledge prices have fallen on many continents, but far too typically costs are reasonably priced

. The first is that 30% of people in sub-Saharan Africa don’t use cellular broadband, despite having a cellular broadband sign in the area. There are various obstacles, reminiscent of gender, schooling, literacy and languages, but the simplest answer is the value of the knowledge itself.

Knowledge prices have fallen in many continental nations, but too typically they continue to be above what is fairly priced, especially in low-income rural areas.

The second question is harder to unravel: 47% of Africans stay outdoors cellular broadband. Underneath market strain, it’s unlikely that the majority cellular operators will seek speedy deployment in these unassigned areas. With a couple of notable exceptions, state-owned operators and common service techniques have very restricted success in resolving the voice-gap, so they’re unlikely to succeed with info.

Given these challenges, the place ought to African regulators invest? their focus? If every little thing (including voice over issues like WhatsApp) is more and more simply part of a universal knowledge service and increasingly more African companies, government and civil society are dependent on entry to info to do what they need to do? [19659002] The objective should undoubtedly be to set up info networks that provide the highest high quality connectivity for most individuals in the country at the lowest potential value. The revenue ranges of users in Africa will not be the similar as those in Europe and the United States, and subsequently costs for consumer info have to be lower than at present in virtually all sub-Saharan Africa.

Fiber arteries

At the heart of the way forward for African knowledge are fiber-optic transmitters passing via the continent. As a result of fiber networks are usually in a monopoly position as a consequence of their high capital prices. If there is only one environment friendly backbone network, then the worth and high quality of service have to be regulated as a way to achieve the above pricing objective.

Fiber infrastructure is a vital national property and ought to be handled like other key infrastructures akin to power and water. . Public ownership of fiber networks via government is just not essentially the greatest and solely option to allow digital transformation. It’s a curious incontrovertible fact that state-owned fiber networks virtually all the time charge more for capability than comparable competing networks.

Regulators have to concentrate on decreasing costs at the wholesale degree to permit for last-mile competitors and general billing. retail costs. In a light-weight request, this is able to be completed by requiring that a publicly obtainable wholesale worth card (together with terms and circumstances and prices) be made obtainable by any dominant wholesale network operator, public or personal. At a harder stage, this is able to mean agreeing on a maximum wholesale worth with a clearly calculated method.

Governments (both local and national) and regulators must make sure that the value and ease of fiber development is lowered. to their lowest practical degree. Historically, street rights (permission granted by property house owners to move fibers via their country) in sub-Saharan Africa have been a type of local government taxation.

Typically, the strategy of acquiring these permits is both lengthy. and bureaucratic. As soon as acquired, there’s sometimes no authorized or operational framework for shielding fiber optic cables from different development work, reminiscent of street enhancements. Street rights must be coordinated via an agency that may present fast response occasions and handle the protection of subsequent work. Where applicable, municipal authorities ought to actively spend money on the development of open access fiber channels as a way to dramatically scale back the prices for operators of investing in fiber networks in their cities.

Selling market entry for brand spanking new operators

So as to create new competitors, they should have vital incentives to stability the market advantages of larger market organizations, corresponding to cellular operators. There is a want for a sympathetic regulatory framework that doesn’t treat new, smaller operators on the similar terms as larger cellular operators.

For example, is the permission of ISPs essential? A easy registration course of with a low administrative charge (resembling in Canada, New Zealand and the US) can be completely enough. If there are lots of ISPs and one fails, the entire country won’t be affected.

Licensing costs are just one small part of the entry limitations that smaller operators face. Spectrum costs – decided by the worth paid by larger corporations – now act as a method of excluding others. Each new iteration of cellular know-how – 3G, 4G, 5G – again creates a brand new worth barrier for smaller operators. Subsequently, as outlined under, there have to be a variety of totally different approaches to providing cheaper spectrum availability from the "free" spectrum (as in present ISM bands) for frequency allocation.

Licensing prices are only one small part of the limitations to entry that smaller gamers face

Finally, entry to capital have to be low to allow smaller entrants to develop over time. A revolving mortgage fund might be set up to permit corporations with lower than a certain degree of turnover to use for extension loans. These quantities can be modest in comparison with MNO investments. However they might help nurture all kinds of data providers with a wider consumer model.

Such variations to favor smaller operators are very attainable. For instance, Kenya's communications regulator is giving an area company, JTL, to unfold its charge for a $ 25 million frequency license over a 10-year period. This can be a step in the proper path, although spectrum costs are nonetheless excessive. Nevertheless, the have to service a spectrum license loan might encourage operators to build infrastructure in additional worthwhile, densely populated urban areas than in sparsely populated, low-income rural areas.

Spectrum Pricing

Spectrum pricing prevents the opening up of latest markets, especially to low-income markets. Widespread sense tells us that in Lagos, Nairobi or Dakar, for example, a person can afford larger common frequency prices per head than those dwelling in a rural village: one measurement matches all. Even worse, the spectrum worth set by a very small number of consumers then distorts the potential shape – both on and off the market. Governments and regulators which are tempted to maximise the revenue from the sale of spectrum rights create an unintended consequence that makes it troublesome for low-income users to offer an economical service.

The large advantage of ISM, which is out of license, is that the whole knowledge ecosystem has advanced utilizing relatively inexpensive, plug-and-play Wi-Fi know-how. Actually, most of the visitors comes from these networks and never from the costlier MNO networks traditionally. Regulators who need to promote cheaper info should pay extra consideration to innovation in spectrum pricing elsewhere in the world.

Dynamic Frequency Know-how (formerly referred to as TV White Spaces) offers a confirmed route to maximize spectrum usage

The USA is exploring expanding free spectrum availability in the ISM bands 5-6GHz. As well as, it opens up the Citris Band Radio spectrum (CBRS) for 3.5GHz LTE sharing, one thing that’s virtually unnoticed elsewhere. The 1.7 GHz and a couple of.4 GHz frequencies even have present ISM frequencies, which are ideal for broadband backhaul and are troublesome to access in lots of African nations.

Dynamic frequency know-how (formerly generally known as TV white areas) offers a proven route for maximizing. use and sharing of frequencies between totally different actors. In lots of elements of sub-Saharan Africa, spectrum is used in virtually unused rural areas, but MNO protests loudly each time it tries to defend its use. One strategy to breaking this logic is to create a secondary use of spectrum regulation that permits small companies to lease from unencumbered rural areas at a a lot lower value, or perhaps in change for a reduction of universal service fund contributions by the main licensee. 19659002] The key to creating higher innovation and competition is the want without spending a dime spectrum to allow small rural players to rejoin the core community. Typically, one operator is able to lock in new and potential small entrants with the wholesale terms and circumstances it presents. For example, the 11 GHz band gives a whole lot of lead time over long distances, and there are several progressive know-how vendors that sell cost-effective units that can make this attainable.

Adapting Know-how Variety

Present MNOs use similar methods to function. their network. Core business elements are often outsourced to the similar vendors, from possession and use of towers to billing techniques and buyer administration. Major applied sciences are bought in giant packages from a very small number of vendors. Not surprisingly, there’s not much competitors between operators and, regardless of their greatest efforts, there’s typically no difference in the quality of service they supply.

Info networks permit for a a lot wider vary of hardware. used to offer connections over the community and to clients. Much of what is constructed into the hardware is now a software program choice that gives extra alternatives to improve and modify present networks than present analog ones. Smaller corporations typically have better entry to such know-how, which may give them a aggressive edge over their bigger rivals for all the necessary velocity and worth wants.

Exhausting to succeed in. rural areas

MNOs should generate returns for his or her shareholders and subsequently aren’t all the time in the greatest place to show a low revenue revenue market with scattered potential users. Their overhead fee signifies that their minimum paying buyer base per base station is low in the hundreds. Whereas community infrastructure costs are likely to fall for all operators, together with MNOs, they’re nonetheless comparatively expensive organizations making an attempt to succeed in out to a gaggle of people who require low-cost solutions. The identical applies to state-owned incumbents, who’ve many comparable kinds of overheads and who, as already said, discover it troublesome to focus on such a process.

There are two forms of organizations which will fulfill this service provision. gap: small-scale ISPs and social networks. Regulators ought to encourage native entrepreneurs to set up knowledge providers in poorly served or lacking areas. These kind of local ISPs might start to determine the fringe markets that have potential revenue in small communities.

Cooperatives in rural communities could be numerous. They are often as small as Lawrencetown, Nova Scotia, Canada. They will meet entry challenges in areas that are not worthwhile for giant operators, corresponding to Rhizomatica in rural Oaxaca in Mexico or Zenzelen in the Japanese Cape. They will embody basic rules, as Guifi.internet does in Catalunya, Spain. They allow farmers to dig their own fiber bands to offer 1 Gbit / s (symmetric) Internet service, as Broadband for Rural Nordic (B4RN) does in the UK.

All these buildings and approaches are relevant to the state of affairs in Africa. . Local organizations help hold income in native communities.

It’s fascinating to note that reasonably priced broadband in rural areas is certainly not restricted to African or even low-income nations. The necessity for regulatory reform for inclusive access is international. With out modifications, regulators have hit the brick wall. A small number of cellular operators might not create a various and native digital ecosystem for African residents. Regulators have to act directly to open up their markets to a extra numerous set of reasonably priced access operators and solutions.

  • Writer's Bios: Russell Southwood is the CEO of the Balancing Act (balancingact-africa.com), an African-language IT professional. Steve Track can also be an African ICT skilled and presently spokeswoman for the Community Startup Useful resource Middle and a stranger at the Mozilla Basis.
  • Reference Notes: 1 Southwood R (2018). Comply with the money. Intermedia 46 2. 2 Rounding signifies that these figures do not exceed 100%. 3 Knowledge on this part are from: Cellular Financial system – Sub-Saharan Africa 2019. GSMA.
  • Credit score: Intermedia, International Institute of Communication