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Africa: Imagining the Digital Future

AfricaFocus Bulletin
Jan 21, 2006 (060121)
(Reposted from sources cited below)

Editor's Note

Russell Southwood's Balancing Act Africa's News Update, coming out weekly in English and monthly in French, is packed with news about new developments in African telecommunications, internet, and computer technology (http://www.balancingact-africa.com). In the latest issue, Southwood imagines what the scene could look like five years from now.

This issue of AfricaFocus Bulletin includes the lead article "Imagining the Future: Africa Looking Forward Five Years from Now," and excerpts from several typical articles from recent issues, highlighting developments such as wireless access using lampposts. street vendors reselling mobile minutes, and the expansion of "grey area" voice communications over the internet While some of the technical terms used below are hardly general knowledge, these developments--with their potential for further dramatic reductions in the cost of communications within Africa and between Africa and the rest of the world--are of much wider than technical relevance.

For previous AfricaFocus Bulletins on issues related to information technology and communications, visit
http://www.africafocus.org/docs05/itc0504.php
http://www.africafocus.org/docs04/han0405.php
http://www.africafocus.org/docs04/chak0405.php
http://www.africafocus.org/docs04/ict0402.php
http://www.africafocus.org/docs03/it0312a.php
http://www.africafocus.org/docs03/it0312b.php

++++++++++++++++++++++end editor's note+++++++++++++++++++++++

Imagining the Future: Africa Looking Forward Five Years from Now

Balancing Act's News Update 288 (15th January 2006) http://www.balancingact-africa.com

[To subscribe, either in English or French:
: http://www.balancingact-africa.com/mailing_list/subscribe.php

To contact Balancing Act:
Russell Southwood, Balancing Act, 71 Crescent Lane, London SW4 9PT
Tel/fax: + 44 20 7720 5993 Cell: + 44 7973 561987
E-mail: editorial@balancingact-africa.com]

The start of the year always sees many predictions for the coming year and a certain amount of gloating from those who feel they guessed right last time around. Some predictions are easy. They are just about pointing to something that is about to take off. The start of Africa's broadband markets would be a typical example. Other predictions are less easy to make. However, making predictions in Africa is so much harder because so much depends on the often unpredictable mix of Government action and commercial strategy. It always seems to be a case of "if this happens, then that can happen". So this week we try to look forward to what the future might hold in three to five year's time.

These are not predictions but are an attempt to identify a number of key things that need to change in Africa in order for the Internet and telecoms sectors to continue growing and for them to play a significant central role in the economic growth of the continent. All of them require everyone involved to be able to make the leap of imagination that will enable a different tomorrow.

So let's try and imagine a future in which:

  • The cost of international bandwidth falls to near European levels: Those involved in the EASSy consortium are already talking about a wholesale price of just over US$1000 per mbps. It could be perfectly possible for the consortium to accept external donor financing and bring the price down to the US$500-1000 range. By itself, cheap international bandwidth will not make a change but unless the continent can get below the US$1800-2000 per mbps 'floor price' that can be achieved on satellite, it will continue to pay more than its competitor developing countries. In a continent with widely dispersed rural populations, satellite must continue to have a role to play but it is not the answer to getting more competitive, high-volume bandwidth.

  • The cost of domestic calls goes down to US0.5 cents a minute: It's happened elsewhere and if the mobile companies are to continue getting business growth for the foreseeable future, they will need to continue to produce lower prices in order to widen their markets. Sadly the worst of the mobile companies are still just "harvesting" the abnormally high rates of return that their high prices have bought with them and have forgotten that as "new incumbents" they might need to make real innovations as the market changes. The mobile companies are now nearing completion with network investment. It's relatively cheap to connect a mobile subscriber whereas rates are still high. For a fixed line operator, it's relatively expensive to connect a subscriber but the rates are relatively cheap. When the vast majority of people make a cell phone their main form of voice communication why does it command a premium in terms of rates? Convergence will put this strange paradox under close scrutiny. How can it make sense to offer a mobile service where the phone is locked to the local cell? The history of the rise of Reliance in India gives a clue as to how this situation will begin to break down.

  • Cost of calling friends, family and international business contacts abroad comes down to 5 cents a minute: At present, this kind of call in all too many African countries costs US$1 a minute using the incumbent telco. Truly competitive prices in the "grey market" show that this can easily go down to US$7-10 cents. If the interests of Africa's consumers (whether as individuals or in organisations) gets put first, then both regulators and operators would be really seeking to lower these prices. Low-cost broadband enabling voice offers can deliver this promise.

  • VoIP is legalised across the continent: Using VoIP will allow the possibility that incumbent telcos could work with the ISP sector to create an IP-based network that allowed locally-owned service businesses to flourish and to contribute to economic growth. The steady roll-out of fibre networks across the continent - with alternative infrastructure providers (like power companies) and carriers' carriers - will allow IP-carried calls to be made between African countries at a far lower cost than switching them via satellite to Europe or North America. The prices just have to come down below those currently offered on satellite.

  • The cost of reasonably-specified laptop comes down to between US$100-200: Nicolas Negroponte's "supply-led" dream is unlikely to succeed but someone will make the breakthrough before too long. A Chinese company has taken over IBM and it's likely that before too long its business strategists will turn their minds to how they can create new business in emerging markets. No-one is arguing that cheaper computing devices will overcome illiteracy levels but there is still such a large, unsatisfied market out there amongst those that are literate.

  • All government offices are connected and have access to both VoIP calling and Internet: So much of the development of connectivity elsewhere relied upon the creation of a "critical mass". Government (and not always national governments) have a key role to play in creating that critical mass. It's small wonder that the considerable number of "pilot projects" have found it hard to flourish if there is no-one to connect to at the other end of the e-mail or the phone call. A small seaside municipality in South Africa - Knysna with only 50,000 inhabitants - gives some idea of how things can be done. Working with the private sector, it has connected up all government offices and local inhabitants can make free calls for enquiries to the municipality. If local authorities, why not groups of hospitals or health clinics? Schools?

  • Every university student has low-cost access to the Internet: The fuel for change is transforming people's sense of what can be done through ideas. The growth of cyber-cafes has already demonstrated that the younger generation of Africans is thirsty for knowledge. Buying bandwidth in bulk can provide this and the pioneering University bandwidth consortium in East Africa may yet blaze the trail. Imagine the next generation of Africa's elite understanding computers and using the Internet as if this was as natural as going back to visit their parents in their home village. Imagine Africa's political elite skipping a generation so that the current generation of pensioners can enjoy their twilight years entertaining their grandchildren rather than resisting retirement.

  • Transferring money electronically becomes easier than carrying large amounts of cash: It is now easy to buy mobile minutes and transfer them to your mother in an up-country village. These minutes are a transfer of money for money is simply something that people accept has value (gold, paper, coins etc). A mobile company has the capacity to store and facilitate the transfer of cash. If they want to innovate (perhaps in partnership with the continent's deeply uncompetive banks), then instead of talking about accounts for the "unbanked", those at the bottom of the pyramid could "bank" money as minutes. And before you know where you are, they've established a "financial history" and...well you can write the rest of the story.

  • Investment is encouraged in the low-cost, rural voice challenge: Africa's regulators have become so used to taking money off operators for licenses that they are perhaps unprepared for the next phase where they will have to provide incentives to find business models that work commercially in areas where a market is barely functional. Thus far they have mostly given this task through Universal Access funds to mobile operators or incumbents. Neither could be said to have focused on lowering their cost base to enter these markets. The low-cost voice challenge will probably be met through using emerging mobile VoIP technologies. The innovators could be small-scale local innovators who interconnect with the larger operators.

  • All of Africa's incumbents are either privatised or behave in a commercial manner: It is impossible to have markets that operate in favour of the consumer if the incumbent remains a protected area. Employing several thousand staff too many involves paying money that could be spent positively in other ways. Without a commercial imperative, the incumbents will not grasp the potential they have with any speed. Some of the monopoly SAT3 consortium members have failed to sell much of their share of the fibre bandwidth despite having the markets in which to do so and no real competition.

All of the above would produce a competive continent that might bid for outsourcing and call centre work and develop its global markets for other products and services. Without it, there is little chance of large parts of the continent participating in the global economy. If you can imagine even some of these things happening....then maybe, just maybe Africa will be a different place in five years. And we're not going to make a prediction because only you have the power to bring it about.


Cameroon - Douala to Get Internet Services with Wi-Fi Lampposts

http://www.balancingact-africa.com/news/back/balancing-act_287.html
January 8, 2006

A Singapore company has devised a way to provide Internet services through lampposts, the company said Wednesday.

The company, Nex-G Systems, was originally hired to provide streetlights for the largest city in Cameroon.

When the lights go on, the company will also be providing technology to connect people to the Internet, said chief executive officer Ronnie Persad, a 55-year-old Singapore-based Briton. The company won a US$29 million deal earlier this month to provide "smart" solar powered lampposts to Cameroon.

"Initially, the idea was to install street lamps that could be remotely controlled from a central point," Persad said.

"We thought, why not put in telecoms infrastructure as well so people can go online and make telephone calls too," The Straits Times quoted him as saying.

The company plans to install WiFi, a short-range wireless technology, on about 4,000 lamps in Douala, providing Internet access even to some of the city's remote areas.

The project will bring the Internet to sparsely populated places where it is not profitable for telecommunications operators to lay telephone cables, Persad told the newspaper. (Source: http://www.netindia123.com)


Botswana: Young Making a Living Selling Airtime

http://www.balancingact-africa.com/news/back/balancing-act_280.html
November 6, 2005

In busy streets and malls, a new breed of vendors loudly announces the prices of its single commodity. The vendors carry the product sticking out of a 'purpose built' side of a carton box. The vendors of mobile phone airtime are increasingly becoming a very distinct and conspicuous group of traders around town. Their aggression and persistence is perhaps only second to Combi men and bus touts.

A growing number of young people like Mpho Moitaodi are joining the trade. In 2003, he was a fresh-faced 17-year-old. He was restive but with no income. When he joined the trade, a good number of the players were graduates of the street, seeking to augment their earnings from other businesses like car washing and guarding in the car parking lots.

When he ordered his first bundle of airtime at a Gaborone West point of sale, he had overcome the stigma that comes with the trade. By sunset, he had discovered an untapped potential. "There is money in the selling of airtime. The response is overwhelming. People, particularly elders are impressed by what I do," he says and adds that he is living his dream. "I have always wanted to be a businessman, I did business studies at school." With great care, he would look at every passer-by and attempt to strike a conversation. Some are not interested. He is not discouraged.

Moitaodi lives at the low-income SHHA houses in Gaborone West. He sells airtime at Maruapula shopping complex. "I earn a living out of this business," he confesses as his eyes travelled upwards to where a group of people stood. His eyes stare intently at a man who walks towards him. "I can afford to pay rent and send some of my profits to mum at Kookane." Unlike most people who start business just to escape from poverty, Moitaodi says he has always been business minded. He has been inspired by his peers to venture into the airtime business. He has a burning desire to go back to school. This also inspires him. He hopes he will make money to go for further education. "I really want to go to school," he says adding that he will never abandon his airtime business.

He is full of life. His busy day starts in the morning. He goes to queue at an airtime point of sale in Gaborone West before he heads to Maruapula shopping complex. "Everyone is my client here," he announces, perhaps to gain more inspiration as some people look down upon him with disdain. He has managed to make enough money to buy a pay phone. He says his turnover on a good day can be P1,400. "I must tell you that I never go home with less than P900," he says proudly and adds that he enjoys his business to a level that he even dreams about it at night. He is thrilled. "I can afford to save at least P200 per day. I like my business," he says.

(Source: The Reporter)


New wave of African VOIP operators emerge from the shadows of the grey market

Excerpts only, for full story see
http://www.balancingact-africa.com/news/back/balancing-act_277.html
October 16, 2005

Africa's grey market VoIP operators are coming out into the light as attitudes and legislation change. The emergence of a VoIP service providers sector could prove almost as significant for Africa as the earlier emergence of independent ISPs. Because beyond the mobile companies, it has been the entrepreneurial energy and lobbying of ISPs that has driven regulatory change in many countries. The emergence of the newly legalised VoIP service providers (or those who hover in a legal 'no-man's land) will add further pressure for change. In this week's issue we talk to one of this new breed of operators Joseph Tekeng of Icon in Cote d'Ivoire.

So who are these former grey market VoIP operators? Most are young (aged between 30-40), have a background in IT and are involved in some way in distribution or sales. Often they operate IT businesses (offering computers, networking and installation) as part of a broader portfolio of businesses. At the smaller end of the business, many are cyber-cafe owners who have sought to increase their income. Indeed, the main motivation for taking the legal risks associated with VoIP has been the desire to make money but also to meet an overwhelming demand for cheap voice calls.

The operators are becoming increasingly sophisticated as the business grows. In the early days, it was enough simply to sign up with a US or European-based provider but now a number are operating gateways on their own networks which requires a higher level of in-house skills.

These former grey market operators have been emerging with the end of the international monpoly in many countries or in response to the formal legalisation of VoIP. The list of countries where VoIP is operated fairly openly includes Senegal, Cote d'Ivoire, Angola, Tanzania and Nigeria. ...

The sceptics are inclined to believe that these operators are simply parasitic arbitragers and that they will disappear when the telco incumbent is able to resume its rightful place through rebalanced lower international pricing. However the critics have perhaps failed to understand the impact of IP networks on the shape of the business. IP networks - in contrast to traditional telco networks - are decentralising. They allow the intelligence in the network to be at the edge rather than the centre of the network. As a result, they encourage the growth of small service providers at the edge of the network and not just in VoIP services.

So how big is the VoIP sector? We estimate that the current large-scale local providers and international suppliers conservatively account for about 15 million minutes out of an annual 64.9 million minutes (source: Balancing Act Voice and Data Bandwidth Forecasts): in other words about 23% of the total market.

...

Cameroonian Joseph Tekeng of Icon is a good example of this new breed of VoIP operators. Icon is offering VoIP solutions to both corporate and residential customers in Cote d'Ivoire and has plans to expand in other parts of West Africa. His operation exists in the legislative 'no-man's land' (vide juridique) that exists in the country. The international monopoly has been ended but the Government is currently in no shape to frame and pass a framework for voice operators. As Tekend told us:"Cote d'Ivoire telecom are not able to pursue us on this. It still has a monopoly on local calls but not on international."

90% of Tekeng's customers are call-shops in Abidjan and as Teken says:"Because of the political situation we have not been able to offer the service more widely."Icon has contracts with two ISPs for connections. Customers get an ADSL line: FCFA38,000 a month fore 128K or FCFA65,000 for 256K. It sells to its call shop customers at 3 cents a minute for calls to places like the USA, Canada and Europe and offer per second billing. The call shops sell on these minutes at between 10-20 cents a minute. Its margin is between 15-25% depending on the type of customer:"We are trying to find ways to reduce our margin so that we can expand the number of customers we have."

The call-shop customers take an internet connection from Icon and buy an internet gateway with a graphic user interface where they can buy pre-paid minutes from a minimum of 25 euros upwards. Currently it has about 200 customers but when it reaches between 300-400 customers Tekeng believes that it will be able to offer free calls to residential customers on the basis of a monthly fee of FCFA5,000 a month. It buys its international minutes from Xeloq.com in Holland and Icon has set up its own domain to sell its minutes.

It has opened an office in Ghana and plans to expand there. It is offering its services to corporate and residential customers only at the moment as VoIP is still 'illegal' there and therefore it will not sell to call-shops. And the price? 15-20% more than 3 cents a minute. It is looking at going into Burkina Faso on the same basis. Where there is little competition, it will increase its margins accordingly. ...


AfricaFocus Bulletin is an independent electronic publication providing reposted commentary and analysis on African issues, with a particular focus on U.S. and international policies. AfricaFocus Bulletin is edited by William Minter.

AfricaFocus Bulletin can be reached at africafocus@igc.org. Please write to this address to subscribe or unsubscribe to the bulletin, or to suggest material for inclusion. For more information about reposted material, please contact directly the original source mentioned. For a full archive and other resources, see http://www.africafocus.org


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