East Africa’s cable guys
By Peter Guest | Published: 01 December, 2008
The phenomenal growth of the African cellular market readjusted many perceptions of business on the continent. Now fresh initiatives hope to bring competitive, affordable broadband to the previously fibre-dark coast of East Africa.
A brief glance at the topography of the information superhighway demonstrates how top-heavy the data world has become. Western Europe and North America are ringed by undersea cables with multiple drop-off points, but there are only a few that snake south of the equator.
There is a crescent of cable around Africa that follows the Arabian Peninsula up through the Red Sea and into the Mediterranean, making landfall at a number of points in North Africa, before curving down the west coast and around the Cape of Good Hope to make final landfall in Mtunzini in South Africa. North of Mtunzini, the entire east coast remains without a submarine data link to the major global networks. Consequently, the cost of internet access in East Africa remains amongst the highest in the world.
Over the course of the next two years, three large cable projects are due to come online, with the aim of connecting that dark east coast of the continent to the global communication infrastructure, providing, in many cases for the first time, affordable internet capacity for individuals and businesses in the region.
Sizing the potential market for broadband use in East Africa is nigh on impossible, but the proponents of these recent initiatives look to the almost universal success of the mobile phone sector. Africa as a whole remains the fastest growing market in the world for cellular communications, surprising many players not only with the volume but the patterns of usage.
Visitors to Nairobi are likely to be familiar with the local taxi drivers’ habit of running their vehicles with the bare minimum of fuel in the tank and heading straight to a petrol pump as soon as they have secured a fare. This model was adapted rapidly in mobile markets, particularly by the lower income strata of society. Many users buy the smallest possible units of prepaid credit, enough only to keep them on the network. SMS or ‘beeping’ – calling but hanging up before the recipient can answer – is used to show an intention to communicate. Whoever gets more value from the call can then buy the required credit.
Understanding the different dynamics that are driving mobile uptake and usage is likely to be vital in graduating consumers from ‘voice’ to ‘data,’ says Frank Oehler, head of business development for new growth markets at Nokia Siemens Networks. Mr Oehler believes that the success of mobile phone products such as the payments system Mpesa and the popular SMS job search service Kazi560 in Kenya are demonstrations of a latent demand for data – so long as that data has immediate value to the user.
“I think the first thing that you have to get into people’s heads is that there is a value to the service,” he says. “They will decide what is the most convenient way for them to access such a service, for example, going to an internet café and having a much more colourful and better user interface on a PC… will provide certain benefits for the consumers.” To underestimate the sophistication of consumers in East African societies could be a severe mistake for any international business looking to break into the market. The level of industry analysis that takes place in casual conversation in Nairobi and Kampala would not seem out of place in the corridors of global telecoms conferences. “People will analyse the personal use case for it,” Mr Oehler says. “Everything is driven by the individual value to the consumer in these countries. They see usage of ICT as providing efficiency to their lives.”
Mr Oehler, like others, agrees with the sentiment that demand in the mobile sector is indicative of demand for more complex services. But those two services are still very separate in East Africa, according to Peter Reinartz, deputy chief executive officer of Telkom Kenya, which was acquired by France Telecom subsidiary Orange in December 2007.
Kenya is typical of the region in that its fixed line usage is eclipsed by the number of mobile devices in operation. Access to the internet is largely through shared devices and there is little chance of the graduation up the complexity chain that NSN’s Mr Oehler references. Dial-up internet is slow, unreliable and denies users the kind of rich applications that they need to achieve the value needed to progress the market. Broadband is available, but expensive. Orange’s current rates, which are typical of the market, start at KSh5990 ($75) per month for a 256kbps connection. The company has higher rates and speeds for the potentially lucrative small- and medium-sized enterprise market and for resellers, such as internet cafés. It is the price point, Mr Reinartz believes, that remains the key barrier to market growth, and that price is a function of the infrastructure.
