In addition, the South African government declared a landing station for the SAT-3 cable, over which it has a monopoly, an "essential national facility." This has enabled the country's regulator to insist on co-location for a new competitor company, Neotel. The Mauritius Information and Communications Technology Authority instituted a price determination against the monopoly fibre operator Mauritius Telecom, enabling much cheaper prices to be put in place. (For case studies of countries on the SAT3/SAFE cable, including Mauritius, see http://www.apc.org/en/node/6142/).
Once a fibre cable has reached the coast of a country, the key problem is getting a truly national backbone in place. On the evidence so far, the private sector will only deliver national backbone capacity to a relatively small percentage of the population.
Understandably, operators have to have a sufficient return to justify investing in relatively expensive capital projects such as infrastructure. Except in the markets of larger countries or in the wealthier segments of national markets, there has been little incentive to invest. The effect of this has been that traditionally there has only been one infrastructure operator, or "one-and-a-half" infrastructure operators – the latter case being where competitors spring up in metro areas and on routes between main metro cities.
So the issue is: how does one inspire wider national roll-out without simply returning to the uncompetitive, monopoly position that was in place before liberalisation, and which resulted in high national rates?
While infrastructure competition does produce some level of price competition, its impact is limited. Two competitors on national backbone prices – even over busy national routes – rarely produce more than a 10 to 20 percent difference on price over the mid to long term. For example, in Uganda, where there are two infrastructure operators, the reduction in prices over three years has been 13 percent.
Africa's policymakers and regulators have adopted a range of different approaches to creating infrastructure competition, not all of which are coherent, but will affect national backbone prices. The more liberal countries, such as Ghana, Nigeria, Kenya and Tanzania, have encouraged those who have built fibre for management purposes to sell their surplus. These entities include power utilities, railways, and oil pipeline and water companies. Alternative fibre operators have provided a competitive dynamic in some markets, but not really addressed issues such as the need for wider geographic breadth of coverage.
The mobile phone companies have had to put up with high prices and indifferent service from many of the former incumbent telephone companies and, as a reaction, have almost all gone down the route of building all or part of their own backbone infrastructure. Where there are existing high national backbone prices, the financial incentive to build your own network is considerable: depending on the country, this may be as much as 50 percent cheaper.
A number of African governments have taken this insight and sought to create national fibre infrastructure companies, Ghana, Nigeria, Kenya, Rwanda, South Africa and Uganda among them. Often with the aid of government financing from Chinese vendor Huawei, the aim has been to create genuinely national networks as quickly as possible. This has raised a number of difficult issues.
In the first instance, many of these countries have chosen the former incumbent (now usually privatised) to manage the resulting network. This is not something that creates trust among potential users that things will be any different than before. In addition, many operators have either already built some infrastructure or are about to do so. Unless the national infrastructure focuses on the more marginal areas, its impact will be to drive out potential investors.
But whether the policy route taken is to create a national fibre network or simply "in-fill" those places the market will not reach, these different approaches may all go some significant way to extending cheap bandwidth to nearly all of a developing country's citizens.
The final piece in the jigsaw has been to find a technological solution that will deliver voice and data services into the most marginal "bottom-of the-pyramid" communities in a way that will create a business that will not require a constant drip-feed of donor aid.
The larger and more centralised solutions have been offered by organisations such as Grameen and the mobile companies. For example, Zain Nigeria (formerly Celtel) has offered entrepreneurs the opportunity to run the base station that delivers their voice service, as well as act as local agents for mobile phones. In other words, the entrepreneur remains in effect a franchisee of the larger company.
A more innovative and less centralised solution has been developed in South Africa by Dabba.
The idea was to create a micro-telco operation from technology that could be supplied "out of the box," for use without specialist knowledge. Dabba has partners who want to expand into the townships of Alexandra and Soweto in the greater Johannesburg area, and Khayelitsha in Cape Town.
The business is focused on working financially with only 1,000 subscribers. The user would get a cheap voice-over Internet protocol (VoIP) wireless handset from someone like UT Starcom. A "super node" will deliver a coverage area of two kilometres, but the phone's range is only 100 metres. The alternatives are that there would have to be a greater density of wireless access points, or, as with the precursors to mobile phones, the access points might be physically marked and people could stand near them. The former would make sense for a large village; the latter might work in a smaller settlement.
Dabba is already interconnecting with South Africa's four main voice carriers, but reactions are mixed. One of the larger mobile carriers has been very helpful, while others have been blocking calls. Dabba's plan is to become an intermediary for the much smaller micro telcos, allowing them to aggregate traffic before entering the telco world, and providing much needed support. It will also enable the micro telcos to offer cheap calling to other micro telcos that work with Dabba.
For the mobile operator, this scheme allows others to take the financial and control risks in areas of marginal business. If it succeeds, it may offer valuable lessons in how to strip back capital expenditure to meet market demand in increasingly marginal areas. (Although this will not prevent the more aggressive mobile companies from trying to strangle it at birth.)
Local entrepreneurs thus have the opportunity to build a business. For the unspent millions in Universal Service Funds all over Africa, it offers a new market-driven element that could energise the drive to reach the last 30 to 50 percent of Africans – and those in developing countries elsewhere across the world – who do not yet currently have access to voice communications or the Internet.
Reproduced and adapted with permission under the Creative Commons Attribution-Noncommercial-Share Alike 3.0 licence.
Once a fibre cable has reached the coast of a country, the key problem is getting a truly national backbone in place. On the evidence so far, the private sector will only deliver national backbone capacity to a relatively small percentage of the population.
Understandably, operators have to have a sufficient return to justify investing in relatively expensive capital projects such as infrastructure. Except in the markets of larger countries or in the wealthier segments of national markets, there has been little incentive to invest. The effect of this has been that traditionally there has only been one infrastructure operator, or "one-and-a-half" infrastructure operators – the latter case being where competitors spring up in metro areas and on routes between main metro cities.
So the issue is: how does one inspire wider national roll-out without simply returning to the uncompetitive, monopoly position that was in place before liberalisation, and which resulted in high national rates?
While infrastructure competition does produce some level of price competition, its impact is limited. Two competitors on national backbone prices – even over busy national routes – rarely produce more than a 10 to 20 percent difference on price over the mid to long term. For example, in Uganda, where there are two infrastructure operators, the reduction in prices over three years has been 13 percent.
Africa's policymakers and regulators have adopted a range of different approaches to creating infrastructure competition, not all of which are coherent, but will affect national backbone prices. The more liberal countries, such as Ghana, Nigeria, Kenya and Tanzania, have encouraged those who have built fibre for management purposes to sell their surplus. These entities include power utilities, railways, and oil pipeline and water companies. Alternative fibre operators have provided a competitive dynamic in some markets, but not really addressed issues such as the need for wider geographic breadth of coverage.
The mobile phone companies have had to put up with high prices and indifferent service from many of the former incumbent telephone companies and, as a reaction, have almost all gone down the route of building all or part of their own backbone infrastructure. Where there are existing high national backbone prices, the financial incentive to build your own network is considerable: depending on the country, this may be as much as 50 percent cheaper.
A number of African governments have taken this insight and sought to create national fibre infrastructure companies, Ghana, Nigeria, Kenya, Rwanda, South Africa and Uganda among them. Often with the aid of government financing from Chinese vendor Huawei, the aim has been to create genuinely national networks as quickly as possible. This has raised a number of difficult issues.
In the first instance, many of these countries have chosen the former incumbent (now usually privatised) to manage the resulting network. This is not something that creates trust among potential users that things will be any different than before. In addition, many operators have either already built some infrastructure or are about to do so. Unless the national infrastructure focuses on the more marginal areas, its impact will be to drive out potential investors.
But whether the policy route taken is to create a national fibre network or simply "in-fill" those places the market will not reach, these different approaches may all go some significant way to extending cheap bandwidth to nearly all of a developing country's citizens.
The final piece in the jigsaw has been to find a technological solution that will deliver voice and data services into the most marginal "bottom-of the-pyramid" communities in a way that will create a business that will not require a constant drip-feed of donor aid.
The larger and more centralised solutions have been offered by organisations such as Grameen and the mobile companies. For example, Zain Nigeria (formerly Celtel) has offered entrepreneurs the opportunity to run the base station that delivers their voice service, as well as act as local agents for mobile phones. In other words, the entrepreneur remains in effect a franchisee of the larger company.
A more innovative and less centralised solution has been developed in South Africa by Dabba.
The idea was to create a micro-telco operation from technology that could be supplied "out of the box," for use without specialist knowledge. Dabba has partners who want to expand into the townships of Alexandra and Soweto in the greater Johannesburg area, and Khayelitsha in Cape Town.
The business is focused on working financially with only 1,000 subscribers. The user would get a cheap voice-over Internet protocol (VoIP) wireless handset from someone like UT Starcom. A "super node" will deliver a coverage area of two kilometres, but the phone's range is only 100 metres. The alternatives are that there would have to be a greater density of wireless access points, or, as with the precursors to mobile phones, the access points might be physically marked and people could stand near them. The former would make sense for a large village; the latter might work in a smaller settlement.
Dabba is already interconnecting with South Africa's four main voice carriers, but reactions are mixed. One of the larger mobile carriers has been very helpful, while others have been blocking calls. Dabba's plan is to become an intermediary for the much smaller micro telcos, allowing them to aggregate traffic before entering the telco world, and providing much needed support. It will also enable the micro telcos to offer cheap calling to other micro telcos that work with Dabba.
For the mobile operator, this scheme allows others to take the financial and control risks in areas of marginal business. If it succeeds, it may offer valuable lessons in how to strip back capital expenditure to meet market demand in increasingly marginal areas. (Although this will not prevent the more aggressive mobile companies from trying to strangle it at birth.)
Local entrepreneurs thus have the opportunity to build a business. For the unspent millions in Universal Service Funds all over Africa, it offers a new market-driven element that could energise the drive to reach the last 30 to 50 percent of Africans – and those in developing countries elsewhere across the world – who do not yet currently have access to voice communications or the Internet.
Reproduced and adapted with permission under the Creative Commons Attribution-Noncommercial-Share Alike 3.0 licence.
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