In what shape should African ICT be?

 The need to close the digital divide between Africa and the rest of the world has become a hot topic in the international telecommunications industry, and quite rightly so. Telecoms systems are vital tools in the maintenance and improvement of the infrastructure we need to sustain, if not improve, our well-being in what has become a global village.

 The divide between Africa and the rest of the world is huge, particularly in terms of online access to information – one of the main drivers of economic achievements.Maps of all the communication cables linking countries, never mind cities, in the northern hemisphere have virtually become blotted with a maze of lines crisscrossing one another, particularly with regard to terrestrial (dry) connections.

 In addition, there are no fewer than 500 fibre-optic transatlantic cables linking the North American and European continents, including the United Kingdom, which can now transmit mind-boggling volumes of voice and data at speeds of well over 1 000 gigabytes or 1 Tb/s (terabytes per second).This compares with the only, single, comparatively slow, fibre-optic undersea cable that connected Africa with Europe until a year ago. It was first launched as the 120-gigabyte SAT-1 cable in the 1960s, but has been upgraded since into the 340-gigabyte South Atlantic 3/West Africa Submarine Cable (SAT-3/Safe).

 “Safe” denotes a cable link with Asia. Even at 340Gb, its capacity has been insufficient to offer the faster broadband service of the latest cables. It was also pricey – Telkom Namibia invested in the cable, but was never connected because Telkom South Africa was allegedly charging too much, according to Wikipedia. Which explains why many people preferred to link up via satellite until July last year when the new Seacom cable along the East African coast – connecting Africa with Europe and India – became operational.

 This, plus the commissioning of more cables this year – offering cheaper rates, faster speeds and downloads as well as more reliability in terms of breakdowns – has changed all that. For one, anticipating the arrival of Seacom, Telkom is said to have dropped its SAT3 rates by 50%.Cable breakdowns do happen. In 2007, SAT-3 went down, putting Nigeria “offline” for seven days, affecting banking transactions, security, etc.

 In its short lifespan, the Seacom cable has broken down twice, the most recent breakdown occurring off the Kenyan coast on 5 July during the 2010 Fifa Soccer World Cup. It slowed down MTN users in Africa, who suffered long delays in the uploading and downloading of business files as cyber traffic came down to a crawling speed.

 People had to switch back to satellite connections, resulting in Internet cafés in Kampala running empty as customers refused to pay more. It took two weeks to repair the cable and reintroduce the broadband facilities to which people had become accustomed. The arrival of more cables, however, will now allow service providers to switch from one to the other in case of breakdowns. This explains why several operators have not only invested in one or more of the new cables, but have also booked capacity in cables in which they have not invested.

 In fact, Africa is being connected via more than 10 cables.

 Completed projects and those still under way include:

 The $650-million Seacom cable (1.28 Tb/s), which runs along the East African coast and went live on 23 July 2009.

The $265-million East African Submarine Cable system (1.4 Tb/s), or EASSy, also on the East African coast, which links South Africa with Sudan. It went live on 16 June this year.

The $240-million Phase 1 MainOne cable (1.92 Tb/s), along the West African coast, from Portugal to Nigeria and Ghana. It became operational on 30 July. It branches out to Morocco, the Canary Islands, Senegal and Ivory Coast. The Phase 2 link with South Africa is due for completion in 2012.

The $800-million Glo-1 cable link (2.5 Tb/s) from the UK to Lagos, Nigeria. Testing of the cable began recently.

The $600-million West African Cable System (5.2 Tb/s), or WACS, which will link the UK to South Africa. It is due for completion in a year’s time.

The $700-million Africa-Coast-to-Europe (5.12 Tb/s), or ACE, cable. For countries such as Mauritania, Sierra Leone and Liberia, ACE will be the first submarine cable connection. It is due for completion next year; and

The $130-million East African Marine System (120 Gb/s – 1.28 Tb/s), or TEAMs, a Kenyan initiative, which is being upgraded.

North African countries have linked up with Europe, the Middle East and Asia, or will be, via three Mediterranean cables. Furthermore, an undersea cable to connect Africa to Brazil is high on the latter’s agenda. This was revealed by Telkom Caribe chief executive officer Mike Singh during the recent Submarine Networks World Africa 2010 conference in Johannesburg. He said such a cable was an economic priority and imperative for South Asia, Africa and Latin America, as it would link South Asia and Latin America through Africa, rather than via the traditional northern hemisphere route.

 In fact, analysts believe there will be so many undersea cable link-ups that some West African countries will have more capacity than they require through WACS and ACE. Some actually fear that excess capacity could sink a cable company, as occurred during a bandwidth glut on transatlantic networks, which contributed to the 2002 bankruptcy of Global Crossing Ltd – then the fourth-largest corporate failure in United States history.

 Thus, after a decade of too little Internet capacity, telecoms companies in Africa may face a glut as well. “Africa was the last bastion a few years ago where you could generate a return from telecoms infrastructure, but for all practical purposes, it’s either gone already or disappearing very quickly,” said a consultant at the Johannesburg conference.

 There is talk of a broadband capacity explosion that will hit the continent from next year onward and bring wholesale rates down further. According to analysts, this “landing” price of international fibre capacity could plunge by 80% to 90% in the next 12 months.

 Land networks/terrestrial lines

 It is one thing to link coastal African cities with the rest of the world, but what about the cost of bringing broadband capacity to the hinterland and landlocked countries? Trevor Martins, MTN’s project manager for the 10 000-kilometre EASSy cable linking South Africa to Sudan, has stated that investments in network projects may be as much as twice the $2 billion to $3bn being spent on new submarine cables.

 Analysts at the US-based Pyramid Research say terrestrial networks must accompany the supply of bandwidth of undersea cables. “Without last-mile access and connection to strong terrestrial backbones, broadband adoption and revenue have limited room for growth. With more reliance on wireless networks, we expect last-mile access to be driven in the short run by WiMAX [Worldwide Interoperability for Microwave Access] technologies and data cards or modems.”

 Fortunately, except for the Main One link, investments in all the new undersea cable systems serving Africa have come from terrestrial operators such as MTN, Vodafone, Bharti Airtel, Telkom, Tata Communications/Neotel etc. They will obviously have to invest more in back-haul infrastructure in order to make money from services they can offer through
the pipes.

 MTN and Bharti Airtel (India’s largest mobile phone company) are well on their way to doing so and are likely to become fierce competitors in the process.In 2008 MTN, which is active in 26 countries in Africa and the Middle East, earmarked R28bn for projects to develop its markets over the next five years. It forecasts an average cellphone penetration of 80% by 2012 in its African markets.

 This will not be easy for MTN. Bharti, which acquired the African assets of Kuwaiti-based telecoms company Zain for $10.7bn in June, is likely to give it a run for its money. Bharti’s new assets are spread across 16 African countries, including Nigeria, Ghana and Uganda. Bharti will make an “opening investment” of $2.5bn in its African operations over the next three years and will be moving beyond voice services to data, Internet, media, e-commerce and other lifestyle products. It has openly stated it wants to challenge leading rivals for supremacy in mobile markets in Kenya, Nigeria, Uganda and Madagascar.

 From a regulatory point of view, governments can play an important role in the rollout of terrestrial networks by stipulating the need for fibre-optic networks or older technology and ways to preserve
the environment. For instance, it has been suggested that from a cost and environmental point of view, existing railway infrastructure in countries such as Zimbabwe should be used for telecoms networks by entities such as NZR, as Transnet similarly established a very profitable communications network through its Transtel division.

 In this regard, the Kenyan government is reported to have created a liberal regulatory and private sector investment environment, with optic fibre cables having been laid along new highways even before Seacom became operational. Governments can further set rates, which in Tanzania are as little as $2.91 a month for voice service, but do not offer much of a return on operator investments.

 The African demand for voice communication is already there – and staggering. According to United Nations statistics, cellphone subscriptions in Africa rose from 54 million in 2003 to almost 350 million in 2008 – the quickest growth in the world. And this growth will escalate as new networks become available, with even Telkom to enter the scene with mobile networks.

 This is because millions of Africans are now doing everything via cellphone – from checking crop prices to banking to paying their electricity bills. To take things further than voice communication, the Kenyan approach to go for optic fibre connections where possible has paved the way for a new “triple play” service called Zuku, which combines broadband Internet connectivity, television channels and voice communications delivered over high-speed fibre-optic connections to Kenyan homes.

 This appealing system, established by local telecoms group Wananchi and network infrastructure company Cisco, is on par with those run in countries such as Sweden, Japan and Holland. The Kenyan service is priced at the equivalent of about R500 per month for an uncapped, 1Mbps Internet connection, with over 100 television channels included. This compares with about R300 to R400 for the same service in Holland.

 This goes to show that Africa can catch up, in terms of Internet connectivity, with European countries, which have preferred the fibre-optic route over wireless connectivity for several years now. In poverty-stricken Africa, however, where even copper lines are a luxury, companies such as Wananchi still look at WiMAX technology in areas where fibre is not a viable option.

 It plans to roll out its new services in nine countries including Uganda, Tanzania, Rwanda, Burundi, Malawi, Ethiopia, Sudan and Zambia. With copper lines ageing, if not stolen by criminals at the rate of one tonne a day (in Transnet’s case), WiMAX technology will remain the only modern means to reach rural and remote areas in times to come.

 Device prices

 In the final analysis, any chance of Africa catching up with Europe in terms of Internet connectivity will depend on the cost to the subscriber in terms of both hardware and subscriptions. According to Pyramid Research, broadband penetration in Africa is currently a mere 3.2%. It forecasts this may increase to 6.8% by 2015, but that this may even be difficult as operators fight for the small number of consumers who can afford Internet service.

 Analyst Kerem Arsal at Pyramid believes that device prices are a major obstacle. He and others believe that in order to exploit the new bandwidth, tax loads on data-centric devices such as laptops and netbooks should be removed, and subsidies given to exploit the new international bandwidth. With more reliance on wireless networks in Africa, analysts anticipate laptop sales to increase faster than desktops at a compound annual growth rate of 15% between 2010 and 2015, but that total PC penetration will only reach 15% of households in 2015.

 The rollout of networks will have to be financed out of subscriptions. The ownership structure of the SAT-3/Safe cable resulted in a few telecoms companies monopolising its benefits – which kept prices high and thus out of reach of many. In some African markets, 256kbps Internet access currently costs $100 a month, according to Cable & Wireless executive, Taj Onigbanjo. In France, Internet of up to 20Mbps speed costs about €30 ($40) monthly.

 But with more cables and operators in the field, these cost differences may narrow. Whether they will equalise in the future is dependent on whether we will ever see the average African earning as much as a European.

 Until that happens, the divide in digital connectivity will no doubt remain. 

 Udo Rypstra