September 26, 2017
World Market

Africa at the cusp of Broadband Revolution

Africa at the cusp of Broadband Revolution

By Santosh Anchan, Portfolio Management Group, TechMahindra.

Introduction - Arrival of Under Sea Cable link

Over the last decade, the African region has been the world's fastest growing region in terms of mobile penetration. Whilst fixed line penetration has stagnated at 4% in Africa, mobile has grown at an astonishing rate to 45% with North Africa leading at 73%. However same is not true for broadband and it lags behind considerably when compared to other continents due to lack of fixed infrastructure coupled with high costs of service provisioning. Currently the average broadband penetration in Africa is only 1.5% with South Africa leading at approximately about 3%.

Owing to coverage restrictions and lack of bandwidth, large parts of the region still witness connectivity delivered via satellites or mobile technology. Lack of bandwidth availability and limited connectivity with rest of the world has arrested the development of Africa and has constrained the continent from achieving its full potential.

However all this is changing and there are high improvements expected in this area over the next 3 to 4 years. This is mainly because we can now see myriad of submarine cables that form a thick ring around Africa, as shown in figure 1. Thanks to Africaís leading telecommunications service providers, World Bank funding as well as various government organizations and their international partners, who have invested in various undersea fiber optic projects to bring much-needed broadband capacity to the continent and enhanced connectivity with rest of the world. Mainly Sub Saharan Africa is going to benefit more from the undersea cable projects that started landing cables at Africaís coastline from 2009 to 2011 with most of its major cities now connected with rest of the world.


Figure 1:Undersea fibre-optic cables in Africa(2013)

Initially there was only one primary submarine cable available in Africa which was SAT-3 in 2003. However, with arrival of SEACOM, EASSy, TEAMS, Glo-1 and Main One the amount of available bandwidth in Africa increased from 340Gbps to 11,160Gbps in 2010. By the end of 2013 when ACE and SAex will complete their part of undersea cable projects this capacity is expected to touch 34,200Gbps. This increase in international bandwidth capacity is going to influence the much needed aggressive investment in projects to build the backbone and last mile access infrastructure to connect interiors of Africa with the now well connected cities. This will also help in the reduction in the wholesale price of these newly laid out infrastructure, thereby improving the affordability of broadband services to mass public.

The North Africa and Sub Saharan Africa divide

We can see a great deal of disparity between North Africa and Sub Saharan Africa in broadband service availability. Out of 1 billion plus population of Africa only 11% of population has access to internet. Of these users, 38% were based in North Africa, an area that contains only 17% of Africaís population. With North Africa excluded, Africaís Internet penetration drops to just 8%. When we compare these figures with rest of the continents, wherein Europe has 67 internet users per 100 inhabitants, Americas has 51 users per 100 people and Asia follows with the figure of 23 users per 100; it is clear that there is lot of work that needs to be done to improve this figure in coming years to ensure that Africa doesnít miss the broadband revolution.

It is not that Africans donít want to embrace broadband in their daily lives. It is the non-availability plus non-affordability of the service makes it difficult for the population to connect with internet. Internet growth in Africa has grown by 2,527%, compared to a world average of 480% between 2000 and 2011. Much of this growth has been due to the splendid mobile penetration in North Africa specifically in countries like Algeria, Morocco and Tunisia. The higher subscription cost is limiting the uptake in Africa. The average cost of a broadband monthly subscription for an Internet user is USD 65, which is 2.5 times as much as in the United States. In North Africa however, the average cost of broadband is USD 12 while in other parts of Africa like Angola, Benin, Ethiopia, and Togo the cost of a monthly broadband subscription is well over USD 100.

As mentioned before, internet access is mainly via mobile technology or via satellite. As Satellite access is more costly, better mobile service availability is helping to some extent in connecting the masses to internet. Mobile subscription in Africa has increased from 5 million in 2000 to 500 million in 2010 and is expected to reach 800 million by 2015. Also, as mobile devices are cheaper and easier to use, it becomes the default choice for most of the users to access internet via their mobile devices. As per Google, 4 out of 10 search queries originating from Africa are via mobile. So in the absence of fully developed broadband solutions mobile technology is helping African population to some extent in connecting to the rest of the world.

Role Played by ICT in building network infrastructure

ICT is going to play a major role in ending the marginalization of the African continent by integrating it to the global village to improve the socio economic conditions. Increase in international bandwidth provides a real opportunity to build backbone infrastructure to connect the remote and rural areas of Africa with the major well connected cities. This could be either wireline or wireless technology infrastructure depending upon the implementation cost and ease of deployment at regional levels.

In the latest Networked Readiness Index compiled by the World Economic Forum and INSEAD, not a single African nation makes it to the top 20. But out of the last 20 countries, half are from the continent. So ICT investments are focusing mainly on upgrading communication infrastructure and increasing the regions fiber optic connectivity footprint. Many countries are rolling out national fiber backbone networks to take the new bandwidth beyond the capital cities to population centers in the interior parts of the continent.

As realized by many countries, Broadband infrastructure is the foundation for the knowledge society and a well connected society can help solve some of the more pressing problems in Africa. Currently the average broadband penetration in Africa is only 1.5% with South Africa leading at approximately about 3%. As per the studies in emerging markets a 10% increase in Broadband penetration helps GDP to grow by 1.3%. And the fact that technology lowers production and distribution costs makes a clear case for further development of this sector.

To improve agriculture, banking, healthcare, education and other sectors there is urgency to bring broadband in most of the African nations. So many African governments have come up with some or the other form of ambitious policies to help improve broadband penetration. Nigeria wants to achieve 12% broadband penetration by 2015, Ghana has a target of 15% broadband penetration by 2015 and Uganda has a more practical target of reaching 10% of households by 2013.

Regulatory Environment

93% of African countries have established regulator but they require more autonomy to regulate independently and effectively. The telecom markets needs to be more liberalized eliminating restriction to entry and competition to encourage investment by private operators. Some of the countries such as Ghana, Nigeria, Kenya, Uganda and Tanzania have taken a lead in this direction and are already seeing the benefit in terms of successful innovative projects and better acceptance of services by people.

In addition to this, the efficient management of spectrum represents a major challenge and priority for the regulators. The lack of access to spectrum limits the expansion activities of operators and deployment of new services such as wireless broadband. Newer, more efficient methods of spectrum allocation, such as auctions, are also of high priority for the regionís regulatory bodies.

Opening up of the markets in East Africa has helped in building more innovative solutions such as M-Pesa, a mobile money transfer mechanism in Kenya. Safaricom in Kenya has started the M-Pesa service in 2007 which offers a swifter, safer and more cost effective means to transfer money. There are more than 14 million users of M-Pesa service with 27,988 M-Pesa agent outlets throughout Kenya. In 2010, these 14 million Kenyan M-Pesa users transferred an estimated USD7 billion, equivalent to 20% of national gross domestic product (GDP) through M-Pesa.

After looking at the success of M-Pesa, MTN has also started mobile money transfer service in Uganda and has around 1.2 million subscribers using the service and transferring a monthly average of USD 60 million. As more and more countries accept this type of money transfer the figure is expected to reach 350 million by the year 2015. Besides this, there are many other phone applications that operators are investing in to provide real-time health and agricultural information, and a virtual marketplace for trading goods and services.

Social media

Social media in Africa is growing rapidly and has a huge potential mainly considering that as much as 40 percent of Africaís billion plus population is 15 years old or younger. In Kenya which has around 60% of the population below 25 years age, in interviews and group discussion has mentioned social media as one of the most attractive features of Internet. Facebook is becoming more popular and growing at faster rate in Africa. There are around 32 million Facebook users from Africa with 14 million mainly coming from the North (Algeria, Tunisia, morocco and Egypt). In all, 27% of African internet users have Facebook profiles, compared to 18% of internet users in Asia and 23% of internet users in the Middle East. So at present only 3% of Africaís population has signed up with Facebook and going by the speed with which it is expanding there is huge potential for social media in this continent.

According to Gaba research, Facebook now receives 100,000 new Senegalese users each month. The number of YouTube video plays in sub-Saharan Africa is doubling each year. Not to be left behind leading social media companies such as Google, Facebook and Twitter who are setting up their offices in Africa. Twitter is working on relationships for expanding SMS service across many countries in Africa. Twitter shortcodes for some African countries have been announced, such as Nigeria (40404: Zain, 20644: Glo Mobile); Kenya (8988: Safaricom) and Madagascar (40404: VIP). There are also some indigenously developed not for profit social media platform such as Ushahidi from Kenya which was originally developed to share and map information related to violence emerging from Kenya using mobile or internet in 2007. It uses crowd sourcing technique for social activism and public accountability. Ushahidi was also used to create crisis and recovery maps following earthquakes in Haiti and Chile, wild fires in Russia, and the tsunami in Japan. So all this indicate that Africans are not only embracing social media at a faster pace but are coming up with useful innovative solutions for the entire society to address social issues such as injustice and natural calamities.

Conclusion

So with the arrival of undersea cables, most of the coastal cities in African continent are well connected to the rest of the world and an increase in available international bandwidth will help drive the cost downward to make the services more affordable to larger part of the population. In fact, International wholesale prices have fallen by more than 50% in many markets since 2010. With coastal cities connected, it become much easier than earlier to build the infrastructure to connect the remote interior part of the continent and help in the overall growth of broadband technology. At the regulatory level more autonomy is required to open up the market and make the spectrum available via auction to operators so that new services can be provided in a more liberalized market. As mobile has already grown to good extent over the last decade it is the right time for Africa to leapfrog into the broadband technology in the new decade.

References:
1. Mobile Africa Report 2011
2. manypossibilities.net/african-undersea-cables/
3. Africa Macro_5 trends powering Africa's allure (Trend 3-Technology)