Imagine an alternate reality.  You’re an innovative start-up like Twitter or perhaps one of the many “adjacent possible” enterprises that Twitter has spawned.  You’ve designed your new service and are ready to take over the world.   All you need to do now is negotiate access with each and every ISP in all of the geographic regions where you would like your application to be available.  What?  Sounds ridiculous doesn’t it but in fact this is what Nathan Eagle has had to do to launch his txteagle service in Eastern Africa.

If you haven’t already go and watch Nathan’s Etech talk.  It is both inspiring in terms of the potential that txteagle represents for leveraging the cognitive resources (not surplus) of developing countries and in terms of being packed with interesting information about mobile developments in Eastern Africa.

HOWEVER, one thing struck a real false chord in his talk.  He represents the mobile industry in Africa as an effective competitive marketplace.  I wish this were true.  He points out that the mobile market has tripled in size in the last three years in Kenya and he recounts an episode in which someone stuck a free SIM card in hand as he was getting into a taxi. He goes on to say that there is now an “all out war for market share in Kenya”.  There may be a war for market share, HOWEVER, it is a marketing war and not a price war.  While the network costs for mobile use may have declined marginally in the last few years, they are still nothing like competitive.

I am not quite sure why he misses this.  It may be the close relationship he is obliged to maintain with the mobile operators.  In his talk he points out that the Kenyan incumbent, Safaricom, will earn a billion USD in revenue this year.  Minutes later he highlights the fact that his initial attempts to establish SMS-based real time blood-bank monitoring in Mombasa failed because nurses were unwilling to pay the cost of an SMS to update the database. He says:

if you’re working at a local hospital, a text message is a substantial fraction of your day’s wage”

Now put those two facts together.  A billion dollars in revenue and an SMS is a substantial fraction of your day’s wage.  Hmmm.

Nathan had to resort to paying nurses the equivalent of three SMSes for every day they updated the blood-bank.  I love the ingenious way he found to make the system work but it does highlight what a throttle to innovation the high cost of communication is.

Recent research from ResearchICTAfrica reveals that Kenyans are spending incredible amounts on mobile communication as a proportion of income.  Here’s how it breaks down.  The average Kenyan spends over 50% of their disposable income on mobile communication. For the bottom 75% of the population, that figure goes up to 63.6%.  In terms of total individual income, the average Kenyan spends 16.7% of their income on mobile communication.  That figure rises to 26.6% when looking at the bottom 75% of the population.  These figures are astounding.  It highlights the fact that Africans are paying for mobile communication in spite of how expensive it is, not because of how affordable it is.

It also emphasises how critical access to mobile communication is for people. Nathan makes an important point when he says the fact that no one in Kenya can afford not to have a mobile phone.  Even if you are digging a ditch by the side of the road, day labour is now organised via SMS.  This means that mobile operators have Kenyans by the throat.

He gives another example about a water pump manufacturer in Kenya who, by combining an mobile-mPesa-enabled, solar-powered metering system with their water pumps, have completely changed their business model.  They are now able to give water pumps away for free (if I understand correctly) and then make a profit by selling access to water via Safaricom’s mPesa service.  Send the pump 20 Ksh and it pumps 20 litres of water for you.  This has increased the water pump companies business and made water more accessible to those who need it.  Nathan suggests that this benefits everyone.  He says:

“Michael Joseph (CEO of Safaricom) loves this because you have to have a Safaricom account to get water.”

Am I the only one who finds this a little disturbing?  When a single mobile operator is a gatekeeper to water supply, something is wrong.  For any village in this situation, Safaricom can charge whatever they like.

The failure of communication regulators in Africa to either license sufficient new market entrants or to curb the excesses of incumbents with significant market power has led to a situation where existing operators collude to maintain high profits.  The cost of SMSes is a great example of this.  If we accept the premise that, in places like Kenya, no one can afford not to have access to a phone, then one cannot help but feel that something needs to be done.  A flour milling company in South Africa was recently fined more than 45 million Rand by the Competition Commission for price fixing and collusion.  I think it is time to take a serious look at mobile operators.

Equally the fact that mobile operators are walled gardens (Why can’t I pay the water pump with my Zain phone?) means that innovators like Nathan are going to be comparatively far and few between.

Imagine an alternate reality where Africans paid less than 5% percent of their income on mobile communications and all phones operated on an IP-based network so that any new African innovation might be unlimited in terms of scope.  Then we would see mobile-enabled social and economic innovation taking off in Africa.

The unfortunate reality is that Nathan and TxtEagle need the goodwill of the mobile operators in the region to do business.  Imagine if you had to woo Internet Service Providers host your web application knowing that they could shut you down on a whim.   For me, the remarkable innovation that is TxtEagle only highlights how broken the mobile environment is for real innovation in developing countries.


Posted by Steve Song

@stevesong local telco policy activist. social entrepreneur. founder of @villagetelco
#africa #telecoms #opensource #privacy #wireless #spectrum #data

  • James

    Am going to disagree with you and agree with Nathan, there is a price war in Kenya. All the mobile operators have remarkably dropped their charges for calling WITHIN their networks. However interconnection charges are still pretty high so people pay alot to call outside the network. And the operator that enjoys it all is Safaricom as they have about 70% market share. There were even taken to the communications tribunal by Zain(as Celtel) for high interconnection fees.

    The only thing that might help customers is mobile number portability. This will allow customers to move within networks without losing their cellphone numbers.

    Safaricom has also taken a ‘walled garden’ outlook when it comes to their ppremier service, M-Pesa. The service is a runaway success and has become a necessary tool for most Kenyans. Its taken a life of its own beyond what the original intention was and is now being used to pay salaries, pay cab drivers, bills etc. The problem is that Safaricom does not allow developers to build applications off the M-Pesa network for their own reasons. M-pesa will continue being used in more innovative ways however the potential would have been limitless if Safaricom had the vision to view the world in a different way. Its like you mentioned in a different post, what if Microsoft and a few other big companies controlled the Internet, would we be seeing the diversity and innovation that we see today?

  • Steve Song

    @James Fair point about the price of on-net calls coming down and I would be curious to know how much that has done to reduce the overall mobile expenditure of the average consumer. Either way, the sooner operators move to cost-based interconnect charges, the better.

  • James

    Actually i think all its done is increase the expenditure as users can now call more people than they would have initially. What African countries need are powerful telcom regulators that can compell companies to do whats right for the consumer….but thats not gonna happen as most African regulators either have no clear idea what there supposed to do or are too compromised to be effective regulators

  • Interesting and stimulating as ever. The prices are going down fast. The cosy duopoly is over (although it’s hard to imagine the Yu network surviving at 0.5 Ksh per minute). But international VOIP-powered calls can be cheaper than calling a landline or a competing mobile network.

    Someone who can invent a multiple SIM card phone that isn’t rubbish will do very well (Is it Samsung trying the hardest?).

    In the initial uptake for East African mobile usage I remember someone reporting that spending on beer was down, as it was replaced by airtime.

    Are there any way you could make a phone where multiple SIMs were loaded into memory and didn’t have to physically be there? I could so go for that.


    Txteagle is in tight with Mobile Planet who (to my knowledge) only work with Safaricom. Also Safaricom worked exclusively with Mobile Planet so that the potential ecosystem around IVR, SMS and premium rate and short code services has been weaker than it could have been. Safaricome typically takes a very hefty slice of the revenue.

    Google have picked a minority shareholding in Mobile Planet as (I think) their first Africa investment. This will strengthen the competitive advantage but do nothing for network-agnostic services. We have to anticipate that Mobile Planet will remain the jealous gatekeeper to Safaricom’s huge customer base with Google backing.

    Finally, of course the txteagle concept is much more interesting than a lot of the mobile4dev stuff (give a farmer a phone – woo hoo) as there is potential for revenue for the user and intermediaries.

    However my limited imagination wonders what the applications really will be, once we have translated “Chat” and ‘Check Balance” into a gazillion languages. (Why not hire a um… translator, or linguist anyway, for half a day, Nokia?).

    I love the idea, but I hope it’s not a nail in search of a hammer.


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  • Tonee

    Lovely. Something worth giving great thought!

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  • I used to wonder that multiple sim cards phone should be very useful for frequent travellers to cut down roaming charges and to retain contact details. Different companies have tried to introduce such phones. But they are very expensive. So, people don’t by them. Because of this, companies are not able to get large scale benefits & can’t cut the costs down. So it has a cyclical effect that does not make it possible to become popular.

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  • Interesting article, will read more on this. Saving money is always at the forefront of our minds, but what about the loss of quality we sometimes experience as a result of this. For example, there is no point changing from one telephone network provider to another for the sake of cheaper rates, if you are likely to be charged a massive transfer fee, from the originating company. When we searched for our 0222 numbers provider in the UK, this was made clearer to us.


  • Jorge

    And they spen money not only on mobile communication but also the internet clicks from African countries has risen a lot during the last two years! Mobile internet is a growing need and most of the people prefer to surf the net through their cells and not by sitting in front of a computer.

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  • what about 03 numbers?

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