Welcome to the 5th annual review of telecommunications infrastructure development in Africa. This review combines my analysis of the last 12 months as well as links to over 350 articles covering a range of African telecom infrastructure development issues in 2018.
Investment in undersea fibre optic cables appears to be the new normal as 2018 saw no slacking off of undersea cable investment news. The biggest news was the launch of the South Atlantic Cable System (SACS) which finally connects Africa directly with South America, offering alternative, lower-latency routes to the Americas. This is probably of most interest to companies that depend on extremely low-latency internet connections for financial trading although SACS is also going to be interesting for the new alliances that emerge for internet capacity and the redundancy it offers existing operators.
A number of smaller undersea cable initiatives were announced including Cap Amílcar Cabral, Ceiba-2, METISS, and Ultramar-GE. This reflects a maturing of the market where smaller countries that have been left out of the first waves of undersea cable investment are seeking to connect into these larger cable initiatives whether for the first time or to establish redundant capacity links.
Interesting too in 2018 are the undersea cable projects that refuse to go away. SAEx, which has been a great powerpoint presentation for the last six years, is showing signs of life at last with Alcatel beginning a survey for the cable in October.
Almost in a category of their own are the PEACE and SAIL undersea cables which are less commercial investments than national strategic investments in global infrastructure by China, perhaps as part of their Belt and Road strategy. Whether these cables will be sustainable in the long term is an open question but either way it is good news for access to international capacity on the continent.
Perhaps the most important lesson learned from the last ten years of cable investment is that one international connection is not enough. Fibre optic capacity enables the internet economy and those who build their enterprises on it depend on it to always be available. Millions of dollars a day can be lost in undersea cable interruptions. Having a redundant international connection has become an essential feature of any robust digital economy.
Terrestrial fibre investment too showed no signs of slowing down with fibre investment announcements from 25 African countries in 2018. Perhaps most notable was Liquid Telecom’s announcement of the “One Africa” fibre optic network. Through a combination of build-outs, acquisitions, and partnerships, Liquid Telecom now has fibre optic infrastructure that stretches all the way from Cape Town to Cairo. The speed at which Liquid Telecom has grown is remarkable and is clearly good news for intra-African internet traffic. They are by far the biggest regional fibre network operator on the continent.
Unfortunately the massive investment in terrestrial fibre capacity hasn’t been matched by commensurately significant drops in the cost of terrestrial access. In many countries on the continent, it still costs more to get data to a submarine cable landing point than it does to take it the rest of the way to the US or Europe.
One big change in 2018 that may be a sign of things to come is the arrival of global internet transit provider, Hurricane Electric (HE) into the Kenyan market. By operating a Point of Presence (PoP) in Nairobi, it allows service providers to buy international capacity (transit) from them directly without having to purchase both terrestrial and international transit. This is not a brand new concept by any means. Undersea cable operators like Seacom have operated PoPs in a number of major African cities for some time. What is unique about Hurricane Electric is that they don’t own any undersea or terrestrial infrastructure in or around Africa. They are able to establish a PoP by trading capacity on their international networks with African network operators. This allowed them to offer wholesale transit pricing at a significantly lower price than local operators. Expect this trend to grow to other major African cities in 2019.
Global transit providers like HE aren’t the full solution to terrestrial fibre prices though. Governments that have investments in national fibre optic networks need to unlock the potential that high prices are keeping pent up in their fibre networks. One strategy would be to offer shares to smaller service providers to enable them to compete more effectively with large operators.
Like other fibre markets, the rapid spread of Fibre To the Home (FTTH) seems perfectly normal now whereas it barely existed only a few years ago. The combined trend of rising demand of streaming movie and television services and the decreasing cost of FTTH deployment continues to fuel this boom. Fibre is a significantly different technology from wireless in two important ways. First, it has a much longer lifespan. Whereas wireless technologies must be replaced or upgraded every 3-5 years, fibre optic infrastructure can last 15-25 years. Second, while wireless technology continues to improve in capacity, it does have limits. Fibre optic infrastructure, on the other hand, capable of carrying terabits and even petabits of traffic, effectively does not. I have argued that any operator that is planning to be around for a few years should be investing in fibre optic network infrastructure as part of their strategy.
Along with FTTH, streaming media or Over The Top (OTT) companies continue to grow and evolve on the continent. In 2018, Netflix announced its first investments in an original South African series, which hopefully is just the first of many investments in local content in African countries by OTT companies. The biggest losers in the spread of OTT services are those who markets are being eroded by OTT. This includes the hundreds of millions of dollars invested by governments and companies in digital terrestrial broadcast system as a part of the digital switchover from analogue to digital television broadcasting. It is hard to see how any digital terrestrial broadcast markets will ever break even. Satellite television is also suffering but their ability to reach outside of the urban centres served by FTTH services providers means they are not going away any time soon. Also, sports and live events seem to be areas of broadcast that OTT service providers remain excluded from.
The biggest news in licensed spectrum in 2018 was the licensing of digital dividend spectrum (700MHz and 800MHz) for mobile broadband across a number of countries on the continent.
The drama of Ghana’s 800MHz auction which began in 2017 with only MTN the only successful bidder, paying $67.5 million for 20MHz (2x10MHz) of spectrum, carried on in 2018. The regulator’s attempts to carry out a second auction were stymied by MTN’s insistence that any bidder must match the amount that they paid for the spectrum. This option did not find any takers. The regulator compromised by offering smaller chunks of spectrum 10MHz (2x5MHz) in the second round for $33.7 million each, although still the same price per MHz. They eventually settled on $30 million for 10MHz, which was acquired by Vodafone just before year end.
In Tanzania, a successful spectrum auction was held in the 700MHz band with two operators, Vodacom Tanzania and Azam Telecom winning licenses for 20MHz (2x10MHz) for USD10M each.
In Mozambique, the regulator put 800MHz, 1800MHz, and 2600MHz up for auction but only received bids for 800MHz spectrum. Three of the five 10MHz (2x5MHz) lots were successfully auctioned at $15M each to Mcel, Vodacom and Movitel. This is a great step forward after the same 800MHz spectrum was put up for auction in 2013 with no bidders due to the high reserve price. The fact that no bids were made for either 1800MHz or 2600MHz may be due to the lower capital costs required for network rollout in 800MHz spectrum, thanks to the larger cell size that is possible in that frequency. The 30 million dollar reserve price for 10MHz of 1800MHz may also have been a factor.
In Kenya, where the regulator has chosen not to use spectrum auctions as a vehicle for assigning spectrum, plans for the 700MHz band are a little confusing to the external observer. The regulator has divided the band into three lots of (I assume) 30MHz (2x15MHz) each. Last year, Jamii Telecom was given a trial license for one of these lots and the regulator has encouraged second tier service providers to form consortia to request the other two lots. Successful applicants will be assigned the spectrum for a year and then will be allowed to keep it if they pay the USD25M fee. First tier operators (Safaricom, Airtel, Telkom Kenya) who received 800MHz spectrum last year are precluded from participation in 700MHz.
You can see from the above that there is no particular standard for either price per MHz or the default size of the spectrum lots made available. In theory, making smaller lots available enables operators to bid on the amount of spectrum they need by choosing the number of lots to bid on but the reality seems to be that the reserve prices are so high that operators are only just meeting the reserve price for a single lot. Larger frequency assignments can help to reduce the likelihood of a cell being overwhelmed by a combination of users and demand. Thus, a comparatively small license such as 10MHz (2x5MHz) may not be ideal for use in dense urban areas.
The missing story in all of the above auctions are the missing operators, those who could not afford the multi-million dollar entry fee. New spectrum licenses ares going to existing incumbents and that’s that. A side-effect of high spectrum fees is that small and even medium-sized operators are locked out of the LTE market. This is obviously not good news for competition and, in particular, is not good news for rural access as high auction prices for spectrum are going to push operators to deploy where they can make their money back fastest, in densely populated, comparatively wealthy urban areas. There is an urgent need for spectrum polices and regulation that directly address affordable, rural, service delivery.
< href="https://www.ghanaweb.com/GhanaHomePage/business/Vodafone-Ghana-wins-one-lot-of-2x5MHz-Frequency-Spectrum-in-the-800MHz-Band-711401">Vodafone Ghana Gets 4G Licence at US$30m
Unlicensed and Dynamic Spectrum
Another ‘new normal’ these days is WiFi. As WiFi comes standard on more and more phones, WiFi access has become a natural value-add to any venue and is remarkably inexpensive to deploy. Hence it is not surprising to see governments, enterprises, and network operators (both commercial and not-for-profit) everywhere putting up WiFi infrastructure. The unresolved question is who should pay for the backhaul/bandwidth. In some cases the government underwrites the cost as a public good. For many businesses, it is like providing parking; a way to draw customers in. In others cases, it is sold on a pay-as-you-go model just like mobile broadband. Still other providers operate a third-party pays model where sponsors and/or advertisers cover the cost of bandwidth. There are a host of WiFi startups that are trying to figure out what the optimum sustainability model is. In the Eastern Cape in South Africa, a cooperative model has been adopted by Zenzeleni Networks to deliver affordable broadband in areas that are too poor and sparsely populated to interest commercial operators. This model appears to be thriving. What is exciting about WiFi is that it allows the kind of innovation that will see successful, sustainable business models naturally emerge from hundreds of experiments.
In the world of dynamic spectrum or Television White Spaces (TVWS) there have been a couple of big leaps forward on the continent. In March the South African regulator formally gazetted rules for the use of TVWS in the country. It has still to appoint an administrator for the geo-location database but has apparently already granted permission in October to an operator to proceed in the deployment of TVWS infrastructure.
Mozambique also made substantial moves toward TVWS regulation. They partnered with Nominet, the UK internet registry who have developed a TVWS geo-location database, to run trials early in 2018. They have plans to announce a regulatory norm shortly that will allow operators to deploy TVWS access technologies. The norm will have particular incentives for operators connecting rural areas and schools in particular.
Satellite broadband is a technology to watch in the next year or two. It feels a bit like the calm before the storm in satellite service delivery. There are a couple trends that are poised to re-shape the industry.
The first is the launching of High Throughput Satellites (HTS) which are capable of delivering modern broadband speeds at realistic prices for ISPs. HTS satellites have been around for a while but 2018 represents a shift to more widespread accessibility of these services and hopefully more competitive prices. At the end of 2017, there were few HTS satellites offering services over the continent. They included Al Yah 2 (2012) and Intelsat 33e (2016). Services from these satellites have brought satellite broadband prices down but there are still a limited number of countries where the service is available and prices, though cheaper, may still be beyond what can enable a sustainable ISP service.
2018 saw the launch of Al Yah 3 which can offer broadband services in 19 countries in the region. Another HTS launch in 2018 came from Avanti with the Hylas 4 satellite. These satellites are signs that HTS services are reaching critical mass over Africa; offering real alternatives to terrestrial backhaul for rural service delivery in particular. Expect more HTS launches in 2019, such as Spacecom’s Amos 17, Eutelsat’s KonnectAfrica and others. If prices come down further on HTS services, this could have a real impact on rural internet service delivery on the continent.
Meanwhile, O3B, a Middle Earth Orbit (MEO) satellite network that launched in 2013 providing high-speed broadband to operators and corporates, expanded their constellation from 12 to 16 satellites in 2018. As a service, they are out of the financial reach of most small to medium service providers. Their clients range from the government of Burkina Faso to mobile network operators in Central African Republic or South Sudan.
The biggest change in the satellite industry, which has yet to bear fruit but whose impact has the potential to re-shape the access landscape, is the launch of several new Low Earth Orbit (LEO) satellite broadband networks, including OneWeb, Spacex’s StarLink, Telesat LEO and others. Launches have already begun for these satellite constellations, which require hundreds of satellites. Some promise to be in service as early as 2020. If these come to fruition, they are likely to change the broadband market substantially providing new competition, driving down prices in served markets and providing affordable access alternatives in remote, underserved regions.
As with any new technology though, the proof is in the pudding. Just launching a single satellites can be a risky business. Operating a constellation of hundreds of satellites introduces new levels of complexity of operation and maintenance. It seems inevitable that LEO broadband satellites will be commercially available in the near future but 2020 may be an optimistic estimate.
If satellite broadband is new to you, I highly recommend this talk by my colleague Jon Brewer at NSRC. Or if you think you already know everything there is to know about satellite, try this interesting analysis of potential throughput of three different LEO constellations.
This year I decided to include a list of articles (below) that seemed relevant to African telecom infrastructure but didn’t fit neatly into a single category. Among them, one thing that stands out for me is the news of operator mergers and of failed operators. In Kenya, Airtel and Telkom Kenya have been exploring a merger and, in Mozambique, TDM and mCel have just completed a merger. In Uganda, Vodafone filed for bankruptcy. In Ghana, second-tier service provider Surfline shut down. And just at the end of 2017 Airtel and Tigo merged in Ghana.
This is not entirely surprising. As mobile network operators become increasingly similar in business model and operation, outsourcing both infrastructure and operations to the same companies, it is not surprising that service delivery becomes a race to the bottom with only a few dominant operators surviving.
This is compounded by the fact that deeper and deeper pockets are required to purchase and retain the spectrum licenses needed to deliver next-generation broadband, effectively shutting out all but the biggest operators.
Real competition is more likely to be enabled by platforms that are sufficiently technologically distinct so as to have different capital and operation costs, allowing innovative business models to emerge. Fibre optic network operators, FTTH service providers, WiFi-based ISPs are all challenging the standard business model of MNOs and could do more if regulators were to enable affordable access to spectrum for small and medium size operators and for under-served regions.