Africa’s Internet access, mired by politics

It was only a few weeks ago when things were looking up, with talks being held to discuss how to get up to 80% of the continent’s people connected to the Net. But then politics got involved…

A story in South Africa’s Business Day newspaper reports that the government might block Eassy, one of the several pipeline projects, because of its “commercial nature”. As the story runs:

The 10000km Eassy cable will be 27% owned by Telkom, Neotel and MTN, and is designed to provide desperately needed cheap bandwidth to 21 African countries. But SA’s communications department has taken umbrage at what it sees as the commercial nature of the enterprise, and intends to withhold landing rights.

Instead, the government will use taxpayers’ money to roll out two rival cables heading east and west, jointly known as the Nepad Broadband Infrastructure Network.

Unfortunately, the government misses the point. Consumers everywhere want cheap, reliable Internet access. Until the market is opened up to competition, that won’t come. And we know all to well what relying on a state-run telco does for access costs.

Digital divide: the cost of access

There’s a few strands to the debate about a digital divide, primarily looking at whether people have access to computers or not. But even for those that do, another obstacle awaits: the cost of Internet access.

Tucked away in this article on TreeHugger about bandwidth is a comment about the access costs in Kazakhstan–an astonishing US$3,355 a month for basic DSL broadband (excluding modem). As this article in ars technica explains:

An unlimited dial-up plan costs about €82 ($111) in a country where the average monthly wage is €292 ($399). As for DSL, an unlimited 1.5Mbps connection costs €2,458 ($3,355) a month, and doesn’t even included the required ADSL modem. Want a 6Mbps cable connection? It’ll cost you, to the tune of €16,144 ($22,032) a month. As the OSCE report drily notes, this is more than a thousand times the price of such a connection in Western Europe.

By contrast, there is a promotion by one provider in the UK at the moment, promoting a 2mb broadband package for just £4.50 a month. Digital divide indeed.

Africa’s grand internet access plans

Ministers, regulators and others are meeting for a big powwow in Nairobi this week to discuss how to connect up to 80% of the African continent to the ‘net.

It all sounds very promising:

The meeting, dubbed Connecting Rural Communities Africa Forum 2007 is organised by the CTO with telecoms market regulator Communications Commission of Kenya as the host. It will discuss research findings, policy options, regulatory strategies, business models, financing and investment, available technology and public-private-people-partnerships that can improve rural connectivity in Africa.

But, unfortunately, while hosting more talks is fine, urgent action is more necessary. Africa’s connectivity is dire: less than 4% of the populace has internet access, according to Internet World Stats. Problems range from telco monopolies blocking competition to major infrastructure and skills shortfalls, not to mention widespread power shortages.

That said, there are signs of life surrounding the various cable projects running down the east and west coasts of Africa.  And even the troubled EASSy project recently received a fillip. All this will help improve things. But talk of connecting 80% of the continent remains, for now, just talk.

M-Health?

 M-banking, m-commerce and now m-health? In Africa, this notion is turning into a reality thanks to MTN, Africa’s largest telecom group. Based in South Africa, MTN has become the first mobile operator in the Phones-for-Health initiative, a public-private partnership to help address HIV/AIDS and other health issues in Africa.

The company is subsidising the distribution of handsets and providing network support to enable health workers across the continent to order medicines, download treatment guidlines and interact with a health authorities. Laudatory behavour, to be sure, but with operating margins a healthy 31%, the company can afford to be generous.

Still, this isn’t just altruism on MTN’s part. More than 60% of Africa’s population now lives in areas with mobile phone coverage and that figure should rise to 85% by 2010. As more phones are distributed and more uses found for its networks, the more the MTN’s sales and profits will benefit. Enlightened self-interest anybody?

Texting the faithful

The craze for phones is just as strong in the Middle East as anywhere else. According to EIU forecasts, phones will outnumber people in Saudi Arabia by 2009. Camera phones are still banned but enterprising phone companies have found new ways to tempt people into upgrading their handsets.

A local company, Saudi Television Manufacturing Company, has launched what it calls a “Saudi Mobile” which has prayer-time settings and a qibla, or direction of prayer, indication, using GPRS technology. To complete the package, a UK-based firm, My Adha, offers a “digital muezzin” service which prompts the faithful to pray by text. Who says a new phone is a frivolous purchase?

A Wizard called Wizzit

 With all due respect to Harry Potter, wizardry isn’t always found at Hogwarts School of Witchcraft. Take a look at South Africa’s newest bank, Wizzit.  A virtual bank launched  in 2005 by a group of local entrepreneurs, it has no branches of its own. Its customers use their mobile phones to transfer money, purchase pre-paid electricity vouchers, buy airtime for a pre-paid mobile phone and a host of other services.

As a recent GTF story explains, the bank appeals to the 40 % of the local population who don’t have a bank account or those low-income workers with accounts who can spend an hour getting to a bank, an hour in a queue and an hour going home just to make a deposit or withdrawal. Thanks to the wizardry of the mobile phone, Wizzit customers can now do all this by text message and for substantially less than traditional banks charge.

Not a topic worthy of a blockbuster movie, perhaps, but surely just as magical.

Two steps forward, one step back

 In 1993, only 16 African countries had mobile networks and none of them had any competition. Today, all 55 countries have mobile networks, and 44 of them are operating in competitive markets.

According to the World Economic Forum’s 2007 Africa Competitiveness Report, nearly half of Africa’s telecom service providers have at least some private-sector ownership, with 25 fixed-line operators wholly or partially privatised over the past ten years or so. That’s the good news. Here’s the bad: Africa still  has the greatest number of monopoly service providers of any region worldwide.

Some progress in Kenya, though. After years of dithering, it now looks like the government intends to sell a 40% stake of fixed-line monopoly holder Telkom Kenya, most likely to a consortium led by British Telecom. If BT succeeds, it will need to re-brand Telkom, long synonymous with inefficiency and corruption. How else to explain the fact that the country now has over 9m mobile phone owners and less than 300,000 people with a fixed line service?

M-pressive prospects

A new report has given some insights into Kenya’s burgeoning mobile payments market. First launched by Vodafone and Safaricom in October 2005, the country’s M-Pesa scheme has grown rapidly ever since. But what is most striking is the potential for such a service to not just facilitate smoother transactions—but perhaps to replace banks altogether. 

Users of the service can deposit and withdraw funds in much the same way they top up their mobile phones. Money can be instantly sent to any phone, which the recipient can then cash in—and it can also be used to buy goods and services. In short, it acts much like a virtual bank card, with Safaricom resellers acting as bank branches. Users don’t even need a bank account.

The need for this is great. In a country with some 36 million people, there are just 450 bank branches. The North Eastern part of Kenya, home to some 587,000 people, has just three branches. Being able to easily send and receive money from any part of the country, via one’s mobile phone, provides a major benefit to locals.

There are many examples of how it is being used: remote truck drivers being sent money for lorry repairs; travellers depositing money at home and withdrawing it at their destination, as a protection against theft; and even taxi drivers preferring M-Pesa for payment, rather than having to carry lots of cash.

Mobile payment systems may not have gained much currency in developed markets, where banking services are easily available and most transactions can be done easily online. But for developing markets, with poor infrastructure, few banks and bigger security risks, the potential seems very great indeed.

Bandwidth for Africa?

Just when Internet users across eastern and southern Africa have doubtless given up on ever getting fast, reliable broadband, some small hope may have been rekindled this week. Work has begun on a new undersea cable which will connect South Africa, Mozambique, Madagascar, Tanzania and Kenya, before linking up with the rest of the world.

Unlike an existing project, Eassy, which has been dogged by political bickering since 2002, this new cable will be backed by private investors, no doubt aware of the pent-up demand for decent Internet connectivity. Although it’s early days yet (a ship charting the route of the cable only left the port of Durban this week), the prospect of competition for the supply of bandwidth can only be good news.

Meanwhile, the prospect of another cable on Africa’s West coast emerged this month, backed by South Africa’s government as part of its preparations for the 2010 World Cup. A chance for hope after all?

Happy days are here again

The supreme buddha of the global telecom analyst community must surely be Paul Budde. His Oz-based website, while a bit of a dog’s breakfast to look at, is full of great wisdom on all things telecom. This week, for example Budde has written that around the world, “the telecoms industry is reaching new heights.”

I had a look and it’s true, ATT’s first quarter EPS was up 21.6% and Verizon’s was up a cheerful 17.4%. On the other side of the pond, BT’s numbers are also bright and, of course, its hard to keep track of the money pouring into Middle East, Asian and even African operators. In Europe, however, DT is still struggling, Vodafone’s numbers - well you don’t want to look. France Telecom is making money but its debt levels are still sky-high and its margins halved last year.

Budde says the divide is between companies that are launching into web-based services and those peddling proprietary-based broadband offerings. While IPTV is struggling in most parts of the world, he points out, web-based video is taking off in just about every country with a PC. Budde reckons that web-based video services (think YouTube) are already taking up more than one third of all global broadband capacity.

Telcos who want to see healthy profits again need to sit at the feet of Paul Budde and contemplate breaking down the walls around their proprietary gardens.