Fixed has no future
Fixed-line broadband is lagging mobile badly in Africa. Where to next for operators?
Fixed broadband, in Africa anyway, is always going to have very limited reach. Mobile voice overtook fixed years ago, and mobile broadband is now taking over fixed, even in more developed African countries like SA that have sizeable fixed-line networks. These are the findings of a recent research study on broadband in Africa. The Future of Broadband in Africa research paper was researched and written by Research ICT Africa (RIA) staffers Dr Christoph Stork and Enrico Calandro, with Ranmalee Gamage, of LIRNEasia, an Asian regional ICT policy think tank.
The voice battle was lost in the last decade; the next few years will show whether the fixed operators lose the data battle too.
The paper uses data from household surveys conducted in 12 African countries by RIA in 2012, and shows that fixed line is declining as a whole. Penetration decreased in Ethiopia, Ghana, Kenya, Namibia, SA and Tanzania compared to 2007/08 data. It improved marginally in Cameroon, Uganda and Rwanda and improved notably in only one country last year, Botswana, and then only to reach 15% overall. Internet use on an individual level has more than doubled in the last four years, according to Dr Stork, who presented the paper at the CPRsouth8/CPRafrica 2013 conference held in India in September.
Stork notes that the real digital divide in Africa is among those with and without electricity. In the countries included in this research, more than half of households have electricity, with Ghana and SA having the majority of households connected, and Tanzania, Rwanda, Ethiopia and Uganda having less than 20% of households connected to the grid, according to the paper.
It further states that Internet access has grown in all the countries reported on over the past four years. SA has the highest usage rate - 33.7% - while Ethiopia has a mere 2.7% usage, up 2% on its 2007/08 figure. This, the paper notes, is likely because Ethiopia still has a monopoly incumbent and hasn't liberalised its market, thus preventing competition.
While the first wave of Internet adoption happened on desktop computers in workplaces, schools, universities and Internet caf'es, the paper's authors note that the second wave is most definitely mobile, with 70% of Ugandan users and 67% of Ethiopian users first using the Internet on a mobile. This figure is about 50% in Tanzania, Namibia and Nigeria, according to the paper.
Interestingly, the paper finds that mobile broadband is both cheaper overall and faster than comparative fixed-line broadband offerings.
The paper uses a number of price baskets to compare broadband prices in each country. The cheapest products are chosen for each basket, over a 24-month period, and include installation fees and any required hardware. In almost every instance, a 1GB mobile offering is cheaper than the equivalent fixed-line offering. Overall, prepaid mobile is cheaper than postpaid for that offering.
On a 5GB basket, few of the prepaid products are cheaper than the postpaid equivalent, the paper notes, and ADSL is more expensive on the whole.
For uncapped products, in the countries where it is available, mobile is cheaper than ADSL - specifically in SA, Cameroon and Kenya. SA's only mobile broadband uncapped offer has since been withdrawn by MTN, unfortunately.
That said, the above still places fixed-line operator Telkom and its equivalents across the continent in an unenviable position. Stork says the trend has been for fixed operators, in the face of declining fixed-line penetration and usage, to jump ship and acquire or become a mobile operator. This isn't necessarily good for either the operators or the countries concerned, however. Other options may be more profitable, he notes, commenting that fixed-line operators need to invest in new technologies, VDSL or fibre, if they want to compete with mobile. Failing that, they could focus exclusively on the corporate market, but that won't be of use to the broader economy in each geography, as it reduces competition in the retail space by leaving it mainly to the mobile operators.
One option, he says, is for operators to focus on data services offered via flat-rate pricing, and ignore traditional voice revenues. Converting all fixed lines into data lines would drastically improve penetration, the paper states, notably in SA, Botswana and Namibia, which have reasonably high fixed-line penetration. Another option is to roll out fibre, Stork says, and focus on offering premium TV content with uncapped Internet.
The voice battle was lost in the last decade, the paper notes; the next few years will show whether the fixed operators lose the data battle too.
First published in the October 2013 issue of ITWeb Brainstorm magazine.