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Africa Com 2012 – Separating out the anxiety signals from the overwhelming noise

Africa Com is Informa’s monster talk-fest that like Topsy just seems to grow and grow. This year it claimed over 8,000 pre-registered attendees, the equivalent of a small town. It is now spread over three days and takes in a growing encampment of nearby subject areas. Weary but not exhausted, Russell Southwood tries to make some sense of what happened to him over the last three days.

Once upon a time, the mobile operators, the masters of the universe, were centre stage at this trade show. Now with data, content, services and other things that might go on it on everybody’s mind, the action seems to have migrated to the areas reflected in the co-located events: broadcast, music, apps and enterprise ICT to name but a few.

All the usual vendors were hawking their wares but the sizes of the largest stands seemed somewhat reduced in scale and the event give-aways seemed to reflect the more economically difficult times. Roratika’s cheap but transforming trilby hat seemed to be the money best spent. But beyond the smell of the BS and the roar of the crowd, it was just possible to detect some real signals:

Stuck inside of Cape Town with the content blues again:
Some hapless individual at the keynote speech asked whether the content deal offered by mobile operators (at its worst, 80/20 in their favour) was fair and was duly brushed off. As moderator of day one of Africa Cast, I raised the same issue and found that the content providers (particularly those from Europe and the USA) found it hard to understand why the terms of the deal were so skewed.

It may seem odd for me to be going on about content when there are big technology developments like LTE around the corner. But the content deal is emblematic of industry forged in the heat of great success that doesn’t understand what’s about to happen next. It’s all about content, stupid. Things like LTE are just the big biro that might make it all possible.

After raising the issue in the broadcast session, a mobile operator executive made a point of talking to me. We started on the old familiar ground of how the content deal was just a negotiation between buyer and seller, did I know how much marketing operators did? And that they “owned” the customers. He then acknowledged that actually the mobile operators were going to find themselves outrun by companies like Google and Skype if they didn’t make some changes to their attitudes and their business models. But in the main, the testosterone-heavy world of mobile executives does not allow them to admit their inner fear.

I had similar conversations with two large SMS aggregators who deal with the major operators. One observed that one operator was almost resentful that he was questioning the deal terms (80/20) and didn’t he realize how much they had invested? This same operator has a pitch that acknowledges that the terms are unfavorable but claims you work in partnership and there will be better rewards in a few years time. Those with successful content assets that already draw large audiences on other media are understandably not much interested in jam tomorrow.

The other SMS aggregator told me that the mobile operators would change their ways but on two conditions. Firstly, they had to feel they were in control of things and secondly, they had to feel comfortable with what was happening. This made me laugh out loud in a rueful sort of way as the change in how content will be handled (when it goes to 70/30 in favor of the content owners) will neither be in their control or comfortable for them.

Operators can’t stop the steadily rising tide of Internet-enabled handsets driven along by things like Facebook, 2Go, MXit, Eskimi and biNu. Whilst Alan Knott-Craig Jnr told me (before he fell out with his investors) that the mobile operators were a fact of life and you had to live with them, several of these large social operators are looking at how payment can be taken outside of the mobile operator.

Mobile operators do not understand content and need to get out of the way and let those that do grow the African Internet. Sivan Pillay, of major formats company, Endemol gave two statistics that showed a world of content beyond the past of SMS football scores and Bible or Koran quotes. 7 million people had downloaded clips from Big Brother Africa and DStv’s Box Office is now doing 600,000 transactions a month in South Africa.

This week a new South African movie site joined the fray called Wabona.com and I met a company called Gigham that has been providing events listings, first in South Africa but more recently in Nairobi. Organisations like biNu and 2Go have a critical mass of active users and so if you’re a content owner, you’ll want to combine their mass of users with your own. And eventually, people like them will work out payment structures that do not require the mobile operators and where the terms are much better than 80/20 to the platform operator.

Mobile VoIP – get on the bus before it runs you over: Old habits die hard and it’s human to do what’s easiest: you will remember how many years it has taken Skype to become a fixed part of the landscape. I may regret having to listen to middle-aged men in airports shouting at lap-tops as a way of communicating with their nearest and dearest but their habits and behaviours have changed. Indeed I find myself having an increasing number of business meetings over Skype and the number of rather prim “It’s not our policy to use Skype” responses reducing.

This way of making calls (and saving money) has and will increasingly migrate on to mobile with the rise in smartphones amongst the wealthiest part of Africa’s customer base.

Similar approaches to how this might be done were on display at Africa Com. Reve Systems offers an app that connects you to an underlying minutes provider that gives you much cheaper international calls. It powers Letz Talk in the Congo and Rainbow and Smart Telecom in South Africa and is particularly popular with large diaspora communities.

Israel’s Mail Vision offers operators a mobile VoIP cloud platform for large-scale deployments. It offers easy-to-use soft clients for all devices with high-quality VoIP codecs for use over Wi-Fi or 3G.

With the steady rise of more ubiquitous hot-spots, those wealthier smartphone users will opt out of the mobile network to make international calls and it will become available at national level. Mobile operators need to start offering these kinds of services to understand how they work and how they can be monetized. Why? Because the logic leads inevitably to all voice being data and once it is, voice will simply be another Internet app.

WiMAX vs LTE – the fog of war descends: The first panel session of the WiMAX Forum was absolutely fascinating. Three WiMAX data operators (Michelle Scanlon, uMAX in Zimbabwe; Praveen Sadelage, Busy Internet in Ghana; and Semere Tekie, Microteck in Botswana) all talked about the business model using WiMAX.

Interestingly, all three were recent adoptees and all were focused on the high-end corporate market and wealthy householders. Thus far each operated a relatively small number of base stations. They have all made a business model based on offering better bandwidth and more responsive service than mobile operators.

The understandable perception is that WiMAX will become the technology that LTE and the mobile operators buried. The bit that is hard to read is how quickly the current “fanfare” LTE roll-outs turn into users actually being able to access an ecosystem of well-priced devices with data pricing at comparable or below current 3G levels.

One Vodacom customer in South Africa told me that there were currently only two handsets (from Samsung) available. Likewise, it’s not clear when dongles will migrate down from the current higher starting prices. All of which means that WiMAX probably has a 3-5 year window. Though interestingly data operators like Smile and other company have opted for LTE so the war is really on.

Alvarion recently announced its BreezeCOMPACT High Power device which is TD-LTE Advanced ready on the basis of a sotware upgrade and the prices I discussed with them for this and another similar radio device are very competitive.

But somehow, it’s not the technology that matters it’s the business model. This category of insurgent challengers is sticking closely to the niche market of high-end customers. They don’t have the capital to address the household market yet. Many will simply make the choice to stay below grass level so that they are not bothered by the mobile big gorillas.

That missing rural offer – pieces could fall into place:
The holy grail of rural roll-out based on cheaper underlying bandwidth and delivery technology may yet be going from a shimmering mirage to becoming actual reality.

But here we are back with the mobile operators and the curious way in which they respond to change. As a mobile operator, you are faced with the cost of diesel at a cell site of US$40,000 a year and you are offered technologies that have shown they can reduce this to US$7-8,000. What do you do? Well, you talk about it for a long time, you run a few pilots in a desultory way and you sometimes even switch the pilots off. Maybe the tower operators who seem to be acquiring this real estate will be better motivated to focus on energy costs.

Vendors like Altobridge (see telecoms news below),VNL and Range Networks are offering low cost, low OPEX base stations designed to operate at a level that will increase the addressable market. The former has had some success with its Orange roll-out in Niger. But mobile operators are still treating this as if it was a Corporate Social Reponsibility project rather than tomorrow’s business.

Estimates vary but up to 60% of the OPEX costs can be the satellite signal. SES-owned O3B will come on stream next year and its O3BCell product is pitching that it will connect operators more cost-effectively thus overcoming some of this particular OPEX issue.

Interestingly, Econet Solar (part of the mobile operator group in Zimbabwe) is now offering a solar Home Power Station through its channel that does customer top-ups. It can also offer lighting in the home, a boon for those currently trying to do their homework by candle light or kerosene lamp.

Those holding back Africa’s Internet growth – We name the guilty men: Africa’s national fibre network connections continue to expand, This week Liquid Telecom announced it had connected Lubumbashi, thus removing one town in DRC from the satellite market.

However, there are still countries and incumbents whose prices are holding back the development of affordable Internet in Africa. Across most of eastern Africa, wholesale STM1s are now selling for between US$7-8,000. The cost in Mozambique? Well, it’s still between US$20-25,000 for an STM1. So you can see that that country won’t be joining the broadband fast-track unless it changes its ways.

We might also add Cameroon, Angola and Chad. The latter has signed a monopoly deal with an Asian-America who is doing a lot of business in the country and he is busily matching the high prices charged by Camtel on the other side of the border. In the snakes and ladders of economic development, fall down the snake that takes you back 2-3 years.

Ever wondered why South African Internet has yet to come down to user-widening levels? US$15-20,000 for an STM1. And Telkom, that fading jewel that the Government wants to do something with that will tell us what in March next year is still playing the old incumbent tricks by offering one price to international destinations from anywhere in South Africa.

The Kevin Maxwell deal in Nigeria (see issue 618) is now reaching such levels of byzantine complexity (even for Nigeria) that it now looks like standing in the way of sorting out what happens to the all-important Multilinks network.

The industry that comes back to Africa Com 2015 will look significantly different to the one that is currently on view. The only question is, as the Black Panthers used to say, are you part of the problem or are you part of the solution?

To get up-to-the minute news, you need to be on Twitter. Follow us on @BalancingActAfr

Pierre van der Hoven, Tuluntulu on a low cost bandwidth streaming solution for mobile

Kwabena Smith, Orun Energy on saving diesel costs on base stations

Justin Hartman, Social Code on South Africa's ICT entrepreneurialism and the failure to support it

Julian Macharia, Buni TV on this new online video delivery platform

Doron Ben Sira, CEO, SkyVision on its acquisition of Afinis

Envir Fraser, Convergence Partners on investment opportunities in ICT

Tayo Oviosu, CEO, Paga 
on the mobile money market in Nigeria

Nigerian ICT blogger Loy Okezi
e on Nigeria's online successes

Victor Dibia, CEO, Denvycom.com
 on his games portfolio and plans to monetize

Oluseye Soyode-Johnson, consultant to Maliyo Games
 on the business model

A special for Balancing Act readers:

Jonathan Donner, Microsoft Research, India and Marion Walton, UCT on Cape Town low income teens' use of PC and mobile Internet

Jonathan Donner and Marion Walton
on why funded libraries and telecentres are still needed

Mike Best, Georgia Tech on using interactive media with Liberia's Truth Commission

Leonard Ah Kun from South Africa’s on augmented reality, Leap Motion and Google glasses

Emma Kaye on an African mobile platform to make music and films

Michael Ugwu, iROKING on Nigeria's Spotify-type service

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