Trends that will accelerate Africa’s data future – anticipating the end of the mobile operator as we know it

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The transition to an all-data future in Africa will not necessarily be smooth or quick. But signs from elsewhere indicate an accelerating move from the old mobile ways to what may become the new data ones. Russell Southwood looks at recent global and African industry news developments that have important implications for Africa’s communications industry.

When industries go through a process of fundamental change it’s often difficult to tell what’s busy being born and what’s busy dying. Below I’ve tried to highlight a number of trends that will be of significant important for Africa:

The Commodization of Smartphones

Rajan Anandan, Google’s Managing Director in India and Southeast Asia, told the Financial Times that Google will “reboot” its Android One initiative within the next few weeks. This initiative, first announced in 2014, is designed to bring “the next five billion” people online.

To that end Google is now encouraging manufacturers to develop smartphones that cost as little as US$30, which the company believes is the “sweet spot” that will attain broad acceptance in countries like India. Earlier Android One smartphones cost around US$100.

Interestingly, Anandan had described the Indian "sweet spot" as between US$31 - $47 but the article was later corrected to say that the phone would not be sold at under 3000 rupees, or US$47.

Nokia, whose non-compete clause with Microsoft reportedly expires at the end of 2016 is thought by one analyst to be developing phones for the low-cost end of the market, mainly in emerging markets, such as Africa, Latin American, the Middle East and Asia. It could not really do worse than Microsoft is doing with its phones in Africa at the moment. The idea is to leverage the brand rather than return to the full manufacturing capacity of former times.

But these low cost smartphones have wafer thin margins and can be a poisoned chalice. We reported on Mozilla’s efforts to create a low end phone earlier in the year: Almost immediately afterwards Mozilla’s Head of Mobile Rick Fant left the company and its CEO Chris Beard recently made clear that it would concentrate on higher end handsets.

But leaving aside all the branded handset device makers’ noise, the Chinese manufacturers are quietly producing much cheaper handsets and will always undercut the branded makers.

But however they arrive, the result is fairly simple. The majority of handset owners in most markets in Africa will end up with smartphones. They won’t all know what to do with them to start with (as people will frequently tell you) but that will change as the digital savvy generations grow up. So think of Africa transitioning from voice only devices with a limited text ability (and sometimes a torch) to fully fledged, small computers. The only limitations are the size of screen and the keyboard. Discuss.

The automatic mobile data network-Wi-Fi hand-off

Several mobile operators have started offering their customers the ability to make and receive calls and texts via Wi-Fi, using their mobile phone number, when their network disappears.

One of the most recent is Optus in Australia. Its WiFi Talk app is available for Apple and Android mobile devices, acting as a gateway to the mobile network. Pre and post-paid Optus customers can make calls or send texts using the app, paying the same rates as if they were using the mobile phone network. They're also chewing through Wi-Fi data, around 300KB per minute for voice calls or 80KB per hour when running in the background.

An advantage of WiFi Talk over other mobile VoIP apps is that you can also receive incoming calls and texts sent to your Optus mobile number. This lets Optus customers use Wi-Fi as a fallback when they're in mobile blackspots, offering an alternative to femtocells which divert calls via broadband or repeaters which boost the mobile signal. Vodafone is working on something similar to WiFi Talk.

Asking you to pay full price for WiFi Talk calls seems a bit rich when you're helping Optus avoid the expense of improving its mobile network. But as the Sydney Morning Herald’s reporter said:”Before you get too excited about the global roaming potential, the app supposedly only works in Australia”.

However, the default for the App when it’s running in background is to find the Wi-Fi network even when the mobile network is available: for example, where there’s a choice between the mobile network and your home Wi-Fi. Big clue there. It’s cheaper to operate voice calls on Wi-Fi data than expensive, old mobile equipment.

Coming the other way Apple has finally fixed an iOS quirk which meant you could be automatically on an available free Wi-Fi network that didn’t work rather than the mobile data network which did.

These kind of services – however mobile operators seek to control them – are the first move from the old mobile network to Wi-Fi based coverage for some significant percentage of activities, whether voice or data. Africa’s mobile and data operators need to think through how to make this process as seamless as possible. It also changes the costs of rolling out to less financially rewarding potential coverage areas, creating new addressable markets.

Easy Rider – The Data MVNO for losing mobile operators

Google’s ProjectFi has got rather lost amongst other announcements from the company. At its core, Fi is just another MVNO (mobile virtual network operator) that combines Sprint and T-Mobile LTE networks into a hybrid that automatically uses the best available signal.

But Fi takes the concept one step further by incorporating WiFi calling, what carriers term voice over WiFi (VoWiFi). In areas with no or very weak cell coverage, but strong WiFi signals the phone automatically switches over. Unlike OTT services such as WhatsApp or Viber, VoWiFi uses the native phone number, dialer and SMS client (Android Messenger or Hangouts in this case), but as with OTT, WiFi activity doesn’t cost you by counting towards Fi data usage. Currently the hand-off is only one way from Wi-Fi to LTE.

Currently Fi is only available on the Nexus 6 but to give some idea of how things are changing, T-Mobile offers 18 devices that give Wi-Fi calling services.

The cute bit of this idea is that where you have two African mobile operators who don’t want to merge for whatever reason but want to use Wi-Fi calling to improve their service, they can come together around an MVNO. And of course, it need not involve Google.

OTTs Driving the Quality of Data Network Service

Based on its own traffic from 62 million members, Netflix provides an index of the speeds of different ISPs in over 50 countries. At present there are no African countries but with Netflix coming to South Africa, it is not hard to imagine that this might be the first country.

The country with both the highest and highest average Internet speed is Switzerland where the top ISP tops out at 4.19Mbps. Further, the country average in Switzerland checks in at a remarkably impressive 4.08Mbps. Interestingly, Switzerland’s slowest ISP is faster than the top ISP in the United States
 See here

For understandable reasons, African telecoms regulators have focused in on voice quality as one of their major areas. However, it will not be long before data quality becomes a key issue as more activities are carried out on the data network.
Netflix’s Index is part of broader struggle (around net neutrality) between itself as an OTT player and various cable and mobile operators who would like to charge its customers a premium for using Netflix’s services to get guaranteed speeds. It will not be too long before these same arguments start playing out in African markets.

International roaming  - The Beginning of the End of Profit Taking

The last piece of news is about an area that the continent has – along with the European Commission – been a pioneer in: the lowering of international roaming costs.

This week mobile operators in Botswana, Namibia, Zambia and Zimbabwe joined their counterparts in several East African countries to cut cross-border roaming fees. This is part of a pilot project due to be launched by 1 September.

According to a report from the Namibian newspaper New Era, all cellcos in the four southern African countries have agreed to implement a glide path to reduce roaming tariffs. A statement from the Communications Regulatory Authority of Namibia (CRAN) has said that operators in any of the other eleven member states of the Southern African Development Community (SADC) will be eligible to join the pilot scheme if they apply before 1 October. According to CRAN, a recommendation will be made to the Communications Regulators’ Association of Southern Africa (CRASA) that a regional clearing house be established to ensure lower costs for roaming in the region.

The last time we checked 20-25% of mobile operator revenues came from international roaming charges. It’s all part of the decline of voice revenues that will reshape mobile revenues and with it the shape of the business.

The chameleon mobile operator will begin to think of itself as a data operator with mobile devices on its network. The questions are then about how can user revenues be grown to replace the failing analogue voice revenues?


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