Satellite to fibre – Africa’s big change is really under way, says new report

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2010 is not shaping up to be a good year for satellite operators and resellers in Africa. There have been rumours that for the first time one operators’ sales in the continent have slipped down several percentage points. This year sees the arrival of four more international fibre cables: Glo One, Main One, EASSy and LION. Balancing Act’s latest report – African Fibre and Satellite Markets – takes the temperature of the current market and seeks to predict where things will be in three years time.

As an acknowledgement of the huge changes that have occurred, this report has gone from being called African Satellite Markets the last time it was published to being African Fibre and Satellite Markets this time around. Whether you are an operator or a bandwidth buyer, you cannot assess the market landscape without taking into account the interrelationship between the availability of fibre and satellite infrastructure.

Some of the key findings of the report are as follows:

* The satellite operators have invested huge amounts in new and replacement satellites. US$ 4.395 billion will be invested in new and replacement satellites against US£2.15 billion in seven international submarine cables, excluding ACE where the budget has not yet been announced. The satellite operators are investing at a time when the tide is turning against satellite use.

* The overall balance of satellite vs fibre use in Africa’s top Sub-Saharan markets 20 markets goes from 45.6% vs 54.4% in 2008 to 11.9% to 88.1% in 2014. Of these top 20 markets, the top 5 markets (South Africa, Nigeria, Kenya, Angola and Sudan) make up the majority of bandwidth demand across the continent and are the countries that will experience the fastest bandwidth growth over the period. So satellite operators and resellers will not only be selling into a smaller share of the overall bandwidth market but will become niche players in many countries. There will be growth but most of it will be on fibre.

•  After three and a half years since December 2005 in which only ten satellites were launched with coverage over Africa (four of which failed), at least 36 new satellites will be launched by the end of 2013, costing between US$4.4 billion and bringing the equivalent of 26,325 MHz of additional capacity over the region. By the time the second constellation of O3b satellites is launched, there will be almost as much Ka-band capacity over Africa as the total stock of C- and Ku-band capacity.

• If DRC fails to get itself connected to the ACE cable, it will be the only major country remaining on satellite. The tiny number of countries remaining wholly dependent on satellite will largely be small bandwidth markets like Eritrea. Although there will be demand from rural and remote areas, between 90-95% of all demand comes from urban areas and frequently just within the capital of a country. Almost no capitals will be unconnected by fibre.

* We have had conversations with a great many operators over the last three months and there is not a single one that is not getting rid of satellite capacity or trying to get out of longer term satellite contracts. There is almost something visceral about the way in which this is happening and some are simply dispensing with all but the smallest amount of capacity for redundancy. The years of tight capacity availability and high prices may have been kind to satellite operators but they have not endeared them to many operators. The combination of more satellite capacity and all this freed up trunking capacity will see prices fall over the next three to five years.

* One of the niche markets for satellite operators is satellite national cellular backhaul, connecting remote base stations to the backbone network. When African Satellite Markets was published in 2005 this was a very significant market. This time around, the report contains a spot-check updating of two of the largest users of this type of connectivity – DRC and Nigeria – and the results are not encouraging.

Satellite operators need to demonstrate that they can respond to these new market circumstances by transforming what they offer. Satellite is dead! Long live satellite! Firstly, they need to make innovations in terms of delivery. Secondly, they need to find ways of bringing costs down so that those who are beyond fibre or wireless have some chance of joining the party. The market needs satellite broadband offers in the US$20-40 per month range. Maybe the big transition from satellite to fibre will re-energise the operators and get them thinking harder about how they retain market share.

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