Low-cost phone and voice operator bounces back with entrepreneur support from Cisco

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South African low-cost phone and voice operator Dabba had its equipment confiscated by ICASA (for non-compliance) in February 2009. But it has bounced back today with new equipment and support from both Cisco and the Shuttleworth Foundation for an entrepreneur programme that will take its service out in the townships. Russell Southwood spoke to its CEO Rael Lissoos about its plans.

On 13 February 2009 an inspector from the South African regulator ICASA (D Makhubu) seized equipment from three sites and accused Dabba of contravening the ECA Sections 7, 31, 32(i) and 35(i), essentially claiming Dabba was providing service without a licence and using unapproved equipment. The cause of the seizures was a complaint of "interference" with a Telkom link. Telkom has followed its usual policy of “say nothing” since the seizure, allowing it to punch its rivals without being called to account.

Whatever the rights and wrongs of the accusations, ICASA turned up and seized the equipment without a formal warrant and only subsequently came back and issued a post-dated receipt for it.

According to Rael Lissoos, CEO of Dabba:”We’ve not had the equipment back and we’ve had no response (to our lawyer’s letter) to ICASA. So we’ve now reconnected using new equipment and are going to expand the service into new areas.”

Cisco is putting up R100,000 to initiate an ICT entrepreneurs programme to help Dabba expand into two new townships. The work will also be underwritten by the Shuttleworth Foundation.

The programme will start by selecting two entrepreneurs and training them and helping them to set up the service. Lissoos says:”If it works with the first two, then we will do it for eight more. The web site announcing the details will go up next week.”

The service delivers low-cost voice and data using lightweight Ubiquiti equipment and pole antennas. The equipment spec is about the lowest cost you can get to deliver a cheaper than average service to localities that are not currently being served. Interconnects have already been put in place to deliver calls to all the main carriers, although have blocked calls in the past.

The idea is to combine backhaul from the network using 5.8 ghz line of sight equipment (which can transmit 5-10 kms in good conditions) with local distribution (over 300 metres from the antenna) using 2.4 equipment. Power is supplied by a solar panel and battery power-pack attached with a locally-made anti-theft bracket.

Once a single distribution “hot-spot” has been set up, users will talk to their neighbours about the services they’re getting and it will be extended locally. As the townships are densely populated, each of the “hot-spots” can cover several hundred people.

All equipment uses open source software and has open source firmware installed. The IP phone service uses Asterisk and the billing is done using A2Billing. The voice service is delivered using analogue fixed phones with converters but could also be delivered using SIP phones when they become cheaper in the future.

The cost of national and international bandwidth remains a key barrier that needs to be overcome: a 256 kbps leased line which covers both national and international connectivity costs around R9,000 (US$1,010) a month. Hopefully, Telkom’s prices after Q2, 2009 will reflect the availability of much cheaper international bandwidth.

Some African countries have been slow to introduce higher levels of mobile competition and therefore are still in the first phase of roll-out to markets that pay back fairly quickly. But a number of African countries (including South Africa) have reached the end of this first phase and are entering a more difficult second phase.

In this second phase the challenge is getting out to the 10-30% of the population not yet covered. The dilemma for the mobile operators and others with incumbent positions is whether to cede this seemingly less rewarding territory to micro-entrepreneurs like Dabba or to devise a new model that works at the edge of markets. Some like Zain in Nigeria are experimenting with devolving the management of base stations and sales to a local entrepreneur.

The challenge for Government and other policy-makers is how to accelerate roll-out into these “edge-of-market” areas. Addressing this task perhaps starts by admitting that the Universal Service Fund/Agency model is not meeting this need in a timely fashion.

In 2007 the GSM Association conducted a study on Universal Service Funds. It identified that 32 out of 92 developing nations had either set one up or were due to do so. The 15 already operational had by this date collected US$6 billion in revenues by levying operators, particularly the mobile operators.

Up to 2010, the study estimated that the soon-to-be-set-up Universal Service Funds would collect a further US$53.8 billion from the industry. Of the funding collected by the time the study was published, only 27% had actually been spent on the purpose of extending coverage to the un-reached and this money that had been spent, only 5% had gone to mobile operators. From talking to a range of regulators, a little but not much has changed since then.

For the newly elected South African government delivering communications services to those who do not have them must surely be a priority as it seeks to deliver on its election promises. Therefore it must choose between backing the same old established interests (Telkom, in particular) who have not found a business model to deliver to all low-income customers and those who seek to empower local entrepreneurs to do so.