Kenya to launch an open access LTE network to help drive down prices and extend coverage

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Past experience with licensing WiMAX in Kenya has shown that a significant number of those buying spectrum failed to roll out. With LTE, the problem simply gets worse as there are more potential buyers than available spectrum to create an effective service. Kenya’s proposed solution is to let a contract to create a national open access wholesale LTE network to be operated by an independent company. Operators would then buy bandwidth from the operating company and make profit on services and applications. Russell Southwood spoke to Bitange Ndemo, the Permanent Secretary of Kenya’s Ministry of Information and Communications about how it will work.

The Kenyan Government has already made two key interventions in its market to try and help it develop more quickly. Firstly, it was instrumental in bringing together investors and operators to roll-out the TEAMS cable and all this happened over the relatively short period of 18 months to two years, a timescale unheard of in most of the rest of Africa. Secondly, it has built a national fibre backbone in three phases that is now operated and managed by former incumbent Telkom Kenya (owned by Orange).

The Government’s frustration is that it wants to both lower prices and extend coverage as quickly as possible. This is both to grow the ICT sector itself and allow all the economic and social benefits it will bring to other sectors in the country.

But according to Bitange Ndemo, the Government has no desire to stop the market working, simply to make competition more effective:”A reporter from the BBC asked me: why can’t the Government intervene to lower prices? I don’t want to interfere in the market. The national fibre optic network (we built) is running efficiently and all operators are using it. The costs are now much lower, especially between Mombasa and Nairobi. Other operators had to lower their prices.”

So why intervene with an open access LTE network?:”The reason we went this way is that we didn’t want to interfere with metro fibre networks. Operators have been using these as their competitive advantage and refusing to lower costs, especially for fibre to the home. So far it has only been rolled out to rich areas and there’s four cables to one of these areas”.

“Other deserving areas don’t have one. We must have a robust last mile solution. Even the Government needs a WAN, beyond its (existing) core network. We need to be able to take services to the smallest colleges and schools.”

The current hurdle to achieving a proper LTE roll-out is the shortage of spectrum alongside the number of potential buyers: “We have close to 19 operators lined up for this kind of frequency which can only accommodate three operators if we use the old model to allocate it”.

To overcome this hurdle, the Government is proposing to create a Public-Private Partnership (PPP). It would let contracts to build and operate the network at the lowest possible cost and existing operators would buy wholesale services and bandwidth from the company:”There is a group in the USA who want to work with Cisco and Intel to do it. The management of the company will be done outside of those who are local partners.”

This may be an alternative to the usual “let the Chinese finance and build it” approach which has run into some problems in places like Uganda. Two problems arise with this approach. Firstly, few Governments take Governance and trust seriously so in both Uganda and Tanzania, management has ended up back in the hands of incumbents. Secondly, in Uganda there have been significant issues over both the specification of the network, its costs and its final quality.

“We can use (this LTE network) to reduce the cost of broadband. The 2.5 Ghz spectrum is much better for propagation and as this is currently held by Government agencies, we can put this into operation. Everyone wants a piece of LTE but not everyone can use it if you let on a 10 Mhz per operator basis because you really need 30 Mhz. That means you would need an auction and that would discriminate against those who could not afford it and escalate the cost. You can’t give it to all 19 of them.” The higher the auction cost, the more the victorious spectrum owners would have to charge higher prices and this cuts against the grain of trying to create the largest number of users as possible and the widest coverage area.

And the reaction from operators?:”Safaricom wanted to build a national LTE network on the condition that payments (from retail customers) were made through M-Pesa. But if that had happened, other operators would not have used it. It will be the same thing that happened with the TEAMS project. Initially operators opposed it but now they are very happy.”

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