Data moves centre-stage: the delights and perils of Wi-Fi offloading, pricing models and access

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In Africa, mobile operators are finding themselves in a situation where their data traffic exceeds their voice traffic but the income from data is much smaller. The crunch is that data also congests the network far more quickly than voice. Many assume that LTE will deal with this surge of data use but bandwidth is like a recreational drug: the more you have access to, the more you use. Russell Southwood looks at how good, old-fashioned Wi-Fi has suddenly come into its own and how it poses a number of challenges for Africa’s mobile operators.

The dream of the insurgent challengers to the mobile operators was that those providing hot-spots would take the static part of a customer’s voice use, leaving the mobile operator with “the road”. Unlicensed Mobile Access (UMA) was an attempt to integrate Wi-Fi voice offload but it never worked. When Wi-MAX was at its high point, mobile voice was a promise that seemed always round the corner but never quite with us. Now LTE has arrived and Wi-MAX is a “transitional technology”: in other words, it will soon be, so long it’s been good to know you.

With the rise of smartphones and the steady arrival of tablets in Africa, data use is increasing within the constraints of what is still largely premium pricing. Estimates vary but somewhere between 20-40% of data traffic in developed markets is going over Wi-Fi networks, The main reason for this “Wi-Fi offloading” is that the mobile operators can’t keep up in network terms with the rapid growth in data. Africa’s pattern will differ only by degree.

So here’s the dilemma for the mobile operators. There are a small number of premium customers who generate the largest percentage of your high-margin income. Increasingly they are wandering round with different devices – smartphones, tablets and laptops – that allow them to pick and choose for data (by price and quality) which network they want to be on.

So the threat comes from those who might provide better pricing and less congested access. Google has partnered with Kenya’s Wananchi to provide (through a new business unit) Wazi hot-spots. It has piloted one at The Junction shopping mall in Nairobi and has 500+ regular customers.

It will work with ISPs and mobile operators to offer a unified roaming scheme (like Boingo) and has a back-end exchange that deals with retail and wholesale billing. It will fill in gaps where it doesn’t have wholesale partners and will roll out in Kenya and across East Africa. You get the first ten minutes free and then it costs you KS50 (US47 cents) an hour or KS500 (US$4.73) a month.

In another part of the continent, In September South Africa’s IS confirmed that it was at an advanced stage of planning for a project that could see it build out a series of metropolitan Wi-Fi networks to serve business campuses and city streets in densely populated urban areas.

The region’s mobile operators have not been slow to see the threat and some are moving pre-emptively into the space and exploring the business model. One operator has rolled out 1,500 hot-spots in one country but the experience has raised significant issues for them that will affect any hot-spot operator at scale.

The backhaul network needs to be upgraded to handle additional traffic and from a new source. As with base stations, the hot-spots need to have 24 hour guaranteed power and there are sometimes licensing issues for masts with city hall or local government. Note to Governments: rein in greedy local authorities who are increasing the costs of closing the digital divide.

The aim is to provide relatively large geographic areas that are covered by 20-50 metre Wi-Fi hot-spots. Others are looking at Wi-Fi mesh networks but these can be expensive if they are provisioned with back-up units. However, whatever its limitations, a Wi-Fi mesh network can provide up to 50 kms coverage. If both operate in unlicensed spectrum, this reduces the cost of delivery, although on occasions it reduces the quality of delivery.

But Wi-Fi is a significantly different technology to existing mobile infrastructure as Hans Beijner, Ericsson's head of product marketing management told Fierce Wireless. The QoS provided by Wi-Fi is very dependent on how it is deployed and what backhaul techniques are used. "It's possible to get close to ‘carrier-grade' performance with Wi-Fi for data services, but not good enough for voice," he said. "Also, the technology doesn't have the same admission controls that you have with cellular, which can result in complete congestion." Since voice and data congestion is a fairly constant feature of most urban African networks, the issue is surely hot-spot capacity.

The fear of the mobile operators is that their high-margin, premium customers will choose to “sleep with” other data providers who are more cost effective and only come home to them for cheap voice. Or, heaven forbid, they might start using mobile Skype clients with these less fussy hot-spot providers to reduce their outgoings. The cost of both current voice and data roaming charges makes this a great temptation for the international visitor. For lower-end customers who are heavy SMS users, the attractions of e-mail will soon become apparent if they are not already.

But with LTE, isn’t this really another of those transitional moments, like the coming and going of WiMAX? Maybe but…The but is as Mark Rayner, CEO, DStv Mobile observed that the upward suck of bandwidth required to use “rich” content will continue to grow:”LTE will come and make the lives of content owners vastly different. But the new bandwidth will bring more demands like HD. So we will still need to be fighting for bandwidth and fighting for it at the right price.”

Also, LTE provides those impressive theoretical download and upload speeds by using a lot of spectrum and all of that will have to be paid for. In addition, one of Africa’s key mobile operators told us that they would be provisioning each LTE base station with 2-8 fibre cores. Some mobile operators are ready for this moment and have extensive fibre backbones but the cost for others will be punishing. All that speedy new LTE data will only go as fast as the slowest link in the network.

So good, old-fashioned Wi-Fi still has legs to run for some time to come. But what would really make a difference would be if a regulator was to offer a series of 2 year pilot licences to new and existing operators to offer data and voice using Wi-Fi in the unlicensed spectrum in un-serviced areas.


This week on the BalancingActAfrica You Tube channel:

Henk Kleynhans, Chair of WAPA on TV White Spaces proposals in South Africa

Steve Song, CEO, Village Telco on the TV White Spaces Workshop

Richard Bell, CEO, Wananchi Group in Kenya on international fibre connectivity, local TV content for its Zuku bouquet and financing its vision:

Kamal Budhabbatti, Craft Silicon on its banking products and m-money payment product ELMA

Riyaz Bachani, CTO, Wananchi on its Wazi hot-spots partnership with Google

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