Double play in Nigeria: ipNX will use WiMAX to carve itself a niche offering voice and broadband
ISPs across the continent are being squeezed by the entry of the mobile companies into the Internet sector. There is double whammy hitting them: some mobile companies are buying their own ISPs, whilst others are simply offering mobile broadband through EVDO and 3G. Nigeria’s ipNX’s has a strategy which mirrors the success of the CDMA 2000 fixed wireless product but it will use WiMAX to offer both “plug and play” voice and broadband. Russell Southwood spoke this week to ipNX’s Group Managing Director Ejovi Aror in Lagos.
Nigeria’s Internet market is not for the faint-hearted. The country is massive and both road and fibre infrastructure have made it hard for any single player to genuinely claim a national footprint. Small one city ISPs (for example in Ibadan and Abuja) have abounded alongside a slew of VSAT operators (often estimated in the hundreds) who chase various parts of the corporate market. It has been the graveyard of at least two high profile companies: Accelon (which was sold to IS) and Mweb (which achieved a pitifully small subscriber base).
The key retail players are Swift, DirectOn PC, Netcom, Starcomms, MTN, Reltel and Multicomms. Wi-MAX providers in the market include: DirectOn PC, Metro NG and Switched Broadband. MTN bought local company VGC which has its own DSL offer. Globacom has plans to bring a broadband offer to the market shortly. At the heart of the market is the car-crash that is Nitel which seems to be visibly imploding. Usually an incumbent of this kind would have a substantial DSL subscriber base in an economy of this size. But its management and finance difficulties have left it without strategy or market share in this market.
The great mystery is actually how many Internet subscribers in the market. The sceptics think there may be as few as 40-50,000 subscribers but Starcomms claimed in its public prospectus at the end of last year that it had 38,000 subscribers for its CDMA 2000/EVDO offers. This might mean a total of 100,000 subscribers but the number is tiny in an economy of this scale and is still largely focused on corporate subscribers. Not particularly optimistic projections would put the potential Internet subscriber market at somewhere between 0.5-1 million.
Various players have mooted the possibility of triple play including Globacom and Daar. Globacom is perhaps one of the few players that has the spread of infrastructure to support a retail offer and with a hybrid IP-satellite bundle it could become a player. Daar would need to form an alliance with an existing player. Given the rights issues, the market locally thinks it’s more likely that those entering the market will simply sell DStv as part of a bundle.
The market is seriously constrained in a number of key ways. Nitel’s operation of the SAT3 cable mean high levels of down-time. And as one player told us, the seven day strike by discontented Nitel workers was a “nightmare”. As a result, the transition from satellite to be fibre has been still-born as everyone hangs on to satellite as redundancy or simply uses it because they can’t get their hands on Nitel’s SAT3 bandwidth. And when it is available, sales move pitifully slowly in memory of the organisation’s public sector origins.
Bandwidth prices are still high (US$2,500-3,000). Everyone is waiting for promised cheaper bandwidth from either Globacom’s Glo One cable due next year or Mainstreet’s Main One cable the year after.
But although there are five potential national fibre backbone providers (Globacom, Nitel, MTN, Phase3 and Suburban) all seem intent on pursuing a “high price, low volume” strategy. Capacity between Lagos and Abuja costs US$4,300 a month, more than sending the same amount of traffic all the way to Europe. And local E1s in Lagos and elsewhere are even more expensive!
Quality on these routes is not good with regular down-time and although everyone except Nitel offers SLAs (some even with penalties for down-time), one connectivity provider ruefully told us: “There may be SLAs but no-one’s succeeded in making them stick.” To be fair, there are enormous problems with power supply and occasional vandalism but these somehow do not seem to account for the frequent outages. As one ISP told us:”Frankly the service is crap. It’s not reliable and there’s too much downtime.”
Recently, the Nigerian government through its telecommunications regulator, Nigerian Communications Commission (NCC), launched a broadband penetration campaign called SABI (State Accelerated Broadband Initiative), which is designed to aggressively expand broadband access to all major commercial cities in Nigeria. Three companies have got letters of intent from NCC: ipNX, MTN (which will deploy a WiMAX network) and a wi-fi alliance of several ISPs
The net result of all these fairly fundamental problems is that one of Africa’s biggest markets still has some of the most costly Internet across the continent.
Stepping into this maelstrom of troubles is ipNX which has invested US$50 million in buying 802.16e WiMAX equipment from Soma Networks and intends to get 250,000 customers for both carrier-grade voice and broadband. It intends to take its initial VoIP footprint nationwide as it expands and sees its growth coming from retail rather than corporate customers.
Its initial roll-out includes Lagos (11 base stations), Port Harcourt (4 base stations installed but not implemented) and Abuja (six base stations not yet installed). The base stations have a range of 3-5 kilometres depending on terrain. Each base station has the potential to support 1,000 subscribers and ipNX currently has 5,000 subscribers. According to Arror, although it has mobility:”It is positioned as a replacement for DSL and is a fixed wireless solution”.
Although it’s difficult to estimate numbers, Arror reckons that the company’s base stations provide potential coverage to 5 million people. The areas covered in Lagos include Victoria Island, Ekoyi, Lekki, Zaba, Surulere, Apapa, Festac,Ikeja and Ojodu.
But what makes ipNX different from any old WiMAX player (of which there are several) is the customer CPE. It is (as one person confirmed to us) genuinely “plug and play” and does not require technicians to come and connect it. Furthermore it has three ports, one for broadband and two for voice. The voice ports take standard phones again on a plug it in and it works basis. Its voice service will launch shortly.
Unlike in Kenya, ipNX has been able to get interconnection agreements with all carriers and will offer prices that match these carriers. None of them put obstacles in the path of ipNX making a nonsense of the kinds of arguments the Kenyan carriers used as obstacles to new entrants. As Arror says:” The regulator NCC has made it clear that it doesn’t care about technology. If you have a licence, you have the right to access other carriers”.
And the price of this service? The household packages for 1 meg vary between N6,000(US$51.74) and N15,000 (US$129.35). The corporate package for 1 meg varies between N20,000 (US$172.47) and N45,000 (US$388.06). Achievable speeds are around 400 kbps. Arror believes that if retail prices go down to between US$50-100 then a mass market will emerge.
But how easy will it be to become a national player? Arror does not underestimate the problems:”The support infrastructure for doing this is not well developed. For example, there are issues of cell sites, power and double generators. In addition, the national backbone will not yet support this kind of development.”
Although we discuss the future of WiMAX versus other technologies (uncertain but who knows?) Arror is clear that the customer does not care what the technology is:
”They care about service and whether it works. It needs to do what it says it does. And with this simple mantra and a simple “plug and play” box, he may just have found a way of carving himself a significant niche in Nigeria’s future retail market.