LTE cannot just be for the big guys if Africa is to reach its full broadband potential

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Two contrasting news announcements about LTE this week highlight what will become the next front in the struggle between Africa’s mobile incumbents and the insurgent challengers. Vodacom made a surprise announcement that it was launching LTE before MTN in South Africa. A less well-known operator in DRC – Cielux – also signed contracts to buy equipment to roll-out. Russell Southwood looks at how LTE will change the landscape in terms of the Internet market.

There has been an ebb and flow in the struggle over how the internet is developed in Africa. Initially there were small-scale ISPs and they had to fight to get decent terms for wholesale access from the then fixed line incumbents. Once these were established in more competitive countries, the balance of power shifted back to the incumbents with the roll-out of ADSL. 

Then along came 3G and 3G+ and the larger mobile operators (by now themselves incumbents) began to drive up the number of Internet users taking between 70-95% of the whole market. There have been some insurgent challengers offering triple play and Fibre-To-The-Home (Wananchi and Jamii Telecom in Kenya) but the numbers have been relatively modest.

LTE offers a chance to create a much more competitive Internet ecology but too many African countries are likely to pursue a policy that will simply reinforce the existing duopoly or tri-opoly. What on earth does tri-opoly mean, I here you say? Well with anything less than four or five players, the market tends to find a particular level of pricing and stay there. Only a market where there are more players and it’s easy to get access for insurgent challengers, do things happen differently.

I was recently having a conversation in a Ministry of Communications in a country which has to remain un-named. The civil servant responsible for policy said that the big operators had the money and that this was the best way for the Government to raise revenues.

This is a short-sighted policy for two reasons: firstly, the mobile operators will pay the high prices if they have to but they will charge back these high costs to their customers to recover their outlay; secondly, the high costs of LTE usable spectrum will deter smaller Internet and data operators who might shake the market up.

 

The first issue comes from an attitude in many Governments on the continent that very-high speed Internet access (or indeed most Internet access) is a luxury that should remain the privilege of the upper end of the middle classes. The alternative in policy terms is quite clear: charge less for spectrum and ensure that the mobile operators charge less to customers. This will create a large critical mass of users for services like video and music downloads at one end and e-medicine at the other end of the “what people want” to “it does you good” spectrum.

Furthermore, cheaper LTE spectrum will allow non-mobile operators of a smaller scale to enter the market and innovate more quickly than the sometimes rather more slow moving mobile operators. But what about voice threatening mobile operators’ voice revenues? Well, the new generation of smaller LTE operators can be restricted to data if that makes it easier for all this to happen. However, this will allow them to offer fixed VoiP calls as they do in the more competitive East African countries already.

So what’s the current scorecard in the “big guys” vs insurgent challenger stakes for LTE licensing.

So far LTE has gone to the “big guys” in Angola (Movicel), Namibia (MTC) and South Africa (Vodacom). We also understand that MTN is testing LTE in Zambia. Kenya has a consortium of big guys with equipment vendors under public guidance but Safaricom continues to threaten to go its own way.

Interestingly, Africa’s first two LTE roll-outs went to state-owned mobile operators. Movicel in Angola will provide LTE coverage to all major cities across the country and is using ZTE LTE-enabled handsets to spearhead the push for the service.

MTC’s new ‘Netman 4G’ services are offered via three devices, the Samsung Galaxy TAB 8.9 LTE tablet computer, the Samsung Galaxy SII LTE smartphone and an MTC-branded 4G dongle modem. Initially, a monthly 4G data subscription costs NAD349 (USD41.50) for a ‘Netman 4G Extreme’ package with 5GB data (plus 10GB additional data per month under a promotion until 30 September 2012), with unused data rolled over to the following month, and maximum upload/download speeds of 50Mbps/25Mbps. An unlimited monthly data package, ‘Netman 4G Unlimited’, costs NAD949, with higher peak download/upload rates of 100Mbps/50Mbps. After 30 September the subscriptions for Extreme and Unlimited will revert to standard rates of NAD399 and NAD999, respectively. MTC also offers data bundles at a cost ranging from NAD0.20 to NAD0.50 per MB depending on size, compared to standard out-of-bundle rate of NAD0.90 per MB.

MTC intends to cover the whole of Windhoek with LTE by the end of July and to cover 45% of Namibia’s population in twelve months, including rural areas, compared to its existing 3G network which serves Windhoek, Walvis Bay, Swakopmund, other main urban areas and some rural communities by 2013. In August 2012, it reported that it had 1,000 post-paid users and that they were averaging  1.6 GB per day, representing 23% of all its existing data use.

Vodacom in South Africa is also going with Samsung handsets (two Galaxy S3 phones) and has a service live in 70 sites that will expand to 500 sites by the end of the year.

On the small, insurgent challengers’ front, the most interesting announcement so far has been from Smile in Tanzania. Following a limited pilot launch in April, 4G LTE services have been rolled out by Smile in several districts of Dar es Salaam, including Mikocheni, Massani Peninsula, Oysterbay and Sinza. Broadband routers are used to access the services and have been installed in homes, offices and public places, such as shopping malls and Internet cafes. Smile plans to extend coverage through Tanzania in 2012, followed by the launch of similar services in the other three countries where Smile currently operates.

This week saw DRC’s Cielux, an ISP, buy LTE equipment and services to upgrade from WiMAX to roll-out under the brand name INET. The upgrade supports Cielux’s ongoing effort to rollout convergent 4G services across the Democratic Republic of the Congo (DRC). It says it will roll out to all major cities by early next year.

There are also several companies we know of that have either acquired spectrum or are waiting to acquire spectrum that fit into this category.

The task of getting Africa connected is so huge that it needs to be tackled by as competitive a market as possible. The shortfall in local access coverage and the invisibility of most rural areas for data access will only be overcome by more rather than fewer operators.

To get up-to-the minute news, you need to be on Twitter. Follow us on @BalancingActAfr

 

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