Chinese-supplied CDMA 2000 becomes hybrid convergence challenger for African operators
The CDMA 2000 technology supplied by Huawei and ZTE has quietly carved itself out an interesting minority position underwritten by Chinese Government loans. It is delivering the early manifestation of African convergence products and upping ARPUs for data. It not only substitutes for fixed line but is also disrupting the GSM technology-based mobile model at the edges. But with first WiMAX and LTE looming over the horizon offering alternative business models, Russell Southwood asks can it last?
In the early days the Chinese vendors concentrated on incumbent telco operators who were financially "on their uppers": their fixed networks were in poor shape and they lacked the capital to fix them. Huawei and ZTE made them an offer that was hard to refuse: we give you this largely untried, fixed wireless technology and pay through loans and discounts to implement it for you.
However, once the technology was put in place, it might not have initially had the meteoric growth of GSM but it showed it could work and attract customers. The voice and data offer it allowed meant that incumbent telcos felt that they were no longer simply retreating. There were initial teething problems on the data side but these were overcome in many cases as the operator got the hang of provisioning the network for demand from both. In the more competitive markets like Kenya and Nigeria, insurgent challengers began to show that it could capture a modest but promising market share.
Among the larger incumbents, the subscriber numbers began to reach healthy numbers as incumbents and SNOs without mobile licences allowed its built-in mobility to challenge the dominant mobile operators with lower prices and Internet service. Challenges followed but no-one got shut down. The technology was no barrier to creating a wholesale/retail market for ISPs if the operator was innovative enough.
A number of examples taken from a wide range of countries demonstrate how it is establishing itself:
Telecom Namibia used it to launch a service called Switch that offered "limited mobility". Very quickly, the existing mobile operator MTC and soon-to-be mobile operator PowerCom (CellOne) lobbied the Namibian Communications Commission to get the frequencies used by Switch cut down to reduce its range.
One of Africa's more dominant telco incumbents found itself in the unusual position of being the disruptive technology challenger. For it is hard to see how this technology, which even with locked cells offers considerable range, can be made illegal. At the beginning of 2008, the Namibian Government kicked any action on the issue into touch for some time by appointing a Committee to look at the issue. There has been no word yet from said Committee….
Before its recent sale to Lap Green, former incumbent Rwandatel launched a similar CDMA 2000 product and before too long taxi drivers in Kigali were fixing the desktop units to the dashboards of their cabs. Furthermore, like many others it introduced EVDO which although it rarely achieves the "up to 2.4 mbps" written on the box, it does deliver considerably faster speeds than most African users are used to.
Mozambique's TDM tried both Huawei and ZTE. The latter installed in the northern provinces and the former in the capital and the southern provinces of the country. Data ARPUs from places not reached by other parts of it network soon began to deliver interesting revenues.
Two years ago Cameroon's Camtel had 165,000 fixed lines in operation. It used CDMA 2000 to launch a fixed/mobile service branded CTPhone. It was officially described as a fixed line solution but with mobility of up to 40 kilometres and both mobile and fixed handsets, it was destined to put a bump in the market. Shortly after launch it had 28,000 users and this rose to the current 150,000: compare this to the now 125,000 fixed lines and you see a net gain. Again it was all financed by the Chinese Government and Camtel sees it as bridge to it getting the third mobile licence.
But the introduction of a mobile operation does not necessarily mean the end of the service. Telkom Kenya introduced a similar service and has done everything possible to push the boundaries of what it could do before getting a mobile licence in the run-up to privatisation. The national rate for the service (mirroring the mobile pricing structure for the purposes of favourable comparison) is KS5.50. It was estimated to have 400,000 subscribers and is going to continue to offer the service.
Two possible reasons explain this move: firstly, it's got to keep making the loan payments so it might as well get something back; and secondly, this strange hybrid service that is cheaper than mobile operators but not quite as extensive is probably a lower price, short to mid-term niche market.
Although less successful, Kenyan insurgent challengers Flashcom and Popote have between them attracted 10,000 subscribers and again the pattern of higher data than voice revenues appears. In 2007, Popote was actually getting 80% of its revenues from data so you could argue that it's an ISP with a small telco attached.
Even in the most unpromising countries it has had something to offer and as tough markets go, Chad is probably a hard one to beat. In 2006 Sotel Chad had 13,000 fixed lines. With ZTE CDMA 2000 equipment it launched a fixed wireless service called Tawali. It is now planning a US$24 million investment again underwritten by a loan. The pilot phase was in Ndjamena and it has attracted 4,000 users, half of whom are data users. Phase 2 will see an additional 15 base stations in Ndjamena and a further 57 in the main cities across the country.
The prize for best innovator with CDMA 2000 goes to Ghana's Kasapa which as the country's sole CDMA operator has also remained a minority market share player. It has used the same technology but got ISPs to sell it to their customers. As it has a presence in seven out of ten provinces it has allowed smaller ISPs to remain competitive with the dominant incumbent Ghana Telecom. The ISPs keep about a third of the revenues. It also has plans to introduce EVDO on to the service by the end of this year or early in 2009.
The difficulty for CDMA 2000 is that just as it gets a foothold, both the technology and bandwidth that can be delivered to customers is being ratcheted up another notch. Even Telecom Namibia took a side bet by ordering Wi-MAX units from Alvarion in February 2007 to upgrade local loop systems "in order to provide primary telecommunications voice services, broadband data and high-speed Internet access.
The mobile companies are trying out WiMAX, most notably MTN in three different countries. The WiMAX mobile standard – 802.16 e – is now in place. It's only a matter of time before someone will want to see if they can run a business on it and what better place to try than Africa. Not so long ago Huawei had no WiMAX offering but now it has two: its base station 3707 and a wireless broadband gateway WASN 9770.
Companies trying to enter Triple Play market and are trialling mobile TV are engaged in a constant upward revision of their network capacity. GSM networks were vey narrowband and were not designed for the kind of data traffic volumes now being envisaged. CDMA 2000 does not seem to have an upgrade path that will deal with the bright and shiny African multimedia future.
But technology is progressing at a breathless pace and WiMAX may itself yet be overtaken by Long Term Evolution (LTE), the actual standard for which is the glamorously titled 3GPP Release 8 which is considered 4G and offers an IP architecture for that elusive moment not so far in the future when voice and data are all just bits. So as ever, it's a case of standing upright on a rolling log as it moves downhill…