Season’s Greetings from Balancing Act’s News Update

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Dear readers, viewers, contributors and advertisers

The pace of change in the telecoms and internet sectors in Africa in 2013 has seemed to accelerate. The established and accepted ways of doing things are being challenged on all sides by both global trends and by things that are particular to Africa.

Infrastructure plans continue to fall into place. Liquid Telecom looks close to realizing the imperial fantasy of Rhodes by having a fibre route from the Cape to Cairo. Google has built a metronet in Kampala as a way of accelerating market development and looks set to roll out more. Somalia will shortly be connected to international fibre. Fibre to the home or whatever implementations are growing in number: Telkom South Africa has graciously signaled it will join the party, late as ever. Soon as one senior executive told us, the experience for corporate customers in most African capitals will be almost the same as in Europe of the USA. In the meantime, vandalism and power cuts bedevil the progress made.

There is a very real danger that as the digital divide begins to be closed that it will turn into a power divide. There are many efforts at the level of the base station and small-scale local delivery but none of the policy dynamism that has driven the telecoms and Internet sectors in the best performing countries. Many Governments seem to have a rhetoric about joining the Information Society but lack the political will to solve the energy requirements to deliver it. A recent workshop of 42 African countries convened by the African Development Bank for an initiative called Sustainable Energy for All in Africa may be a good thing but we want to see what it's actually going to deliver on the ground.

This has been the year that digital content in Africa began to become a mass reality. Google is as coy as ever about You Tube numbers but when I talked to their Head of New Products – Sub Saharan Africa Brett St Clair he seemed to be implying that there were somewhere around 80-90 million users in Sub-Saharan Africa. Since this is before most countries have affordable data and enough provisioning, I have to ask: Are you really ready for this video tsunami? The off-the-record answer from many different sources is no.

The continent continues to innovate and one of the bigger innovations has been the TV White Spaces pilot roll outs. The technology works so let’s see those permissions to innovate turned into licences.

Africa does not do always do big transitions well but the SIM card registration campaigns are now shuddering to a completion in many of the bigger markets. By contrast, the digital transition in broadcasting, which should free up much needed spectrum for LTE, is a complete shambles in most countries that have started the process and the deadline of June 2015 is unlikely to be met.

It’s tough a year to pull out trends and make predictions as so many things are changing but this is my end-of-year selection:

The end of the mobile company as we know it: If everything becomes data, then voice in its current form will continue to decline as a revenue stream. Places like Egypt may ban What’s App, Skype and Viber but this is only putting off the final day. African mobile operators continue to demonstrate that they have no feel for content and have not yet got the pipes ready for the digital content future. So yes, mobile companies will become the people who sell cheap, commodity bandwidth, almost on a utility basis. This means going from the marble lined offices and four wheel drives to a warehouse at the cheap end of town with cars from the lower end of the range. Being one of the Masters of the Universe was fun while it lasted, but it’s over.

Working out how to do digital content in Africa: In the meantime, there seems to have been an almost endless stream of VoD platforms launching to distribute film, TV and music content. The two much rumoured announcements of VoD platforms by major operators failed to materialize. On the basis of user numbers, iROKO has clearly got a lock on the Nigerian Diaspora. Buni TV has gathered equally interesting numbers in East Africa powered by its XYZ show and Wabona looks set to have the largest numbers for South Africa. So far the only really convincing player in the mobile space is Afrinolly. On the non-local content side, DStv’s Box Office gives some idea of what’s possible. All of these VoD platforms and their music equivalents like Mdundo and Tavoom are seeking to build a large free user base to whom they can then sell premium content. To follow this fast changing space, you need to be reading our newest e-letter Digital Content Africa, which has reached its fifth pilot issue and will be launching in 2014. Details below.

The transition to LTE: This is not going to be without its problems and hiccups but it has to be a large part of the answer to getting digital content to work in Sub-Saharan Africa. Video that actually plays without buffering will be a very compelling offering as the existing data on video usage and information from early roll-outs shows. It’s pleasing to see a whole range of ISPs sneak in ahead of the mobile operators to deliver LTE data and there will be more to come. Whatever the merits of WiMAX, LTE now has an unstoppable momentum as a technology in the ISP space. Mobile operator roll-outs will be driven by the same strange impetus that powered 3G. The early movers want bragging rights and once one’s got it, there’s a sheeps’ rush as the rest follow. Handsets will be a key issue as there is no consensus as to what spectrum will be used primarily for LTE.

Changes in the corporate market: Everybody’s favorite cash cow the corporate market stands to benefit from the industry changes that are about to occur. CTOs in banks and mining companies will begin to ask themselves why they are paying 4-5 times the amount for bandwidth in the office than they are at home. I can hear all you operators out there chorusing that it’s because the quality and service is so much better. Stand in front of a mirror and repeat those claims and see whether you can look yourself in the eye. When it becomes a global standard, the looking down and shuffling excuses like “this is Africa” will no longer be convincing.

Hybrids and cheap devices: There have been a steady stream of start-ups that are trying to find Africa’s new holy grail: a cheap household device that will also have significant offline capability. The idea is let’s acknowledge that Africa’s Internet is patchy and data prices still make it difficult to download cheaply and work our way around it. The Raspberry Pi makes an appearance on this front as the low-cost vehicle in two cases. I’m watching with interest the progress of Kahenya Kamuny’s Able Wireless which is seeking to provide low cost streaming at the same price as the market place pirates. Joris Komen recently did a video clip interview for Smart Monkey TV which will be uploaded in January about the Library Pi which will offer a huge repository of digital learning content, both international and local. South Africa’s Eduze is pitching in the same hybrid space.

The mobile money transformation is happening but it’s a slower process: There’s always some wiseacre telling you that mobile money has only really worked in Kenya. This is clearly nonsense but the take-up in West Africa has been significantly slower for a number of reasons, not least in Nigeria that they decided not to give all the action to the mobile operators. Paga’s one million users may seem tiny in the Nigerian context but will come to be seen as the first step on the long road to widespread use.

The glass half empty moments of 2013:

- Airtel continues to make losses in its major markets and the gap between what they said they would do and what they have achieved remains wide. How long will its Indian shareholders stick with it?

- Orange continues to make losses in Kenya and perhaps a more ruthless shareholder would have already walked away. Expresso in Ghana and elsewhere…Nuff said.

- Satellite bandwidth prices are slowly drifting down but the existing operators do not seem to be rethinking their business models. Considerable opportunities exist but may go to the new entrants.

Next year we will publishing: a detailed update on data centres (African Data Centre Markets is now mid-way through the research stage), Africa Mobile Data and a third update of African Broadcast and Film Markets. Other smaller surprises will be signaled later in 2014.

Balancing Act has stopped the You Tube channel that carries its own name and launched a new channel called Smart Monkey TV and we’re now getting over 9,000 views a month with an upward trend. It delivers 15-20 video clip interviews a month and covers the following things News Update readers will be interested in that have always hovered at the edge of News Update’s coverage:

- Africa’s Film, TV and Music online platforms.
- The energy divide on the continent and solutions to it.
- New technologies like 3D printing and nanotechnology.
- Start-ups, incubators and investors.
- Improving Internet Access.
- ICT4D and Education and Technology.

Please join the party and subscribe, by clicking on the link below and pressing the red “Subscribe” button below the monkey:
SmartMonkeyTV/videos

As part of the Smart Monkey TV portfolio, there will be a fortnightly publication called Digitial Content Africa, which will focus on digital content and services, with a particular focus on film, TV and music. Again to become an early subscriber, simply send me your name and e-mail address to: info@balancingact-africa.com

This year we have carried out many different research and consultancy projects - both large and small - for a range of clients including operators, equipment vendors, investors and policy bodies. Because we operate discreetly, you may not be aware that we offer these services. If you think you have needs or requirements of this kind, talk to us about them. In what will be a year of great change, we will have both data and ideas to help you change your circumstances.

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A big thank you to all those who have helped News Update keep ahead of what was happening in 2013. Without your help, we would not have been able to bring you your weekly dose of information and new opportunities.

News Update will return in the New Year with issue 687 on 10 January.

All the best

Russell Southwood
CEO
Balancing Act

Isabelle Gross
Senior Analyst
Balancing Act

Sylvain Beletre
Senior Analyst
Balancing Act

Alice Saywood
Marketing