You take the high road, we’ll take the hot-spots– Africa’s data future slings a shot over the bows of today’s business model

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At GSM 3G Africa (now AfricaCom) 2006. London-based South African Niall Murphy was talking about how the company he was then CTO for, The Cloud was covering the UK and parts of Europe with Wi-Hot spots and that a small but growing portion of its data use was voice.

Except for sales reps and similar professions, most people spend only up to 10% of their time on the road. The new wireless hot spot challengers in the voice space will have difficulty taking the road but may acquire an interesting share of everything but the road. And where would this leave the mobile operators? More of which later…

So here we are nine years later and South Africa’s IS is launching a data voice service on 8 June leveraging its AlwaysOn Wi-Fi hotspot network in South Africa (see Telecoms News below). There 2,200 Always On hot spots, mainly in urban areas. Calls to AlwaysOn users will be free and calls to fixed line and mobile numbers in South Africa will be charged at R50 per hour, on a per second basis.
This business model can best be described as hybrid as it follows the telecoms charging model. There are presumably two motivations for tackling charging this way. Firstly, if you go the telecoms interconnect route you will find your business model is shaped by per minute charges. Secondly, IS presumably calculates that it will make more money charging this way than it will through increased data use.
Meanwhile the use of Viber and What’s App is growing in places as different as Nigeria, Cote d’Ivoire, Senegal and Mali. Once customers have discovered free (except data charges) services they will migrate to them. It’s a behavior change and like all behavior changes it takes time but you can see where the road is headed.

Elsewhere the more progressive mobile operators have already got on the programme and made it easier for users. In the USA, Sprint and T-Mobile provide Wi-Fi calling where the device can automatically switch to a Wi-Fi network if the mobile network is unavailable. How long will it take someone to work out how to make a Wi-Fi hot spot the default connection when one is available over the more expensive mobile network?

So this brings us back to geography and hot-spots. Wi-Fi has been a very durable technology, its customer device ecosystem is probably the cheapest on the market and its road map for upgrading is very interesting. In urban areas in Africa, it’s increasingly common to be able to pull up 3 or more hot-spots.

In the more developed markets, cafes, restaurants, malls, shops and hotels are all offering either free or pay-for Wi-Fi. So if you can call using an OTT service from a hot-spot, why would you bother using a pay for service? The only possible advantage of the pay for service would be that you got a service level guarantee that it wasn’t like free Skype on a bad day on a dodgy data connection. But either way it moves the previous mobile call off the base station and on to the data network. Not only that, if the customer is calling someone else on a data connection, it is an end-to-end data call.

The logic of this transition is that the hot-spot connected data calls will go to the data operators (whether they are like IS or are actually a mobile operator) and the road will remain with traditional mobile operators.

I can already hear the restless people at the back of the room saying: how are we all going to make money out of this? How can we own the customers? A word to the wise, no-one has a right to make money in the market. If everything’s data, you’ve got two choices: firstly, the customer will either buy data (and enough of it) that you make money from selling it; or secondly, the customer will buy things like content and services that sit on the data layer. And that’s Africa’s next tough challenge for operators...

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