|Africa and the Middle East I 2003
|Broadband Could Help Africa Bridge the Digital Divide
|3D Global Communications
Melissa Powell, former BMI-T Communications Handbook Editor has extensive knowledge of the South African and African IT and Telecoms markets. As the Managing Director of 3D Global Communications, a leading African communications consultancy, Melissa works with top industry players such as BMI-TechKnowledge, Marconi and Interdyne Technologies and is integral in their strategic development and the implementation of their go-to-market strategies. Having been both a communications strategist and an editor has given her the ideal experience, including the conceptualisation of creative communications strategies and implementing them, to ensure that clients are correctly positioned within a particular market.
The de-regulation, liberalisation and opening of the South African telecommunications market will give a big boost to businesses there, especially to SMEs. SMEs, for the most part, have little access to reasonably priced broadband. Inadequate access to reasonably priced broadband hampers SME start-ups and quick access to markets. The many broadband projects now underway and the SNO (second network operator), together with the government’s regulatory drive to modernise the sector, should all work together to boost SME access to broadband.
Technology is the true enabler. You can be a multinational with 50,000 employees or a small, medium enterprise (SME) or even an individual. The Internet has broken down the traditional entry barriers to going into business and has given birth to a burgeoning new sector of the economy. The SME market (a term that has gained much recognition over the past two years) is growing and becoming a substantial part of the African economy. On a continent that is weighed down by unemployment, a lack of infrastructure and basic amenities – people have been forced to adopt an entrepreneurial spirit and are pioneering new ways of doing business. There is no doubt that the importance and benefits of broadband are truly enormous for the world at large. “Nowhere is this more so than in Africa with, especially, wireless broadband data having the potential to transform the continent and to bridge the digital divide between first and third worlds,” says Franklin Pieterse of Marconi. In an increasingly deregulated African market, competition is taking off and is creating new business opportunities. There is ever-increasing corporate demand for broadband Internet services due to the increased speed which makes it easier to use applications. However, obstacles to the widespread uptake of wireless data broadband exist in Africa, the major problem being that of implementation. Implementation is often incredibly costly due to the vast distances between densely populated areas on the continent. Still, many experts maintain that the opportunities outweigh the risks for investors. The South African bandwidth market is in a state of flux at the moment and the majority of SA companies are adopting a wait-and-see approach. There is much consternation in the market and controversy surrounding many African telecom projects. Despite this, African ICT research house BMI-TechKnowledge states in its reports that it is essential for industry players and business to be prepared for the future bandwidth environment in Africa. Clearly, Africa is a telecommunications environment that poses problems not seen in the rest of the world, and thus it is nearly impossible to adopt international models. The most important issues facing African telecom development are regulations and cost, and the South African business community is demanding higher bandwidth at lower cost. Although there are many regulatory and licensing issues to resolve, 2003 promises to be a very dynamic year for the communications industry. In South Africa there are three events that will have a major impact on bandwidth and the cost of bandwidth. The introduction of the third cellular operator last year brought new competition to the local mobile market. With an aggressive marketing strategy in place, Cell C has continued its drive into the local market reaching just over one million subscribers by August 2002. “The uptake of mobile communication has increased phenomenally in Africa over the past few years,” says Pieterse. “While voice communication has been the main drive of subscriber growth, it is highly likely that high-speed, broadband data communication will substantially boost those numbers. With the tremendous opportunities and benefits that high-speed data can provide, it may be argued that Africa would do well to focus on broadband, rather than on current wireless technology like GSM or DECT.” The second major event is the imminent launch of the Second Network Operator (SNO); unfortunately, this continues to be a rather frustrating process. According to the latest research by BMI-T, South Africans will end up forking out roughly R900 million in lost savings due to the constant start-up delays of the second network operator. Dobek Pater, senior telecoms analyst at BMI-T says that the introduction of the SNO will heavily impact the South African business sector, especially the SME market, by giving businesses access to competitively priced services. This will make the local commercial market more competitive internationally by reducing the telecommunications expense portion of operational costs. Additionally, Telkom is rolling out full service xDSL during the first half of the year. This process, however, will initially be small and slow, but it is an indication of the improved service and products to come. Moreover, the effect of Telkom’s IPO (initial public offering of company shares) will have to be closely monitored. South Africa is the only country to launch an SNO, together with the IPO of the incumbent operator. This has caused immense disquiet amongst industry watchers as this will most certainly cause instability within an industry plagued by setbacks. International Bandwidth Projects SAT3/SAFE/WASC Undersea Fibre Project The SAT3/SAFE/WASC undersea fibre project has the greatest potential to bridge the ‘digital divide’ insofar as international bandwidth in South Africa is concerned. This project has a stated start-up capacity of 80 Gbps on the SA-Europe route and 120Gbps on the SA – Far East route. The total cost to build this cable is estimated at US$ 630 million of which the South African telecoms company, Telkom will carry US$ 100 million. Portions of this cable were expected to go ‘online’ in the second or third quarter of 2002. SAT2 Undersea Fibre This existing initiative is currently able to provide capacity of between 1 – 2.5 Gbps. Currently Telkom charges more for SAT2 bandwidth than for satellite bandwidth. Unconfirmed reports state that SAT2 can carry up to 13 Gbps. Africa One: 2002 The stated capacity of Africa One, when switched on, will be 80 Gbps. Although the published dates for this project to go online are similar to those of the SAT3/SAFE project, it is not clear what the current status of Africa One really is. Africa One will be configured as a SDH self-healing ring around the whole of the African continent. The cable is intended to have landing sites in as many countries on the continent as possible in order for Africa to avoid the costly interconnection charges they currently pay to international cable operators. The estimated cost to build this cable around Africa is approximately US$ 1.6 billion. Having more landing sites means that the project is more expensive than SAT3/SAFE but, potentially, it could provide each country with cheaper international bandwidth. Satellite initiatives: Existing and Future Current satellite bandwidth to South Africa is estimated to be in the region of 1.5 Gbps. While it is certainly clear that new initiatives are being launched all the time, it is a fact that radio spectrum is limited in terms of how much bandwidth it can carry compared to fibre. To give a sense of scale: a single strand of fibre can carry more traffic than all the world’s satellites. Various sources estimated the total worldwide satellite bandwidth at less than 200 Gbps year-end 2002. Compare this with the 80Gbps switch-on capacity of just one cable to the world’s lowest bandwidth continent – Africa. With the collapse in the telecommunications industry during the past year (partly brought on by the pricing of 3G licensing in Europe) a measure of sanity has returned and current projects have a more conservative outlook on bandwidth. Metcalfe’s law states that a network is worth the square of the number of devices on the network. This would then mean that South African bandwidth framework is only as valuable as the number of countries which it connects to. Conclusion Scenarios, Drivers and Inhibitors of Bandwidth in South Africa Qualitatively the following are the main drivers and inhibitors of bandwidth uptake in SA: Cost: the lower the cost the quicker the uptake. xDSL is an example of a service that has an expectation of lower cost for higher bandwidth compared to, for example, ISDN which is perceived as having a higher cost for lower bandwidth. Taking South Africa’s GDP/capita into account, it is clear that the proportion of our GDP spent on telecoms is already above world norms. It is unlikely that significant new spending can be unlocked to obtain new customers. It is possible, however, that spending previously allocated to other categories, such as entertainment, may be reallocated to telecommunications Regulation: the current regulations seek to phase competition into the South African market. However, in order to ensure that the new operator is in a position to build its own infrastructure, it has been afforded some protection. In a duopoly there is still an expectation that costs will not decrease significantly, protecting the new operator and giving it a chance to build its infrastructure. Hence while bandwidth is expected to increase at a good pace, it is not expected, initially, to grow astronomically New technologies: xDSL is a technology that permits copper pairs to carry many times the bandwidth that was possible with analogue or ISDN technologies. The use of DWDM on fibre backbones has allowed, in certain cases, up to 320 light wavelengths to be used simultaneously on the same fibre thereby increasing the capacity of the fibre by that factor. Here are three possible scenarios for the future SA bandwidth environment: Scenario 1: The High Road The SNO comes in with substantially cheaper bandwidth prices (e.g. 50 per cent reduction or more) and a different business model. New technologies and more opportunistic business strategies mean that pricing and targeting are more aggressive by both the SNO and Telkom Scenario 2: The Low Road Delays in licensing and continued international economic scarcity continue to create a downward pressure on investment in the telecoms sector specifically in developing nations. As the costs of the War against Terrorism mount, funds are diverted from other technology initiatives in Africa The likely scenario The key message is that bandwidth is a value chain and, as such, consists of linked elements that conprise local access, international routes, national routes and international bandwidth. The question of bandwidth has moved beyond simply knowing how many exabits (one billion gigabits) per second of traffic are being moved around, to ensuring that customers can achieve their communications goals in terms of service levels, price, flexibility, security, etc. As South Africa’s market is liberalised during the course of this decade, we should see a variety of creative new products and services emerge to add value to our businesses. Thus it is clear that broadband – and specifically wireless broadband data – holds opportunities across the globe and is potentially very important in the economic and social uplifting of the entire African continent. Stakeholders should be monitoring the broadband environment closely, so as to be ready for any future developments and opportunities. “It would seem that broadband can play a prominent role in the realisation of the ‘African Renaissance’ should African governments decide to put their efforts into its adoption,” concludes Pieterse.