Closing the digital gap

by david.nunes
Ruediger MuehlhausenIssue:Africa and the Middle East 2006
Article no.:5
Topic:Closing the digital gap
Author:Ruediger Muehlhausen
Title:VP for Group Messages and PR
Organisation:Siemens Communications
PDF size:80KB

About author

Ruediger Muehlhausen is the VP for Group Messages and PR at the global headquarters of Siemens Communications in Munich. Mr Muehlhausen, during his sixteen years experience in the computing and telecommunications business, has held various positions within Siemens and Siemens Nixdorf. Mr Muehlhausen graduated from the University of Hildesheim in Technical Translation, and in Business Administration at the VWA in Munich.

Article abstract

In Africa, broadband is a pre-requisite for both economic growth and the delivery of social services such as telemedicine, distance learning, higher education and the like. Few service providers, though, can afford the investment or have the expertise to implement broadband. In Africa, a Build, Operate and Transfer strategy for broadband deployment, where a technology partner takes responsibility for commissioning and operating the new network, while training local employees to take over, can provide the essential financing and know-how.

Full Article

The emergence of broadband has created a global revolution in communications – an unprecedented resource for sharing information, wildly popular ‘rich media’ entertainment, and valuable new markets for countless products and services. Still, the benefits of broadband are not distributed equally. The disparity between developed and developing countries is huge and continues to grow. How do we close it? How do we make broadband affordable and widely available, so that people everywhere can take advantage of its benefits? More importantly, how can we in the technology sector help carriers and operators in Africa make the transition to broadband a success? In addition to solving technical challenges, this means providing a solution that a growing number of users will embrace. It also means a solution that is self-sustaining, so it continues to fulfil its promise long after our work is done. This article examines one approach that addresses these issues, and has been shown to do it successfully. In the developing world, broadband is not just a delivery mechanism for online games, music and streaming videos. There is more at stake, and therefore technology providers have to work more creatively to make it succeed. Broadband makes an impact- for reasons not normally seen, where communications are pervasive, and services such as education and healthcare are widely available. One example is telemedicine, with rural doctors able to transmit x-rays and consult with experts worldwide for a diagnosis and treatment plan. Another is higher education, where students can use video-telephony to communicate with instructors while fast Internet access brings the world’s information resources within easy reach. Broadband also connects people to the rest of the world in ways that people from developed countries may not realize. In Africa, the largest market for broadband users is the Internet cafe, providing a connection to the online world for those who otherwise could not afford it. The web café is not just a place for surfing and online games- it might be the only place in a neighbourhood or village to send and receive email, or speak with loved ones overseas using VoIP for low-cost international calling. It also provides web access for small businesses that would otherwise not be able to afford it- that might not even have a PC- providing a vital connection with the global economy. Despite these vital benefits, a decision to deploy broadband still comes down to economics. For telecom companies and network operators, broadband is a major financial commitment. Carriers are understandably cautious about making major investments- especially when a proposed project is being done for the first time in their region. They cannot afford to raise the capital required to bring new services to market, and then wait patiently for profits to come in. Sometimes governments provide backing, but they have many critical priorities in addition to broadband infrastructure. To justify the investment, positive cash flow is needed as soon as possible- and this requires flexible approaches that limit risks and allow fast profitability. A formula for success in Ghana One approach that has worked in Africa is to set up a Build, Operate and Transfer strategy for broadband deployment. With this model, the technology partner takes responsibility for commissioning and operating the new network while training local employees to take over day-to-day operations. Instead of simply proposing hardware and software, Build-Operate-Transfer provides a trajectory that gets the new service to market as quickly as possible while at the same time reducing costs. The trajectory not only includes the infrastructure but also all professional services necessary to realize profits as soon as possible. The Build-Operate-Transfer formula was used to good effect in Ghana when a national carrier recently set out to build a fast Internet access network. Even though Ghana is one of the most stable and most developed countries in Africa with intensive commercial activity, few companies, hotels or private individuals have fast or reliable Internet access. Even most Internet cafés have poor service, many still operating using dial-up lines. Like their counterparts in other regions, the carrier was well aware of the importance of providing high quality Internet service, but was unsure about how to proceed. They knew that ADSL and broadband Internet had great revenue potential, but were uncertain about the best way to bring it to market. In addition to what technology to use, they were uncertain about issues like rollout timing, pricing structure, marketing strategy, and a host of other questions as well. To bring its vision to life, the carrier adopted the Build-Operate-Transfer strategy, contracting with a global vendor to not only build the infrastructure, but also run it while training their own staff until they were able to take control. The fact that the partner was capable of proposing an integrated turnkey solution, as well as implementing it completely, had a vast impact on the carrier’s final decision. The vendor delivered all services required to prepare the carrier for a massive rollout – from the initial market survey to cost/ benefit analysis, solution design, marketing strategy, equipment installation, training and initial maintenance. There is yet another advantage of working with an established global partner – access to financing at favourable terms. The Ghana operator now benefits from an attractive long-term financing package that helps ensure a positive cash flow. What is important to customers? The fruit of interactive sessions between the carrier and its vendor partner was a promising business case for introducing high-speed Internet service on a large scale. Before recommending equipment or a deployment strategy, the vendor prescribed a market survey of potential customers to address important questions like: How much are people prepared to pay? Which features and benefits do they understand? Which features and benefits are important to them? The study found that people were less interested in speed than quality service and reliability. This was true for both business and residential users, and both groups were willing to pay a price for it. Existing dial up as well as broadband offerings in Ghana were characterized by slow access, frequent downtime and poor quality- as well as high prices. The new offering would set a higher standard of quality for broadband access, and serve as a model for other broadband suppliers to follow in the future. At the same time, attractive pricing arrangements aimed at schools and Internet cafes would bring broadband to people who would otherwise not have access to it. Step by step to network profits Rather than deploy the entire network at once, a phased implementation spread the carrier’s investment over time while capturing revenue as early in the rollout as possible. This included capturing revenue as an ISP as well as offering bandwidth to other Internet service providers. The nationwide rollout is occurring in stages that focus on areas of highest revenue potential before moving to smaller markets across the country. – The initial test phase involved connecting the first DSLAM-site (Digital Subscriber Line Access Multiplexer) located in the northern part of the capital Accra, to serve about 1500 initial ADSL subscribers. During this phase, other core equipment was installed such as the broadband remote access server (BRAS), the ISP infrastructure and the element managers. – In the second phase, three additional DSLAM sites were rolled out in central Accra, Accra Cantonments and in the seaport of Tema. Five remote cabinets serve VIP users such as the presidential palace, the ministries and the airport. – In the main rollout phase, additional DSLAM locations were implemented in other areas across Accra. During this time, the carrier also took over network management. Demand for broadband service in Accra has grown since the rollout began, to the point where additional DSLAMs are now needed. Rollout in major cities across the country is coming next. To make the ‘transfer’ element of the project a reality, one very important ingredient was hands-on training for the carrier’s engineers, which allowed them to take over network operations during the main rollout stage. In addition to training in technical operations, training was also provided to sales and marketing staff responsible for launching and promoting the new richer data services. This specialized marketing training would turn out to be crucial for maximizing potential revenues. The carrier is now addressing Ghana’s demand for fast Internet connections by preparing to supply reliable ADSL services countrywide. Over 20,000 installations are planned during the next three years, along with corporate services such as virtual private networks (VPNs) that provide secure, guaranteed bandwidth. In addition to delivering broadband directly to consumers and enterprises, the carrier is also making bandwidth available to Internet service providers. This not only creates an additional revenue stream for the carrier, it also creates a ripple effect of new opportunities for Internet-based businesses. At least one ISP in Accra is already offering ADSL service to its own customers. Fulfilling the promise As the Ghana story illustrates, a successful broadband rollout is about much more than technology innovation and integration. It is about brainstorming with the client to identify opportunities and design a marketing strategy to fit the local culture and business environment. It is about bringing the right product to market, with a deployment strategy designed to generate revenues as early in the rollout as possible. In some cases, it could even be about creative financing to ensure a positive cash flow. Most importantly, it is about building a healthy dialog with the client, so that when the project is done, they are ready to take over. In Africa, as in the rest of the developing world, deploying broadband means overcoming a variety of challenges, from lack of infrastructure to limited disposable income on the part of consumers. The Build-Operate-Transfer formula has been shown to work effectively in this demanding environment, providing a rewarding transition for operators and bringing the promise of broadband to life.

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