 | Issue: | Africa and the Middle East 2014 |
| Article no.: | 5 | |
| Topic: | How hosting Internet content within Africa’s borders will boost broadband development across the continent | |
| Author: | Brian Herlihy | |
| Title: | Executive Director | |
| Organisation: | SEACOM | |
| PDF size: | 220KB |
About author
Brian Herlihy raised US$10 million of venture capital and founded SEACOM in 2007. As the founder and CEO, Herlihy led the financing, development and construction of the first submarine fibre optic cable to connect East and South Africa to the world’s major international networks in Europe and Asia.
In his Executive Director role, Herlihy today focuses his efforts on strategic projects essential to SEACOM’s continued development. An American citizen, Herlihy has extensive experience in mega infrastructure projects in Africa across disciplines as diverse as project development, financing and government liaison.
Herlihy holds an MSc (Development Studies) with a concentration in African Economics and BA (Economics and Philosophy) from the London School of Economics and Boston College respectively.
In addition to his role at SEACOM, Herlihy is also the CEO and Founder of the Black Rhino Group. This group was founded in 2012 to focus on energy and power initiatives across Eastern Africa. Black Rhino’s passion, expertise and devotion lies in developing mega infrastructure projects that directly impact a country’s GDP.
Article abstract
The trend to facilitating local content is crucial and will see the continent’s wholesale market shift from raw pricing to value-added service. It is no longer enough to chase customer acquisition purely through price reduction—wholesaler service providers should help operators and other service providers to get access to services and features that allow them to compete more effectively.
One key element of this is providing the services and infrastructure that make it simpler for the major international Internet applications, services, and content companies to deploy their offerings closer to their end-users in Africa. Another is in working with African media houses to help them digitize their content and package it for online delivery.
Full Article
For the past decade, Africa’s telecoms industry has focused heavily on putting in place the infrastructure to connect the continent to the rest of the world. We’ve seen a number of new submarine cables come to market since 2009, bringing with them cheaper and more plentiful international bandwidth services. Thanks to cables that have landed on the East and West coasts of Africa, wholesale international bandwidth prices have fallen steeply, causing follow-on reductions in retail broadband prices and an increase in data speeds. . In some markets, prices have fallen by a factor of ten during this time.
Now the conversation is shifting towards how international subsea cable providers and other telecoms service providers can facilitate the hosting and creation of content within African countries. From providing raw international connectivity, many service providers have started to add offerings such as inter-country (coast to coast) links, remote peering, content delivery networks, and cloud aggregation to their value propositions. The rationale for this is two-fold: one, fierce price competition means that cable operators need to create value-added services to ensure their sustainability, and two, local hosted content creates even more demand for international services and bandwidth.
As counterintuitive as it may sound, by facilitating local hosting of content, subsea cable providers are creating demand for their services rather than cannibalising their traditional markets. This is a trend we’ve seen repeated again and again in the world’s more mature Internet markets as they have grown over the past 20 years. The more content that is hosted locally, the more demand grows for more diverse and higher-quality international services at rates higher than anyone expects.
So, what’s behind this dynamic? It’s the rise of user-generated content and collaboration, especially video. With the continuing growth of Facebook, Flickr, YouTube, Skype and so on, people want to spread and share content rather than merely consuming it. And that, in turn, means that there is more demand for data bandwidth services and other services to support this.
The incumbent’s hold on the market
In Africa, we have yet to see local content proliferate in the ways we would like it to. For now, the end-user experience is one factor that stands in the way of more local content. People will only start downloading and uploading larger amounts of content when there is a smooth and affordable broadband experience – an element still lacking in many African countries.
To get to that point, African incumbent operators in many territories will need to be persuaded that the more content customers create and use, the better it will be for their businesses. Some still have a ‘control’ mentality, where they seek tight control over the services used and deployed across their networks. Still, we are seeing some promising moves in the right direction. In addition to the massive build-out of undersea cables, government and operators in many countries are investing in national fibre links and last-mile connectivity to improve broadband capabilities. That’s addressing the ‘access’ part of the equation, helping users get better connectivity at a lower cost.
On the International front, high-speed and scalable solutions such as IP and MPLS networks are enabling African operators and ISPs to bring faster and more reliable Internet connectivity to their enterprise and retail customer bases. African IP Transit offerings, meanwhile, are sparing them the need to transit traffic through off-continent locations. Because they no longer need to transit, they’ll be able to reduce latency and network hops, resulting in a better experience for the user.
The content side is as important and here, we’re seeing important elements of the infrastructure ecosystem start to come together, including reliable, carrier-neutral, data centres, open peering exchanges, content data networks and cloud delivered ICT infrastructure.
What’s more, we’re also seeing more and more multinational Telcos and Internet companies look to provide their content from within Africa’s borders. Across content and access alike, we’re seeing money flowing into building essential new infrastructure as well as consolidation and better utilisation of existing infrastructure.
Enterprise market to lead the way in Africa
For now, I think we’ll see a different approach to hosting and virtualisation of content in Africa to the one we have seen unfold in the rest of the world. Abroad, it has been consumer services such as Netflix, YouTube, Hulu, and Skype that have driven content consumption from a large base of consumer users. . Enterprises responded only once their end-users were already making extensive use of services such as Dropbox and Google Apps for business, whether on their own smartphones and tablets, or on their work devices.
However, network providers and over-the-top content providers remain skeptical that there will be enough consumer demand for cloud services in Africa to provide them with a business case. Much of this is due to the continued lag in access speeds available to consumer users in Africa. So, we’re seeing a heavy emphasis on the enterprise market from hosting and cloud companies in Africa.
The cloud services market is going to be massive in years to come—Forrester Research forecasts that the global market for cloud computing will grow from US$40.7 billion in 2011 to more than US$241 billion in 2020. In Africa, the cloud makes a great deal of sense for many small to mid-sized enterprises because it allows them to fast-track deployment of applications such as HR & payroll, financials, and so on, when many of them still have manual processes and little to no internal IT department.
For them, the cloud is a flexible, pay-as-you-grow model that allows them to access modern business apps without needing to make large capital investments in technology or build an IT department of their own. Yet, they also want cloud services hosted in their own countries because:
• Laws and regulations in many countries demand that sensitive corporate data be stored within the nation’s borders rather than offshore.
• They want the best possible performance and lowest latency rather than needing to access content from a server hosted across the ocean.
• They want the assurance that services will be charged in local currency rather than dollars or euros.
This trend is very welcome because it will mean that we’ll see more African enterprises replace legacy systems and manual processes with world-class, cloud-powered business solutions that make them more globally competitive. The technology will enable them to increase productivity, tighten corporate governance and gain more visibility into their businesses. In summary, by using the cloud African businesses have the opportunity to “leap frog” in terms of technology and systems development.
A shift to adding value
The trend to facilitating local content is crucial and will see the continent’s wholesale market shift from raw pricing to value-added service. It is no longer enough to chase customer acquisition purely through price reduction—wholesaler service providers should help operators and other service providers to get access to services and features that allow them to compete more effectively.
One key element of this is providing the services and infrastructure that make it simpler for the major international Internet applications, services, and content companies to deploy their offerings closer to their end-users in Africa. Another is in working with African media houses to help them digitize their content and package it for online delivery.
Though enterprises will be the first to benefit, we expect to see content fan out to consumers very quickly over the next few years as broadband and smart device prices continue to fall. We’re anticipating massive demand for services such as e-learning, e-health, entertainment, and more in the years to come, much of it video-based and all of it driving more demand for local and international bandwidth.
The social and economic benefits will be significant. Businesses will be able to become more efficient and more integrated with the rest of the world, while governments will be able to deliver richer electronic services to their citizens. And for consumers, social media, video streaming, and other rich media services will quickly become a part of everyday life.
