 | Issue: | Africa and the Middle East II 2002 |
| Article no.: | 9 | |
| Topic: | Is African Telecommunications Taking a New Course? | |
| Author: | Melissa Powell | |
| Title: | Managing Director | |
| Organisation: | 3D Global Communications | |
| PDF size: | 24KB |
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Article abstract
The African telecommunications market is highly promising, but investors find it risky. Local governments, seeking investment, are devising policies and regulations to promote market stability, reduce the risk and drive economic development. Broadband – specifically wireless broadband data – is potentially a key to the economic and social progress of the entire African continent. However, since the majority of the population does not yet have basic voice service, it is unlikely that the broadband infrastructure will receive the needed investment.
Full Article
The African telecommunications market is currently experiencing its biggest upheaval in recent history. Privatisation and market liberalisation are the forces charging inexorably towards an, as yet, undetermined end. Africa does not present the most stable commercial environment at the best of times, and these forces are increasingly creating an unpredictable and shaky platform from which to launch a successful telecommunications business plan. The general global economic downturn adds to this heady concoction, with regulatory and fiscal landmines; devaluating currencies; economic and political turmoil; social mayhem; poverty; large-scale unemployment; corruption; crime; and fraud presenting almost insurmountable risks to telecom companies wishing to succeed in the African telecoms environment. The African telecoms market has reached puberty with raging hormones, mood changes and a few pimples, yet slowly developing into a confident young adult. According to African ICT analysts, market liberalisation is the first tenuous step towards a brighter telecoms future for Africa and this process is ushering in a myriad of opportunities for companies confident enough to take that bold step. Essentially, Africa is unsaturated and with little competition it presents a virgin territory begging for development. African governments are also actively wooing investors, attempting to make investment in African telecoms less of a risk. However appealing the African market is, policy regulation and market stability are key to attracting the much-needed foreign direct investment (FDI). The continent struggles under the yoke of democratising those technologies for the social and economic benefit of its populace. According to analysts there is a direct and influential correlation between telecommunications universality and economic development. Research indicates that there is also a strong relationship between the national telephone penetration rate and a nation’s per capita Gross Domestic Product (GDP). Global evidence suggests the most efficient and cost-effective means to increase teledensity is the implementation of telecommunications sector reforms such as competition, privatisation and pricing, in order to remove the supply constraints in the sector. The issue of Universal Service Obligations is another method of increasing teledensity and requires a broad programme for overall economic growth. Cross-subsidies from international telephone accounting rates and other sources have managed to increase teledensity in some countries. Nevertheless, such sources are declining as more emphasis is being placed on encouraging the private sector to play a much bigger role here so as to divert public finances to other priorities. Although national per capita income levels impose a constraint on universality, there are significant differences in the percentage of income that is spent on telecommunications in different countries. In some countries with relatively low GDP per capita, less than 1% of GDP is spent on telecommunications. In others with similar GDP per capita figures, as much as 4 or 5 percent is spent on telecommunications. In many countries it is not the absence of demand, but rather the deficiency of supply that is the principal reason for the lower teledensity. This problem often leads to long waiting lists for telephone services in many developing countries. It has become clear that whilst income levels are still a major consideration, it is the actions of governments and regulators that have a telling impact when it comes to the effective promotion of universality in many countries. Broadband: The Poster Child of Africa Hailed as the new poster child for Africa, the availability of broadband carries the promise of both social and economic development a solution which some believe may bring home the real tangible benefits of technological development. There are huge opportunities for the African continent and broadband technology will be revolutionary in transforming medical and educational facilities on the continent. In Africa, wireless broadband data, especially, has the potential to transform the continent and to bridge the digital divide between first and third world. The uptake of mobile communication has increased phenomenally in Africa over the past few years. While voice communication has until now been the main driver 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 will do well to focus on broadband, rather than on current wireless technology like GSM or DECT,” says one telecommunications executive.” The immediate future of wireless broadband data lies in third generation (3G) mobile telephony. 3G marries Internet Protocol (IP) with high-speed mobile access, thereby doing away with the need for physical connections (wires, cables etc), while providing a faster mobile connection to the Web as well as opening up new ways to communicate, conduct business and learn. It also brings wideband radio communications, which are much faster and increase network capacity. In an increasingly deregulated African market competition is taking off and is creating new business opportunities. There is an ever-increasing corporate and social demand for broadband Internet services due to the increased speed and the ease of use of its applications. However, obstacles to the widespread uptake of wireless broadband data in Africa exist, the major problem being that of implementation. This would be incredibly costly due to the vast distances between densely populated areas on the continent. Still, many experts maintain that opportunities outweigh the risks for investors. “Perhaps most encouraging, especially for the African continent, is the existence of a clear migration path from current mobile technology to 3G. This path would enable lagging countries to shed outdated technologies and move directly to 3G without having to first go through a technological evolution,” says Franklin Pieterse. Not only Africa, but countries across the globe stand to benefit from 3G. As previously stated, 3G joins high speed mobile access with IP-based services, which means that users can be online 24/7 without incurring costs until actually sending or receiving data (at much greater speeds). In addition, 3G’s merging of wideband radio communications and IP-based services pave the way for advanced mobile Internet services. Best of all is that the migration path is such that operators will be able to continue making use of much of their existing infrastructure, with only comparatively minor adjustments being necessary to complete the evolution from GSM to 3G. Thus it is clear that broadband – and specifically wireless broadband data – holds benefits across the globe and is potentially very important in the economic and social upliftment of an entire continent. “It would seem that it can play a prominent role in the realisation of the “African Renaissance” should African governments decide to put their efforts into its adoption,” he says. Technological illiteracy Notwithstanding these gargantuan stumbling blocks, Africa is faced with a far greater challenge – technological illiteracy. The continent consists of a mainly rural population, some of which have never even seen nor heard of the telephone. Advanced telecommunications technologies are useless unless this massive technological gap can be eradicated. However it seems that access to basic voice services will be the foremost focus of African telecommunications policy. There exists a challenging dichotomy between satisfying both the essential need for these basic voice services and the demand for advanced telecom services by commercial entities. Economic stimulation requires an advanced and stable telecommunications infrastructure. Without this infrastructure, African economies will be left behind in the information age, thus relegating the continent to further despondency and universal access to basic voice services will remain a pipe dream. Governments need to find innovative ways to unite these two seemingly disparate goals. Cross-subsidisation is one such method, where operators wanting to offer advanced services are required to use some of that revenue for the implementation of basic voice services to the rural populations. Many African countries are using this approach, with operators installing pay phones and entrepreneurial phone shops throughout the rural areas. Taxation may also facilitate this process, as advanced services are taxed to fund the delivery of basic voice services, while licence fees can also be utilised for this same purpose. Once universal access to basic voice services is achieved, Africa will be able to effectively introduce more advanced services on this infrastructure backbone. “There is no benefit in technology for technology’s sake. Therefore, education needs to be a continuous process. Exposure to advanced technology needs to be instilled throughout the continent, beginning at school level. This is essential to increasing the technological knowledge base, and therefore increasing the demand for more advanced services,” says senior telecommunications analyst, Dobek Pater. Infrastructure Currently, a lot of Africa’s telecommunications revenue flows out of the continent, simply because many African countries lack infrastructure and are forced to rely on foreign operators to route their traffic. This process smacks of Africa’s colonialist past where raw materials were exported from the continent to be bought back as refined goods at a higher price. This leads to a massive deficit in the continent’s value. According to Marconi’s Franklin Pieterse, Africa is still struggling to provide universal access to basic voice services. “This, unfortunately, creates an environment where broadband initiatives receive less priority. With the majority of the population needing basic voice services, it is unlikely that the market for broadband has reached critical mass. Yet it is impossible to ignore the many benefits that broadband has to offer,” he explains. The solution lies in managing the seemingly disparate goals of promoting universal access and implementing advanced telecom networks and services. South Africa seeks both to increase the degree of universal access and promote utilisation of new technologies and services in support of commercial activities that enhance national economic growth and global competitiveness. It is a delicate balance between liberalisation and control in the telecom sector that advances both goals. Both wireline and wireless technologies offer unique solutions to Africa’s communication demands. But it is not necessarily the nuts and bolts that need to adapt to Africa’s telecom needs. “We have the technology available today that can revolutionise the way we communicate with each other,” he says. “There are a few essential elements that will make this a reality in Africa. The first element is cost. Any solution for Africa has to be cost effective due to the socio-economic conditions on the continent.” “Another element is sustainability. It is no use having a system that is state of the art unless it is sustainable. The most important element, however, is local content. We need to take the technology to the people and communicate on their level. Applications and services need to be relevant and appeal to the needs of the community. It needs to be multilingual and user-friendly. The demand for telecom services needs to be driven from the ground up. By bringing cost effective and applicable telecom technology to even the most isolated regions it will be possible to create the necessary demand for more advanced networks. This will ensure that Africa is not left behind, but embraces new technology as a means for socio-economic upliftment,” states Pieterse. Conclusion The future of African telecommunications lies squarely on the shoulders of the government. Creating a stable economic, social and political environment in Africa is the only way to attract investment. The landscape is strewn with many pitfalls, yet the benefits offered by a solid telecoms infrastructure can boost Africa into the 21st Century and beyond.
