With the recent and impending arrival on the continent of undersea broadband cables equivalent to many terabytes of bandwidth, the question turns to the relevance and demand for satellite communications. In an exclusive interview with Africa Telecoms, Flavien Bachabi, Intelsat's Regional Vice President for Africa, shares some of the company's insights into this market.
Intelsat is recognised a leader in the field of satellite communications and has been providing satellite-enabled services to Africa since 1965, with its focus still firmly fixed on the continent. This is evident in the fact that 24 of it's fleet of 55 communications satellites service more than 200 customers in the region. The relevance of this carrier technology is underpinned by the more than 40 mobile operators that rely on Intelsat to provide backhaul services to outlying areas. “Africa has been one of the fastest growing regions for fixed satellite services in recent years, fueled by demand for critical infrastructure from communications providers and television programmers,” says Bachabi. He adds that the significant demand for Internet access over the past five years has reshaped the communications landscape, particularly in Africa where years of neglect have resulted in pent-up demand finally being alleviated by the arrival of the myriad submarine data cables. “Until recently, only a handful of the 53 African countries were connected to fibre,” he states.
Despite these fibre connections, however, Intelsat still has a pivotal role to play in this arena. “Even after the arrival of the new undersea fibre systems, only about 15 countries will be connected in some way or another to coastal landing points via fibre. This alone demonstrates the necessity to have a blend of satellite, fibre and wireless to adequately address Africa’s specific challenges and requirements. “Intelsat has been at the forefront of providing solutions to make Internet and broadband more accessible across the continent, the benefits of which are already noticeable, in that the development of the telecoms sector has already created new business opportunities and jobs,” he says. There has naturally been a knock-on effect in improved service delivery in the provision of social, educational and medical services, with Intelsat playing a role in developing international satellite-based telemedicine networks, for example. The unique African environment characterised by dislocated communities with little or no modern infrastructure has actually played to Intelsat's advantage as it and its customers are able to deliver world-class solutions that other technologies cannot replicate as effectively or efficiently. “Intelsat’s long-standing leadership has provided a communications infrastructure that has extended voice, data and media services to the most remote regions of the continent,” explains Bachabi. “Satellite networks are extremely predictable, allowing constant and uniform quality of service to thousands of locations, regardless of geography. Unlike most terrestrial alternatives, satellite networks can be rolled out quickly to multiple locations, connecting cities with remote villages across a large landmass, where terrestrial fibre is insufficient or non-existent. Since satellite-enabled communication networks can be quickly deployed, customers can establish and deliver new services faster. “Satellite can reach everywhere, linking the remotest parts of the inner continent’s countries to major coastal urban centers where fibre is available, offering an ideal and necessary redundancy solution to fibre.” It is on the back of these needs that the company has been growing its satellite-based services for the past 45 years to the point today that it not only provides backhaul services to a growing number of mobile operators, but has also invested in its own terrestrial network that spans 20,000 km. Bachabi says that eight out of the top 10 mobile operators in Africa, representing 64% of the region's subscribers, currently make use of Intelsat's communications satellite system. “From a financial perspective, 17% of total company revenue in 2009 was generated from Africa and the Middle East. We are committed to the continent and will continue to provide new service offers to meet customer demand as demonstrated through our investments in IS-25 and Intelsat New Dawn.” The company's own terrestrial network, branded IntelsatON E, is powered by Cisco and consists of a global, terrestrial architecture, based on an IP /MPL S network, teleports and points of presence. It is fully integrated with its satellite fleet, providing a single source for converged voice, video and data solutions. This does not mean the company is taking its eye off the satellite ball, with it rolling out additional infrastructure to service the continent. “We are currently in the midst of our company’s largest fleet investment programme and have eight satellites in various stages of construction. We launched Intelsat 16 in February and are on track to launch Intelsat New Dawn, which will serve Africa, later this year,” explains Bachabi.
The power and convenience of communications satellites was demonstrated most notably earlier this year in the aftermath of the Haiti earthquake. Intelsat was able to dedicate two communications networks to provide critical communication links. “The two networks, established via Intelsat’s satellite and terrestrial network infrastructure, supported governments, Africa to a global audience,” says Bachabi. “In addition, Intelsat will combine this space segment with its global infrastructure of teleports and fibre, and points of presence, offering end-to-end managed solutions.” Services will include tape play-out, live shot and transmission services from event locations in Johannesburg, Cape Town and Durban; live shot locations for non-rights holders at Ellis Park and Soccer City; incountry satellite newsgathering services; and managed platforms for encoding, multiplexing and compression equipment in high and standard definition.
Sidebar 1: What are the different kinds of satellite orbits?
An orbit is the path that a satellite follows as it revolves around Earth. In terms of commercial satellites, there are three main categories of orbits: Geosynchronous Orbit (GEO): 35,786 km above the earth Orbiting at the height of 22,282 miles above the equator (35,786 km), the satellite travels in the same direction and at the same speed as the Earth's rotation on its axis, taking 24 hours to complete a full trip around the globe. Thus, as long as a satellite is positioned over the equator in an assigned orbital location, it will appear to be "stationary" with respect to a specific location on the Earth. A single geostationary satellite can view approximately one third of the Earth's surface. If three satellites are placed at the proper longitude, the height of this orbit allows almost all of the Earth's surface to be covered by the satellites.
Medium Earth Orbit (MEO): 8,000- 20,000 km above the earth These orbits are primarily reserved for communications satellites that cover the North and South Pole. Unlike the circular orbit of the geostationary satellites, MEO's are placed in an elliptical (oval-shaped) orbit
Low Earth Orbit (LEO): 500-2,000 km above the earth These orbits are much closer to the Earth, requiring satellites to travel at a very high speed in order to avoid being pulled out of orbit by Earth's gravity. At LEO, a satellite can circle the Earth in approximately one and a half hours.
Sidebar 2: Intelsat New Dawn
This ground-braking initiative, announced at the end of 2008, is a joint-venture that will result in the launch of a new satellite into the 33º East orbital location, which is ideally positioned to serve Africa. The satellite will feature a payload optimised for wireless backhaul, broadband and television programming and is expected to be operational next year. “Nearly 75% of the satellite’s C- and Ku-band transponder units are under contract, with pre-launch commitments received from leading wireless, network and video service providers,” says Bachabi. “Gateway Communications, Vodacom International, Zain Nigeria and Gilat Satcom have all purchased capacity, which clearly shows the underlying demand for additional capacity in Africa.” “The New Dawn joint venture, with its optimised satellite and African-led financing, represents a solution for Africa by Africa,” noted Andile Ngcaba, chairman of Convergence Partners, one of the South African-based JV partners, at the announcement. “Over the course of this satellite’s life, it will provide world-class connectivity, allowing businesses to grow and rural communities to connect. Convergence Partners believes that investments in African projects of this nature can offer superior returns while also accelerating the socio-economic development of the continent.” “Intelsat has provided satellite communications to Africa for more than 40 years. We have witnessed the economic growth realized by our customers when they have access to reliable communications,” said David McGlade, CEO of Intelsat. “The New Dawn joint venture is a great example of the type of creative investments Intelsat will use to further develop our fleet in regions where we believe there is unmet demand. Once in service, Intelsat New Dawn will be an integral part of our global, resilient satellite network, providing growth capacity and allowing us to further expand our services to our long-time customers in Africa.”
Plugging into the World
Mike van den Bergh, CEO of Gateway Communications gives his views on the numerous undersea cable projects presently underway and the growing demand for communications in Africa. He sees the African continent swiftly coming out of its digital dark age.
RIGHT AT THE FOREFRONT OF AFRICA'S EMERGENCE, are companies like Gateway Communications – who provide a variety of wireless, satellite and terrestrial network services to the African telco and business sectors. They are going from strength to strength. That's possibly one of the primary reasons Vodacom’s decision to acquire Gateway Communications a little more than a year and a half ago couldn’t have been more perfectly timed. Since the acquisition, Mike van den Bergh, Gateway Communications’ CEO says the company has restructured slightly and that efforts to become more tightly integrated with Vodacom are going well. “Prior to the acquisition, we were providing all forms of network services to carriers, large enterprises and multi-national corporations (MNCs). “A year ago however, we realized that this structure doesn’t make perfect sense – since telcos, large enterprises and MNCs have different needs,” he says.
WHERE’S THE REVENUE AT?
Another reason van den Bergh believes Vodacom will see a great deal of value from its acquisition of Gateway Communications is the fact that the revenue scales are beginning to tip in the direction of data. “There are a couple of realities telcos are having to deal with at present,” he says, “and one of the most sobering is the fact that although voice is still the dominant revenue driver in their business right now, data is where the real growth is taking place. “Data needs to be a big focus because voice rates are decreasing – a trend that’s driven predominantly by the increased competition in the market (and the drop in margin telcos are having to contend with in order to remain competitive), as well as the decrease in mobile termination rates,” he says. Interestingly enough, van den Bergh says SMS is a huge driver when it comes to mobile data – since it’s accessible to every mobile phone user and the barriers to entry are minimal. “There’s also the fact that research shows the youth market is more comfortable using text messaging than initiating a voice call to someone in their social circle,” he says. Showing just how important SMS is in the greater scheme of things, Vodacom reported that it had carried in excess of 600 million SMS messages between the start of the 2010 Soccer World Cup and the semi-finals, representing a 40% increase in traffic for that time of year. “Add to that, Pyramid research’s prediction that SMS revenues will double to $12 billion by 2013 and it’s clear why this is a focus for the mobile telcos,” he says. The popular market opinion that increasing data revenues and sliding voice revenues will ultimately mean the data market swallows the voice market and all forms of mobile communications traffic gets carried across a single, converged, IP-based network is inevitable. But, says van den Bergh, it’s further off than what many people think. “Five years from now, I still see voice as a separately reported component – and furthermore, one that is carried differently across the network,” he says. “Beyond that, we might see completely converged IP-based networks making their debut in more developed markets. “It will take longer for this trend to hit the emerging markets though,” he adds.
DATA HUNGRY MARKET
In a sense, van den Bergh says the world has always assumed that the adoption of broadband data capabilities will be different – or at least take place at a slower rate – in Africa than what has been the experience in other markets. But, he says, if you look at what happened when large amounts of submarine capacity suddenly became available with Seacom’s arrival, it’s clear that the only difference is that the adoption rate is far more accelerated. “I was in Kenya when the Seacom cable came ashore and, it was like Christmas, a couple of national birthdays and a few other celebrations rolled into one,” he chuckles. “The rate of uptake in Kenya, Tanzania and neighbouring countries has been astounding and despite the dearth of voice and data communications there, the focus has been on data and not voice,” he adds. As the trend continues, van den Bergh says the undersea cables that have yet to land will add another dimension to what’s possible. “In today’s context, we’re finally becoming able to provide world-class access to parts of the continent where nothing existed before. “And believe me, looking at adoption rates thus far, the more we provide, the higher the uptake will be. “With that increase in usage, the rates will drop,” he says. “The elasticity of demand is virtually unlimited in our market,” he enthuses.
THE BUSINESS OF NETWORK SERVICES
Turning to Gateway Communications' use of Seacom and what it has used that influx of capacity to achieve, van den Bergh says the company has provided increased levels of connectivity to mobile operators and ISPs, up the East coast of Africa – something it would never have been able to do under any other circumstances. “In fact, the first tranche of capacity we ordered was completely taken up in the first month and we’re currently scrambling to get more,” he says. Van den Bergh says Gateway Communications has also used that new capacity to establish the first Multiprotocol Label Switching (MPLS) network up the East coast of Africa. “In the wake of the new capacity Seacom has on offer, we’ve seen ISPs we never knew existed before creeping out of the woodwork and a number of new ISPs being formed. “The market has literally mushroomed overnight,” he says. Van den Bergh says that the landing of the Seacom cable has also allowed Gateway Communications to gain a range of new licenses – in countries like Kenya – for the building-out and provisioning of backhaul capacity. “We’ve also learnt valuable lessons and seen the market learn a couple of its own, specifically with regards to redundancy, putting all their eggs in the Seacom basket and paying dearly when the cable experienced issues,” he says. Thankfully, because of its legacy van den Bergh says Gateway Communications had configured resilience into its offerings and could very quickly cut over to other cable systems and satellite, where needed.
THRIVING UNDER ADVERSE CONDITIONS
While Gateway Communications has by all accounts been through an interesting time over the past 18 months, van den Bergh admits that the effects of the world economic crisis was at times cause for concern. “Over the past two years, we’ve seen the market become a great deal more cost aware, something that was driven by the increasing pressure on sales margins,” he says. “And unfortunately, nobody is immune to this, as operators and businesses feel pressure from their customers and in turn, have to drop their margins and place pressure on their entire chain of suppliers,” he says. “The opportunity we had at our disposal however, was to make smart investments for the future – not just in terms of choosing the right technologies and business practises, but in choosing investments that would allow us to be far more cost effective into the future,” he says. “We had to re-assess our own market priorities,” he continues, “and that’s’ one of the primary reasons we split the business into those two areas. “It gave us more focus and made us far more reliant on what our customers actually needed, forcing us to make a real effort to understand our customers and how we could do a better, more cost effective job of helping them navigate their challenges,” he says. Some of those investments were obvious, like increasing the company's investment in submarine cables, but also focusing on terrestrial network build-outs and getting high capacity backhaul to areas where it was needed.
While the developments in the market over the past 18 months have been significant and the next 18 months are likely to eclipse even that, van den Bergh says we can only truly understand how far we’ve come if we cast our minds back in time. “And the truth is, things have changed immeasurably,” he says. “Ten years ago, Africa was without a doubt the dark continent and you’d be grateful for whatever form of connectivity you could find. “Now we have cables everywhere and as a result of that, MNCs have the same connectivity expectations in any African country as they would anywhere in the developed world,” he says. “Now, if we look forward five years, we won’t recognise Africa,” he adds. “As more and more cables land, we’ll begin asking what today sounds like a ridiculous question, like: ‘how good is the average Cameroonian’s access to Youtube on their smartphone?’ “With world-class infrastructure we will also begin asking what new, innovative services can be built,” he says. “We’ve all heard the example of a rural fisherman using SMS to check the stock levels at a market and potential selling price of his catch before actually going to one or another market. “Add convergence and world-class infrastructure into the mix and suddenly that same fisherman is able to send buyers a picture or video of his catch and actively begin engaging with his customers,” he says.
The biggest challenge the African communications market faces however is over-regulation and the fact that often regulators don’t understand the market entirely and as such, draw on greedy international companies for input. “One of the worst sins we’ve seen committed in this industry over the years relates to companies who come along to regulators and governments and convince them that more money can be made out of things like international termination,” van den Bergh says. “In turn, the regulators raise these rates, which initially makes the government more money, but very quickly also drives down calling rates,” he adds. It doesn’t end there however. Van den Bergh says you then see grey markets emerging, shortcutting the usual telecoms infrastructure to offer much cheaper calling rates, but shocking call quality. The result is that even fewer people make use of telecoms and the GDP of the country is affected negatively. “Why not focus on making less money per unit of calling or Gigabyte of data usage, but doing so across a much larger volume of calling and data usage?” he asks. “This allows you to focus on quality and deliver truly compelling service levels – in turn encouraging even more usage,” he says. Van den Bergh says there’s an annoying myth out there, that Africans will accept what they can get. “In our experience however, if you give someone a high-quality service they will use it for longer and more often. “And it’s our belief that the revenues grow for everyone and markets flourish if this happens,” he concludes.
Sidebar: Aligning with Vodacom
While van den Bergh doesn’t say it directly, another reason for the restructuring is in all likelihood the fact that Vodacom saw a ton of value in enriching its core offerings as a telco with the services and intellectual property Gateway Communications has at its disposal. “In October 2009 this restructuring process started with us separating the business into two distinct parts. “One is focused on the carrier and wholesale services portion of the business – or that part of the business that typically interacts with telcos and Internet service providers (ISPs) – and the other is focused on the business sector and as such, providing services into the MNCs, banks and other large enterprises,” he explains. That shouldn’t suggest that the one part of the business works closely with Vodacom and the other doesn’t however. Van den Bergh is quick to point out the part of the company that’s focused on the business sector, namely Gateway Business, works well with the effort Vodacom is itself putting into providing services to businesses under the Vodacom Business banner. “The restructuring was a great idea, since it gives our telco and ISP focused business unit – known as Gateway Communications – the ability to deliver a range of highly-focused services into Africa. While this will obviously assist all of Vodacom’s operations across the continent, it will also target every other mobile carrier on the continent. “We remain independent in that way,” he says. “Not only can Vodacom now draw on our expertise when it comes to fine-tuning their mobile network, it can leverage our expertise in the management of large satellite networks as well as mobile and terrestrial communications solutions. “It’s also no secret that Vodacom is keen on the converged communications space – and since a great deal of our expertise is squarely in this space, there’s a great deal of value we’ve already added here,” he says.