When you live in a pulsating business hub like Lagos, Nairobi or Johannesburg, it’s easy to forget that an estimated 57% of Africans still don’t have any teleconnectivity. Yet the vast tracts of land that cellular signals have failed to reach are a concern – not only to the operators chasing fresh revenue or obliged to meet universal service obligations to cover unprofitable rural areas. They also worry governments and organisations concerned with economic and social development. Imagine the good it would do those unreached individuals and their local economies if they had the power of communication in their pockets. With Africa’s teledensity standing at 43%, according to Delta Partners, operators can expect significant subscriber growth over the next few years. But the cost of reaching and serving those new subscribers amid impending price wars will put tremendous pressure on their margins. As ever, it’s very obvious that new tactics and cheaper technologies are needed to reach rural communities.
Share and Pare
We’re finally seeing some progress. KPMG recently released a report recommending infrastructure sharing as a way to establish networks in far-flung areas without too much expense. Although operators fight fiercely for subscribers, they are finally recognising that they can slash their costs by sharing some basic infrastructure. The need to trim both capex and opex is persuading operators to treat tower sharing as a viable option, says Johan Smith, director of KPMG’s African Telecoms Group. The move can cut infrastructure costs by 16% to 20%, and the accumulated savings run into billions of dollars. As well as expanding their coverage, operators must also upgrade older networks to take data services to rural areas. Sharing towers – or outsourcing the whole task to a third party tower specialist – cuts their costs and allows them to reach new users. Savings come not only from avoiding erecting separate towers, but by splitting the site rental and fuel bills too. Operators in Africa have been slow to wake up to the potential, but some multi-billion dollar deals are now being discussed, Smith says. Several tower specialists are eagerly bidding to acquire the base stations owned by African operators. In December 2010, American Tower Corporation (ATC) agreed to acquire a stake in almost 2,000 of MTN Ghana’s transmission towers, and to take responsibility for managing those assets. ATC has also acquired 1,400 towers from Cell C in South Africa. Vodafone Ghana has outsourced 750 towers to Eaton Telecom to cut costs and improve coverage. Eaton will also lease spare capacity to other operators to broaden their coverage too. Nigeria’s Helios Towers Africa has signed similar deals with Millicom Ghana and Tigo DRC. These deals are the start of an unstoppable trend, Smith says. It’s partly driven by regulatory pressure and social responsibility obligations to cover unprofitable areas, which may make tower sharing crucial by allowing operators to jointly enter remote regions without punitive rollout costs. The International Telecommunications Union (ITU) stressed that infrastructure sharing was sensible for Africa way back in 2008. Yet progress so far has been limited, with Bharti Airtel, Millicom, MTN and Vodacom the most active co-operators. Airtel’s cost-cutting strategy relies heavily on outsourcing, so its tower division, Bharti Infratel, is expected to make some aggressive inroads.
On the technology front, several innovations are boosting rural connectivity. One is power line communications (PLC), which adapts existing power lines to carry broadband data packets. This system can quickly cover any region served by the main electricity grid. Wireless mesh technology is another innovation bringing more outlying areas online. That technology creates ad hoc chains of normal Wi-Fi routers to multiply the reach of the signal. Mesh networks require each router in the chain to see the next, and some communities are ingeniously using mirrors to reflect signals when line of sight is impossible. In Botswana, Orange is installing Ericsson’s Expander cells that have a range four to five times greater than traditional transmitters, allowing Orange to reach rural users previously too remote for cost-efficient coverage. Village Phone initiatives are also becoming commonplace, and are supported by many operators in many countries. The idea is simple, as successful ideas often are. Rural entrepreneurs buy a phone and act as the local operator by letting people make calls for an affordable but slightly marked-up fee. Often the entrepreneurs can buy the phones with a small loan from one of the charities involved, such as the Grameen Foundation in Uganda. The owner quickly pays off the loan and then has a profitable business. It’s been recognised as a sustainable development tool by numerous governments and agencies such as the World Bank and the United Nations. In Ghana, a more ambitious scheme called the eCare initiative will grant loans of up to 90% for rural entrepreneurs to buy small ICT centres. The kit in a modified cargo container has three fixed cellular phones, a solar panel system, a computer, printer and a desk. The proposed site must have Ghana Telecom coverage, but does not require electricity as the centres are solar powered. Partners in the project include the United Nations Foundation, Ghana Telecom and Kumasi Institute of Technology and Environment. Towers have also become cheaper to run, thanks to newer technologies. MTN recently installed a mast to take connectivity to Riemvasmaak, a remote community in South Africa’s Northern Cape. There is no mains electricity, so the tower uses wind and solar power, and stores the energy in maintenance-free batteries.
MTN has spent R18 billion in the past two years to take 3G broadband to rural South Africa, and has built a 900Mhz network to do so. It also upgraded its existing network with UMTS for wireless broadband in rural areas. The 2.1GHz technology it had used didn’t give it the footprint to reach the furthest rural areas, but 900MHz technology does, and negates the need for building more towers in those regions. Wireless broadband is the most effective way to take data services to rural Africa, says Karel Pienaar, MD of MTN SA, and the development of pioneering solutions and technologies will enhance that progress. “It has been a long-term vision for us to develop a data network that extends into the rural communities.” Delivering broadband data would really help bridge the digital divide, he says. Many communities are not being reached through commercial efforts, but through charitable initiatives. Intel and MTN have jointly agreed to accelerate broadband access by supporting WiMAX rollouts, affordable PC bundles for consumers and entrepreneurs, and by developing cost-effective internet browsing devices. The companies are also collaborating to equip students and teachers with technology skills. Moreover, they are investing in emerging innovative technology companies that are developing products to resolve rural Africa’s business and social problems. Meanwhile Airtel has rebranded the operations in 16 African countries that it acquired from Zain last year and has promised to improve their infrastructure. It will extend into more rural communities, says Manoj Kohli, CEO of its international operations. “We remain committed to offering affordable services, deepening our network coverage to include the rural population and enhancing the digital experience through 3G across the continent,” he says. “We want to be a partner in Africa’s growth and will work closely with governments and regulators to enable the telecom networks to touch all parts of society.”
Rival operators are watching to see how and where Airtel begins to play more strongly. Its strategy of outsourcing some operations to gain economies of scale and expansion has already seen Airtel award a contract to IBM to manage its computing technology and services. Part of the aim is to make services more affordable for rural communities by installing advanced technologies created by IBM Research. Breakthroughs include Spoken Web, a voice-enabled internet technology that lets users access and share information simply by talking over the existing telephone network. This initiative is particularly compelling for illiterate populations or people with no access to computers. Airtel also says partnerships with Ericsson, Huawei and NSN will dramatically improve the quality of its networks and expand its 3G footprint. “The partnerships take us closer to our vision of making telephony available and affordable for everyone across Africa, even in the most remote areas which are at present disconnected from the world,” says Kohli. “We are also laying the foundation for the introduction of 3G HSPA wireless broadband as access to content is the right of every African citizen. Many of our new customers will have an online experience for the first time in their lives.” The company is also launching Airtel Money, which lets unbanked customers use their handsets for person-to-person money transfers, bill payments, point of sale purchases in supermarkets and to pay utility bills. Airtel also contributes to rural development through social responsibility initiatives to provide schools with equipment and broadband access. In July, members of South Africa’s ICT industry and the Department of Communications pledged to work together to accelerate economic growth and job creation by setting some specific targets. They include achieving 100% broadband internet coverage for the entire population by 2020 and creating at least one million new jobs. Vodacom CEO Pieter Uys said getting a decent connection speed to everyone demanded mobile technology, which could cost hundreds of billions of rands. Given the limited radio spectrum available with which to do that, the operators must collaborate, he said. There also needed to be a coherent policy framework on spectrum allocation and broadband rollout, which does not currently exist.
Two months earlier, Vodacom had emphasised the important role mobile technology could play in Africa’s development in its 2011 SIM Report, researched in conjunction with the World Wide Web Foundation. “Access to telecommunications and relevant content will significantly help in crossing the digital divide in South Africa and Africa, furthering education and creating jobs,” said Uys. The report urged regulators to focus on consumer welfare when allocating spectrum to service providers. Treating spectrum as a source of short-term government revenue by auctioning it to the highest bidder could cost the economy billions more in lost economic value compared to allocating it to the most compelling service offerings. “Affordability for low income users will require innovation that does not place most of the burden of access costs on the user,” said Steve Bratt, CEO of the Foundation. “We hope regulators allow innovations in this area to flourish and not inhibit them by preconceived notions of the right model or pricing.” In May, Vodacom introduced Airtime Advance, a service that lets customers use voice and data services even if they run out of airtime. Prepaid customers with a proven track record can request R10 worth of advance airtime, and Vodacom will deduct the amount from the customer’s next recharge. Another innovation Vodacom launched this year is the Web Box, which provides affordable and easy internet access using an ordinary television set. That innovation could change the face of internet connectivity said Romeo Kumalo, executive commercial director at Vodacom South Africa. “Just over 10% of the population has access to the internet; this device will ensure that internet access is available to many more who previously had limited or no access.” The Web Box at R749 was developed specifically for lowincome emerging markets. It is a keyboard with a SIM card and inbuilt modem, and a simple user interface that lets users navigate easily between services including internet browsing, SMS and email, an FM radio, online photo album, games, videos and music players. It uses the Opera Mini browser that compresses data by up to 90% for faster and more affordable browsing. “The value that this product will add to schools, homes and small businesses is potentially dramatic. The wealth of knowledge that is available on the internet can now be accessed by millions of South Africans, which will add greater value to the economy,” said Kumalo.
Redressing Rural Neglect
Yet despite efforts by operators to expand their footprint, and efforts by socially aware companies to play their part, rural Africa remains neglected. In August the Commonwealth Telecommunications Organisation (CTO) staged its annual Connecting Rural Communities Africa Forum in Dar es Salaam, Tanzania. As usual, the conference featured discussions on innovative strategies, business models, financing mechanisms and technologies for improving ICT access and realising the socioeconomic benefits. Speakers reported that governments were stepping up efforts to roll out mobile and internet connectivity to rural areas. Representatives from Zambia, Tanzania and Zimbabwe said they were making a push to establish telecentres with internet access. Zimbabwe’s Post and Telecommunications Regulatory Authority said it had earmarked US$10 million from its Universal Access Fund (UAF) for rural connectivity. Tanzania has also established a UAF to connect rural and underserved areas. “Tanzania is making steps to address a rural connectivity backlog, but Africa still faces challenges in its policy frameworks, power and skills,” said Tanzanian President Jakaya Kikwete. Access to electricity hinders the rollout of cellular services in many countries, but this is changing as most governments have started electrification projects to connect rural areas to the power grid. Zambia’s government is being particularly inventive. It has pledged US$10 million for national cellular connectivity and is distributing internet-ready computers to rural areas. The Zambia Information and Communications Technology Authority (ZICTA) is using cash from its UAF to erect telecoms towers in rural areas to help operators quickly roll out their networks. Cleverly, those towers are a shared facility, and ZICTA will earn revenue from the operators that use them. Zambian operators already have infrastructure sharing agreements to help them cover some rural regions. Even so, they have been unwilling to enter rural areas as there would be no return on investment. So the Zambian government introduced tax breaks in August to companies that import telecoms equipment for rural areas. The tax break has already seen Airtel Zambia extend its network to 88 more communities. Its rival, MTN Zambia, has pledged to spend US$40 million on rural expansion this year. Network expansion in Rwanda and Zimbabwe is being aided by US$40 million in loans from the Export-Import Bank of China. A loan of US $60 million will be used by Zimbabwe’s state-owned NetOne to develop its broadband infrastructure and connect to the EASSY submarine cable to boost its ability to compete with private operators. China is the largest single investor in Africa’s telecom sector, and in return, Chinese companies including Huawei and ZTE have won more contracts than any of their rivals, as the loans stipulate that supply and installation contracts go to Chinese firms. That condition naturally causes controversy, since no other player can hope to win the tenders. The Ugandan government has blocked a loan from China after complaints about unfair business practices. Still, the biased loans are allowing Africa’s telecoms players to expand into rural areas, and most governments accept the Chinese dictum as a fair price to pay.
Role of Governments
Further help is coming from the Commonwealth Telecommunications Organisation (CTO) and USAID’s Global Broadband and Innovations (GBI) programme. They recently ran a training workshop for Africa’s Universal Access policy makers and other rural communications stakeholders. The GBI programme advises governments on best practice regulations and broadband strategies, and encourages the use of appropriate software applications, low-cost technologies and cloud services. “Access to telecommunications has enormous benefits, both socially and economically, to rural communities,” said GBI programme manager Joe Duncan. “This is a great opportunity to bring what we know about universal service to the men and women working so hard to provide rural connectivity in their countries.” Dr. Ekwow Spio-Garbrah, CEO of the CTO, has said one factor accounting for Africa’s lower economic growth is the weak uptake of e-progress. Africa needed new e-leaders capable of transforming their country by taking full advantage of all the e-tools available, he urged. And yet, he pointed out, many nations were bogged down by leaders who did not know how to send an sms or e-mail, had not heard of MySpace, and until some counterparts were overthrown by popular uprisings, had not taken seriously social media like Facebook, Twitter or YouTube. “Now that social media have shown their power and capacity to overthrow governments, let us hope that African leaders are listening, and will take prompter action in their own interest,” Spio-Garbrah said. He then announced that the CTO would raise US$300 million over the next few years to invest in a Commonwealth Telecom Development Fund to make member countries more capable of e-transformation. The CTO has also created a commercial subsidiary, CTO Ventures, to make equity investments in small companies that aim to expand in emerging markets, but lack the capacity to do so.
Africa’s Unresolved Challenge
In 2008 a CTO report confirmed that rural connectivity remained an unresolved challenge in Africa. Problems included the lack of electricity, the low income in rural areas, high opex and capex costs of infrastructure, and low skills levels. The research also reiterated that affordable connectivity is critical to improve the delivery of government and business services to isolated communities and to empower people through education, employable skills and wealth creation. “Nowhere is access to and effective use of ICTs less pervasive and more needed than in the rural and isolated areas of sub-Saharan Africa,” the report said. It recommended liberalising and privatising the telecoms sector, and having independent regulatory authorities capable of establishing and enforcing impartial rules. Several regulatory authorities in Africa were still subject to direct government oversight, which could be detrimental to competition and to achieving rural connectivity. That was a particular risk when the state still had a financial stake in the incumbent operator, the report warned. The economic viability of telecoms in rural regions depends on favourable interconnection terms with the fixed-line operators, the report found. So it suggested that regulators might need to enforce skewed interconnection fees to reflect the higher operation and maintenance costs of rural networks. Operators should also be encouraged to share infrastructure to reduce capital expenditure, and be given preferential access to universal service funds and tax breaks. The CTO report also encouraged the authorities to allocate licence-free spectrum to operators willing to set up wireless local area networks. It then warned that universal service obligations imposed with each licence must be accurate and flexible to be achievable. Universal service funds may be more effective if operators can bid for the cash to subsidise their work in rural regions, the study suggested. The Ghana Investment Fund for Telecommunications (GIFTEL) awards grants on a competitive basis to operators providing public telephony kiosks or telecentres in neglected areas. Another problem still not addressed since the CTO report highlighted it in 2008 is that operators struggle to expand into rural areas if there are insufficient skilled people to install and maintain their equipment. “There is a sizeable gap between the existing ICT skills and those necessary to accelerate rural connectivity,” the report said, recommending that governments urgently address the skills gap.
CTO report revisited
Three years later, little has changed. Many African universities still lack adequate ICT laboratories and affordable high-speed internet access. Many pupils leave school without having used a computer. Rural schools are even more ill equipped, making ICT lessons impossible. The strategies to overcome all these challenges remain the same, yet African citizens are still waiting. Solutions include implementing simultaneous rural electrification and connectivity programmes, infrastructure sharing and skills building. There is no single best path for all countries to follow, and each national rural connectivity plan must be tailored to that country’s circumstances. That said, the CTO recommended tactics that have proven successful in comparative countries. It is worth repeating them now: Its recommendations to governments are:
• To establish an independent regulator able to establish and enforce impartial rules, and with jurisdiction over both telecoms and broadcasting as these technologies converge.
• Implement technology-neutral licensing to promote competition and the provision of services by the most costeffective means.
• Encourage local participation when installing ICT infrastructure to enhance local skills.
• Equip universities and tertiary educational institutions with modern ICT hardware and high-speed internet to create skilled ICT graduates.
It urged regulatory authorities to:
• Put regulations in place to ensure affordable services in rural areas.
• Encourage favourable interconnection terms that reflect the higher costs of rural networks.
• Provide incentives for infrastructure sharing to reduce duplication and increase cost-efficiency.
• Allocate unlicensed spectrum to encourage the use of innovative technologies.
• Ensure that licence obligations are feasible, flexible and technology-neutral.
It urged the body responsible for universal service funds to:
• Disburse funds by competitive tenders, and ensure funds go where they are needed most.
• Prioritise funds for bidders offering rural solutions such as public kiosks and telecentres.
• Strive to meet the rural connectivity targets in their licence conditions.
• Provide reliable, high-quality services with the most costeffective technology available.
• Cooperate to share their infrastructure.
• Establish employee training programmes to build skills.
• Prioritise services to rural government headquarters, educational institutions, hospitals, post offices and other public access points, including kiosks, telecentres and payphones.
• Negotiate interconnection terms that reflect the higher costs of rural networks
Technology manufacturers should strive to:
• Step up research and development in technologies for rural connectivity, including solutions suitable for rough terrains.
• Focus on renewable energy, such as solar, wind or hydroelectric power