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
Africa Telecoms attended the recent Inaugural Qualcomm CDMA Summit in Nairobi, Kenya, to find out more about the future of the technology. The goal of the Summit was to bring together the entire CDMA ecosystem in Africa for discussion, debate and information sharing. Each African market has its own unique challenges, and hence requires different solutions, and through collaboration with partners and peers, real innovation can occur within this ecosystem across the continent. For many years, the wireless world has been divided between the Code-Division Multiple Access (CDMA) standard and Global System for Mobile communications (GSM) technology. The need to provide essential ICT wireless services to the African continent through the use of high-speed mobile broadband can only be fulfilled by CDMA technology. James Munn, VP Sub-Sahara Africa, Qualcomm, states that CDMA is a minority player but has a pivotal role to play, through innovations such as EVDO Rev. B (EV-DO Rev. B is the next generation of CDMA mobile broadband technology) and has the potential to be the next movement in the Mobile Broadband space for Africa. In this regard, CDMA1x is a superior technology over its rival. GPRS/EDGE (General Packet Radio Service), usually offers a slower data bandwidth for wireless data connection than CDMA’s high-speed technology (1xRTT, short for single carrier radio transmission technology), which has the capability of providing ISDN (Integrated Services Digital Network)-like speeds of as much as 144Kbps (kilobits per second). However, 1xRTT requires a dedicated connection to the network for use, whereas GPRS sends in packets. This is the starting point where CDMA mobile broadband currently stands on networks that are EV-DO enabled. These networks are seeing download speeds of 3.1Mbps and with EV-DO Rev. A as the next evolution, download speeds will reach between 9.3Mbps and 14.7Mbps with Rev. B and DO advanced again increasing those rates to 32Mbps. Dr Bitange Ndemo, who has been a major advocate of CDMA technology, opened the summit, describing CDMA technologies as more robust than others currently used in Kenya, with CDMA being a great solution for the provision of Last Mile services in the country. He also reiterated that rural areas continue to be a priority area for the Kenyan Government through the formation of “Digital Villages and E-Learning Facilities” being very high on the government’s spending agenda. According to Dr Ndemo, 60% of the Kenyan population are covered by CDMA. He closed his address explaining that adoption rates for data usage had far exceeded the government’s expectations and that this is expected to continue. For Sachin Bhatmuley, Senior Director Business Development at Qualcomm Inc, there are some key drivers for development of the sector: “Qualcomm’s focus for Africa can be split into 3 areas; firstly, on the adoption of 3G services in Africa, secondly, the success of current 3G operators in Africa and increasing their market penetrations and finally, the conversion of 2G networks to 3G networks.” Three main trends were highlighted to improve rates of adoption for CDMA technology:
TREND ONE - Reduced price of Handsets
CDMA device costs are declining and have been for a number of years. In 2004, CDMA2000 devices were around the US$80 mark. By 2008, they had reduced in price to under US$17. There is strong evidence to suggest that as demand grows for CDMA handsets, these prices will continue to fall. There are 3 predominant reasons for this drastic reduction in price over the past few years; firstly, increased demand for CDMA devices is increasing the scale of production reducing the cost. Secondly, the Global CDMA Certification Forum (CCF) is reducing the time and development costs of taking new devices to market. Thirdly, the Open Market Handset Group (OMH) is assisting in the unification of standards across the CDMA ecosystem which is allowing for the handsets to be used across multiple networks. OMH is an industry initiative led by the CDMA Development Group to enhance the CDMA ecosystem by offering a greater selection of devices through multiple distribution channels. Similar to what is seen today with GSM phones and SIM cards, CDMA industry partners are working together to introduce devices where the complete set of configuration data to support operator and subscriber identification is stored onto Removable User Identity Modules (R-UIMs), or SIM cards for CDMA devices. OMH results in lower ASPs (Average Selling Price) due to volume aggregation, thus increasing device variety and affordability. The initiative is gaining momentum. Currently, Visafone and Starcomms in Nigeria, PT Bakrie and PT Smart in Indonesia, and Citycell in Bangladesh are all providing OMH-compliant CDMA networks. In August 2009, Samsung announced the world’s first OMH handset in India. Since then, several additional OMH handsets have been introduced and a number of Tier-1 and Tier-2 device OEMs are designing and producing OMH-compliant devices.
TREND TWO - Smartphone Proliferation
This is the fastest growing segment in the mobile phone market: Smartphones are expected to total 40% of total handsets shipped by 2014. Smartphone growth hit 34% in 2009 and 36% in 2010. According to Gartner, over the coming 12 months the number of smartphones on the market is expected to outnumber the number of PCs globally. This presents huge opportunities for African operators to bring the internet into the hands and mobile devices of communities across the continent. This is allowing operators the ability to increase subscriber ARPU by offering data services that would not previously have been accessible.
TREND THREE - Devices becoming more diverse & data oriented
Voice revenues are continuing to decline and operators are investing in capacity where they are seeing returns, and these returns are deriving from Data. Services such as mobile entertainment, e-readers, education, social networking, locationbased services, mobile commerce, mobile healthcare, mobile machine to machine are all potential lucrative revenue streams for operators.
What does all this mean? According to Bhatmuley, it is time to “Prepare your networks!” Think innovative VAS, as this will be crucial for increasing ARPUs on operator networks, and providing consumer-driven content. For Bhatmuley: “Think beyond phone: New devices, new services, new revenue streams.” The emphasis on data was repeated throughout. For Russell Southwood, Chief Executive, Balancing Act, we are now looking at a very different Africa from a few years back. Some key trends that are being seen in the African space include the shift from satellite to fibre, services such as mobile banking, mobile internet, and triple play. Handsets have historically been a serious issue for CDMA operators and potential subscribers as they have been more expensive than GSM devices with less choice. This is changing substantially with a wider range of handset options and reduced prices on the handsets. According to Said Said, CEO Tanzania Telecommunications Company Limited, the future is going to see fibre cables reducing broadband costs and then the true benefits of CDMA will become apparent as a superior data technology. It was hypothesized that LTE could in the future allow for WORD FROM THE GROUND Dr Bitange Ndemo, Kenya 1Peak rate for 3 EV-DO carriers supported by initial implementation. 2Peak rate for 3 EV-DO carriers with 64QAM in the DL. Rev. B standard supports up to 15 aggregated Rev. A carriers. 3DO Advanced peak rate for 4 EV-DO carriers, assumes 2x2 MIMO and 64QAM in the DL and 16 QAM in the UL. 4Capacity increase possible with new codec (EVRC-B) and handset interference cancellation (QLIC). 54x increase with receive diversity the evolution of CDMA The path to success the convergence of GSM and CDMA technologies. Until this happens, it is imperative to fairly represent CDMA technology as a practical and effective technology for the African continent.
Sidebar 1: CDMA's World War 2 Foundations - A Glamorous Past
Once described as the most beautiful woman in the world, actress Hedy Lamarr was one of Hollywood’s most glamorous silver screen goddesses of the 1930s and 40s. But Ms Lamarr had another talent: she was brilliant. Working together with avante-garde music composer George Antheil, Lamarr came up with the notion that multiple frequencies could be used to send a single radio transmission – a concept that’s now known as frequency hopping. The concept would eventually provide the basis for the CDMA airlink, which Qualcomm first commercialized in 1995. The idea remained dormant until 1957 when engineers at the Sylvania Electronic Systems Division in Buffalo, New York took up the idea, and after the Lamarr- Antheil patent expired, used it to secure communications for the US during the 1962 Cuban Missile Crisis. After becoming an integral part of government security technology, the US military, in the mid-80s, declassified what has now become CDMA technology, a technique based on spread-spectrum technology. The technology soon caught the attention of the nascent wireless industry. CDMA, incorporating spread-spectrum, works by digitizing multiple conversations, attaching a code known only to the sender and receiver, and then dicing the signals into bits and reassembling them. This meant that CDMA resulted in extremely secure transmissions. Qualcomm, which patented CDMA, was attracted to the technology because it enabled many simultaneous conversations, rather than the limited stop-and-go transmissions of analogue and previous digital options. In the prescient words of Hedy Lamarr : “Films have a certain place in a certain time period, but technology is forever.”
Sidebar 2: A Case Study Mickael Ghossein, CEO, Orange Kenya
Kenya is about 580,000 km2, of which only about 10% is covered by a power grid. This has a huge effect on opex costs for mobile operators, as power generation is then needed for their base stations. Telecoms in Kenya – 250,000 fixed lines and addressable market of 20 million wireless subscribers across CDMA and GSM networks, with two landed submarine cables (Seacom and TEAMS), with EASSY expected within the first half of 2010 (before going to print this was imminent in the last week of March). Telkom Kenya offers fixed line services for Voice and Data, a GSM mobile network and a CDMA mobile network for voice and fixed data. This makes it the only fully integrated telecoms network in Kenya. CDMA was the natural answer for Telkom Kenya as vandalism of copper cable into rural areas was becoming a problem and wireless was the route to take. The technology needed was to cover large areas and this is why CDMA was initially chosen. It works at a lower frequency than GSM (less than half), giving it a larger coverage area. An additional benefit is that capex and opex are reduced due to fewer base stations needed. In 2008 Telkom Kenya started to roll out green CDMA base stations to help manage capex and opex costs, as well as for environmental and conservation reasons. This has meant Telkom Kenya has seen cost savings of up to 60% of the opex for those sites.
EVERYONE HAS TO START SOMEWHERE!
It was just over two years ago that I met my first green base station. It was at the Mobile World Congress in Barcelona, where Ericsson was making a big fuss about going green. “You have to be seen to be green,” said Steve Barnett, Ericsson’s Head of Network and Technology Consulting. “And we can save people a lot of money.” The 40m-tall concrete tower wasn’t aesthetically pleasing, but an imaginative operator could soon fix that with a funky lick of paint. The prototype base station was about to begin trials to see how well it met its promise of substantially lower running costs. Traditional base stations need a lot of power to feed signals from antennae at the top to transmission equipment at the bottom. This tower houses all the equipment at the top, eliminating the need to feed signals up and down. Nor does it need air conditioning, since it’s cooled by natural air flow, while batteries to power the equipment are buried to keep them cool. Numerous other operators and equipment manufacturers also claimed to be striving to save the planet. African operator Celtel boasted about being the first in the world to install hybrid base stations that combine a diesel generator and a bank of batteries, which take it in turns to power the equipment. Running on battery power halves the fuel bill and the diesel recharges the batteries, making them suitable for rural areas. China Mobile talked of buying solar and wind powered base stations to cut electricity consumption, because its base stations account for 73% of its fuel bill. China Mobile also collects and recycles dead batteries and old cellphones from its customers and rewards them with free airtime as part of its green campaign. Everyone was being very earnest and thoroughly caring, yet there was a definite sense that efforts to save the planet were ‘nice to have’, but certainly not a business imperative. Then Nokia lightened the mood a little by demonstrating a nifty clamshell handset dubbed the Remade, which it built from recycled cans, plastic bottles and car tyres. The hitch was its total inability to actually make or receive a call, but Nokia claimed it was working on that one.
GREEN INITIATIVES STALLING
A couple of years on, has very much really changed? Fuel bills are not only among the largest operating expenses for telecoms players, but their energy consumption is a growing culprit for greenhouse gas emissions. Faced with big bills and bad press about environmental damage, operators and equipment vendors are feeling the pressure to devise energy efficient networks and reduce their carbon emissions. Their efforts include using the wind and sun as renewable energy sources, seeking more energy efficient practices for data centres, and initiatives to recycle old equipment. The trend has undeniably garnered a lot of attention, as event organiser Informa staged a telecoms exhibition last year specifically focusing on saving money and saving the environment. The ICT industry accounts for 2% of global carbon emissions, and the conference examined how that impact could be reduced. Informa’s Global Green Telecom Summit was based on the growing interest in environmentally friendly strategies and the fact that reducing energy consumption and deploying alternative energy solutions would greatly reduce the industry’s impact on the environment. Interestingly, Informa isn’t running a Green Telecoms summit again this year, presumably because going green still isn’t big enough to justify a dedicated exhibition. “The last green event was very interesting, but very few people were willing to put their money where their mouth is. Green telecoms has a much better chance of catching telcos’ attention if it is related to cost-efficiency,” said Informa Research Director Julie Rey. Research house Analysys Mason, part of South Africa’s Datatec group, has been studying the issue for a while. Senior Manager David Eurin reported back in 2009 that green initiatives designed to cut costs would survive, while publicityoriented smoke screens would disappear. Operators were keen to use the green factor to reassure investors during a recession that they were ‘doing something’, he said. “Being seen as green has been near the top of the corporate social responsibility agenda in the last few years, responding to a surge in media coverage of environmental issues. Broadly worded mentions of ‘responsible behaviour’ and being ‘members of the community’ and aiming to make ‘a positive impact on social progress’ have been seen in company reports.
THE CHANGING LANDSCAPE
Those green policies had their value, however, as telcos were using environmental issues as a catalyst to cut their operational costs and drive efficiency. “Investment decisions will be tight, so we can expect that only those initiatives wit h a strong business case will be launched,” Eurin said. “There certainly seem to be opportunities to reduce costs. For example, France Telecom reported that about 50% of its energy bill comes from base station equipment.” In response, France Telecom was investigating solar panels, wind turbines, fuel cells and other alternatives to provide offgrid energy, cut costs, and reduce dependency on expensive and polluting diesel generators, particularly in the African countries where it operates its Orange networks. Companies also use a credit system based on the Kyoto Protocol to offset their carbon emissions. Although this is a quick way to become green on paper by obtaining a zero emission net balance, Analysys Mason says it can prove very costly for little immediate benefit. The system relies on a trading market organised by the United Nations, in which certified reductions in emissions can be bought from carbon projects set up in developing countries. Recently a telecoms company stated – off the record – that it would drastically reduce its use of this syste m because it cost too much, Eurin said. Analysys Mason is turning green initiatives into something of a speciality, by offering fixed and mobile operators a service to monitor, control and reduce their energy consumption and carbon emissions, and to help them negotiate better deals with energy suppliers. Ericsson is still plugging away at its green initiatives with Konstantinos Tzingakis, its Director of Innovations in South Africa, saying environmental concerns are one of the most topical issues facing society. Being environmentally savvy is not only impacting the lives of individuals, but also affecting businesses in how they operate and their choice of business partners, he says. Telecom companies are playing a more significant role in the fight to address climate change, Tzingakis believes. That is being forced upon them by soaring energy prices, spurring telecom operators to scrutinise their environmental and social responsibilities and their energy bills. Although ICT accounts for just 2% of greenhouse gas emissions, it is estimated that their technologies have the potential to reduce emissions by up to 98% in some other sectors of the economy. Overall, ICT could help to cut emissions by about 15%, Tzingakis says, by allowing people to use resources more efficiently. Ericsson believes it has differentiated its products by developing energy efficient equipment and methods for network and site optimisation. Its WCDMA base stations are designed for energy efficiency and a power-saving feature has been developed to improve the energy efficiency of already installed GSM base stations. Such environmental initiatives have seen Ericsson earn a Green Company Award for innovation in China and be acknowledged as a Green Pioneer in Korea. “The telecommunications sector has a crucial role to play in meeting the challenges posed by climate change,” Tzingakis says. “To do this, telecoms providers and operators need to work together to create energy-lean products and production processes. More efficient technologies will reduce the amount of fossil fuels that operators need, as well as make it possibl e to use alternative sources of energy such as solar or wind power.” Being environmentally savvy is a hot point of discussion in the ICT industry, with everyone wanting to go green, says Dan Engel, the regional sales manager of Polycom. “Pressure is being placed on companies to use recyclable materials in the manufacturing of their products, as well as to properly dispose of unwanted or outdated equipment.” Going green is not an easy transition, he says, but energy-efficient IT is high performance IT. Tough economic conditions have led to cost cutting and many businesses have halted their investments in green solutions. Yet becoming greener is still a key priority towards future sustainability. Polycom offers a range of communication solutions that reduce travel and promote greener business for all industries, and for its own operations too. Using video to train Polycom’s worldwide sales team will save an estimated 374 metric tons of carbon emissions annually, Engel says.
WHAT CAN THE INDUSTRY DO?
The core goal of green ICT initiatives, products and practices is to design, manufacture, use, and dispose of equipment efficiently and effectively with little or no impact on the environment. Specific goals are to reduce the use of hazardous materials, maximize energy efficiency during a product’s lifetime, and promote the recycling or safe disposal of defunct products. The Organisation for Economic Co-operation and Development (OECD) has published a global survey of more than 90 government and industry Green ICT initiatives that focus on the environment and climate change. The report concludes that initiatives tend to concentrate on the green technologies themselves rather than on their actual implementation to tackle global warming and environmental degradation. In general, only 20% of initiatives have measurable targets. So far the rules and regulations developed around green technologies concentrate on the IT sector, rather than the telecoms sector, with schemes such as Energy Star ratings and Climate Savers Computing Initiative in the US designed to reduce the power consumption of PCs. However, telcos may be affected by The Green Grid, a global consortium dedicated to improving energy efficiency in data centres and business computing systems. It was founded in 2007 by several key IT companies. Data centre facilities are booming as business data increases, and each houses a rising amount of powerful IT equipment. Their managers are running into limits related to power, cooling and space, and the rising demand has had a noticeable impact on the world’s power grids. Once a standard set of measurements is adopted by the industry, it will be easier for end-users to manage their facilities and equipment to achieve optimal energy efficiency. Few companies are enthusiastic enough to build their entire business case around environmental awareness, except for Green Telecom. This independent UK-based player supplies corporate clients with phone lines and telephone systems with its services carried over the BT network. It promises to help organisations meet their Carbon Reduction Commitment (CRC) whilst saving them money, as it does not believe that going green should cost organisations more. Its carbon footprint is calculated and offset to a wind energy project in India that provides reliable, renewable power to the Rajasthan state electricity grid. That project will reduce greenhouse gas emissions by lowering the grid’s dependency on fossil fuel-based electricity generation. Green Telecom also reuses or recycles all incoming packaging materials and minimises its use of paper. In August this year the company began a transition to paperless billing to enhance its green credentials. All electrical waste, such as old telephone systems, is removed from its clients’ premises and disposed of in compliance with the European Union’s Waste Electrical and Electronic Equipment (WEEE) directives. Its systems installation division runs a tree-planting programme to offset carbon emissions and encourage wildlife. Overall, its green procedures are designed to make all employees and suppliers aware of their actions and contributions that may impact the environment.
THE FUTURE OF GREEN ICTs
Simple telecoms initiatives that can contribute to going green include VoIP and phone extension mobility, which make hot-desking more practical. That allows companies to operate from less office space, which reduces the cost of rental, heat and lighting. Although staff may resent not having a permanent desk of their own, companies may push for that because the average annual energy consumption for an office building is more than 23 kilowatt hours per square foot, with heat, air conditioning and lighting accounting for 70% of that, according to US studies. Another area where operators and network equipment manufacturers can play a major role is through teleconferencing, a technology that is often implemented as part of green computing initiatives. Holding virtual meetings instead of travelling reduces greenhouse gas emissions related to travel, although a more compelling reason for companies to adopt teleconferencing is to eliminate the time and money previously spent on travelling. That cost saving and the fact that staff are not losing productive time by being in transit are far more likely to sell the technology than appealing to a customer ’s sense of environmental responsibility. And that’s it in a nutshell, really. Operators and suppliers alike are undoubtedly under pressure to highlight the efforts they are making for the good of the globe. Yet they are under even more pressure from their boards and shareholders to generate a profit. Since going green is initially an expensive investment offering only a longer-term payback, innovations that benefit the environment must first and foremost be able to prove that they also benefit the bottom line.
SIDEBAR - WHAT DOES THE RESEARCH TELL US?
If it hasn’t, it is certainly expected to soon, because Pike Research predicts that investments in green telecom network infrastructure will touch $122 billion by 2014, representing 46% of telecoms capital expenditure. Of that, 63% will be for mobile networks. Pike’s report on Green Telecoms Networks published in July looks at the opportunities, technology requirements and environmental impact of green schemes. Asia Pacific is expected to lead the capex spending, followed by Europe. Global emissions reductions by then (compared with doing nothing) should reach 24%, with a 46% reduction from mobile networks. Up to 80% of an operator’s energy usage is absorbed by its networks, base stations and switching centres. But replacing them with renewable energy solutions carries a dearer upfront cost, so implementing greener equipment only becomes compelling if companies look at the total cost of ownership rather than the upfront fee. Yet if they are done well, green initiatives can provide major cost savings. Examples include using free and renewable energy sources, and remotely controlling equipment through an energy-saving on, off or idle switch. Even so, Pike Research believes that renewable energy will power only 4.5% of the world’s mobile base stations by 2014, and a higher but still unimpressive 8% in developing countries. At the moment renewable energy powers a negligible 0.11% of the world’s mobile base stations. That figure shows that for all the fine talk and fancy inventions, going green just isn’t happening yet. Pike Research also points out that there are many opportunities for fixed and mobile operators to reduce emissions from data centres, both in the design of the facilities and through server consolidation and virtualisation.
The Colour of Innovation is Orange
How Orange is winning in West and Central Africa
Managing one's business dealings across a massive geographical area like Africa from a single, regional head office is no mean feat. It takes solid insight into each country's cultural nuances, a good understanding of how mature that country's market forces are and someone heavily focused on the legislative landscape. But, as different as some of the countries on the African continent are (think South Africa and Nigeria), certain constants exist. A case in point, says Claire Paponneau, Director of West and Central African Operations at Orange, is the booming demand for mobile communications and the strong appetite for data services, which make product development a far more predictable process for large, multinational operators. "That said," she continues, "each country has different economic and regulatory environments. "Our aim in all of the African markets we do business in is to get the coverage that is expected by the population and the government, while at the same time remaining profitable." It's a goal that sounds far easier to attain than what it is in reality. All about local relevance Orange's presence in Africa is not exactly something that's recent. And Paponneau says that her company hasn't seen Africa as a territory to conquer, like so many of its peers. "Orange has been active in a number of countries on the African continent since the eighties and nineties. And in every case, it's been a distinct opportunity that's lured us there as opposed to a need to conquer the continent," she explains. Paponneau says Orange's past policy preferred a 'greenfields' environment where it could shape and mould the goto- market strategy and infrastructure before taking any steps into the market. Today, however, some of Orange's most successful ventures have been into markets where they've taken over or merged with existing players. "There's also a misconception around Orange being more successful and comfortable with operations in Frenchspeaking countries, because of the company's clearly French roots," she adds. "The reality is that we have successful operations regardless of the language spoken within the markets we operate. This is because we go to great lengths to understand the market and are committed to the long-term." Strong evidence of this is provided by its investments in entities such as its Africa technology centre, which staffed by a research and product development team from the Ivory Coast and a manager from Senegal. "This centre has worked on and developed a multitude of services and solutions that have been successful on the African continent," Paponneau says. A great example of such a service is Facebook for mobile, which Orange developed and launched in multiple African countries six months ago. "In six short months, the service has already garnered one million customers and is continuing that growth. It's important for us that these services weren't exported from other parts of the world. "They were designed in Africa with local relevance in mind," she says. says that although Orange has a name that's synonymous with mobile telephony throughout the world, it has a convergence strategy at heart that sees it committed to driving new services on the voice and data fronts. Paponneau says Orange is driving voice, data and new services such as mobile banking for the African markets
The growth of broadband
Still speaking to the topic of local relevance, Paponneausays that although Orange has a name that's synonymous with mobile telephony throughout the world, it has a convergence strategy at heart that sees it committed to driving new services on the voice and data fronts. Paponneau says Orange is driving voice, data and new services such as mobile banking for the African markets it operates in. "We see broadband as a key lever for growth in the next years," she adds, "and that's the reason we launch a 3G network wherever possible." "And where we can't have a 3G service, for whatever reason, we do our best to roll out a WiMAX service to ensure that the high-value business segment is addressed with speedy, reliable communications infrastructure." Less visible but nonetheless critical, Paponneau believes, is Orange's involvement with the submarine cables providing backhaul to Africa; and the numerous terrestrial cable projects focused on assisting countries without direct access to the submarine cables to still be provided with cheap international capacity. "We feel it's key for us to assist in developing this connectivity – terrestrial or submarine – since broadband is a key driver and enabler for our customers," she says.
Despite its commitment to providing locally relevant services, driving broadband penetration and the fact that it's the top operator in a number of the countries it operates in (Senegal, Mali, Ivory Coast and Madagascar, to name a few), Paponneau says that Africa is a competitive region. "It's difficult to say which countries have the most competitive landscape, since there are some factors that make markets with two to three players competitive and other factors that make markets with upwards of five players difficult to operate in," she says. "If I had to choose, however, I'd say that markets saturated with upwards of five players aren't a good landscape for competition, since there's just insufficient room for all of the players to be profitable while at the same time developing a quality of service that's of a high standard. "The risk is always there that a price war will develop and as we've seen in markets such as Kenya, where a price war happens there are lower costs but also a lower quality of service." "In the beginning," she says, "there's benefit for the consumer and it might seem as if the price war is a good thing. All it does is drive down innovation, which is counter intuitive to what an operator should be doing in any market." On the topic of a 'price floor', which has been suggested for the Kenyan market, Paponneau says it's an interesting suggestion, but not one she feels is achievable. "The price should be linked to the cost and when costs reduce, reductions in price should follow," she says. "It's a good suggestion and we're ready to contribute, but it's something that needs to be carefully worked through. "We already have interconnect costs that have been decided and defined by a regulatory body. If the retail market is also decided upon by a regulator, we will find ourselves in a situation that's not very stable for very long," she says. Paponneau says it's sad when you're part of a market where you can't build value. "For me it's not about where competition exists, but rather where we're stronger for the existence of competition. "Those markets, in my opinion, are the ones where we're able to and encouraged to differentiate on services innovation – like bringing new devices to market before our peers, and launching innovative broadband offerings and services that enrich our customers' lives," she says.
The customer is king
An area that's considered innovative to some and just plain smart business practice to others is the act ofoutsourcing certain elements of the business to effect reductions in operating expenditure. For Orange, Paponneau says this takes on the form of infrastructure sharing, site sharing and outsourcing non-core activities, as this can reduce costs while leaving quality of service unaffected. "We won't do more than that, however," she says, "as we want to remain masters of the customer relationship and quality of service. "Instead we've embarked on a project to outsource internally, forming a single entity that is dedicated to developing and managing all of the value added services platforms across our African operations. "This gives us the dual benefits of being able to reduce the costs of developing and managing value added services platforms in-country, while still being able to provide a guaranteed quality of service and local relevance," she says.
Innovation the way forward
While Paponneau admits that it's difficult to talk about what Orange has in the pipeline when it comes to upcoming services and differentiation, she says it's clear that innovative services are the best way to add value to customers' lives. "We will continue looking at services that are heavily linked to content, such as the 'football fan club' we've launched in more than 10 countries to date." Paponneau says that the service provides users with access to a number of news articles related to African and European football (since a large number of professional African players play the majority of their football in Europe), information on upcoming games, as well as a chat feature for community members. So far, Paponneau says, the service has been very successful and it provides a good blueprint for other contentdriven services. "Orange feels that even though technical innovation is important, innovation that centres on services customers can derive real value from is just as important," she says. And as such, it won't be surprising to see the company centring on services that reside above cost-effective, solid data services – as opposed to focusing on the data services themselves, as so many other telcos do today.