London — After such a financially tough year in 2017, it’s time to look forward to how the industry might get out of the current financially straightened circumstances. In this week’s issue Russell Southwood makes 5 wishes for the industry that he hopes will come true.
Wish No 1: An Industry-Wide Commitment to high-quality, low cost data
To repeat a tune we have been singing for many years: everything is becoming data (even voice) and the business model is changing. The question is then: what kind of companies will survive this digital transition?
Imagine that mobile companies in their present form had never existed and you had to build a network for the kind of future African customer demand for data. What would it look like?
In any scenario you might imagine, this would need to be a high-volume fibre network capable of dealing with the kind of high-use cases that will come out of the next two generations of mobile wireless technology.
The challenge for existing operators is that in commercial terms they need to build that high-volume, high-quality network on a commercial model that works on lower retail prices than are found elsewhere globally. This is the only way to create a mass -market route to Africa’s digital future.
The major operators that remain committed to developing the business in Africa need to give a commitment together that they will all work together to achieve high-quality, low-cost data. It will require the sharing of network resources at the infrastructure layer to enable all operators to compete and innovate at the retail level.
Wish No 2: Regulation that addresses the future, not the past
Over at least the past two decades, the cornerstone of assumptions for Africa’s more impressive regulators has been that competition stimulates lower prices and innovation. Although not always stated, that competition needs easy market entry and at least 3-4 major players to be effective.
The problem in Sub-Saharan Africa is now two-fold: there is the changing business model referred to above and the steady consolidation of players in the market. If Airtel and Millicom could find buyers for their African operations, they would no longer be on the continent. The challenges of the 9Mobile bidding process in Nigeria and the talk of bidders coming together into alliances demonstrate what is happening. Both Government and regulators need to understand that mobile operators are no longer the golden cow that can be milked at will. However you look at it, there will be less players and therefore less competition to drive innovation.
There are currently already a series of regulatory dead-ends on the continent. You have everything from the countries that have never given up having a single state incumbent (for example, Ethiopia at the most extreme end) to places where a single mobile operator has replaced the position of the old incumbent (for example, Kenya or Senegal).
There are still many African regulators who have the capacity to start regulating for the future. They need to encourage new market entrants who will bring something other than the business models that are currently failing those who are not in the number one or number two position in the market.
Wish No 3. A Breakthrough for Digitally-Enabled Services
In order to get to a digital market that works effectively in low-income markets, major operators (for which currently read mobile) have to work together to create common standards that will allow all of their users to access the digital future.
Instead of just investing in start-ups that are in the digital space and hoping to become as dominant as the existing OTT players, they need to find ways that will enable more players to enter the market.
Again we’re back to that word sharing. There need to be common APIs that will simplify access to market for digital service companies across all the major operators.
For the African customer, the same process of simplification needs to take place on payments. The mobile payment backbone has to allow customers to be able to pay easily across all networks.
There is a growing realization that innovative start-ups in Africa will not simply spring to life by themselves. There needs to be a far greater focus on looking at what in the jargon is known as the industry verticals.
The majority of African digital start-ups are finding themselves with too smaller number of customers to achieve critical mass. Both the major operators and the start-ups have a common goal: the need for digital services to break through to millions rather than thousands of regular customers.
Wish No 4. Scaling-Up Innovative Approaches to Low-Cost Provision of Bandwidth
There are two key pieces that need to be in place to create Africa’s digital mass market future: access to data services for low-income users and the spreading of effective data services to those areas without both voice and data. Among other things, falling satellite costs may remove one obstacle to wider data and voice coverage.
POA!, Surf, Zenzeleni and Tizeti have all adopted different approaches to getting data to customers who have less money. This is not easy stuff to do so not everyone will succeed. At a regulatory level, there needs to be more openness to the kind of experimental approach that bought M-Pesa into the world.
There is a growing momentum amongst policy-makers and donors to address this problem. Donors are increasingly aware that if they can communicate digitally with the areas they are putting money into, chances are that the money they are putting in will reach the people it was intended for.
The challenge is to get the funding behind innovative approaches that will work across more than one country. Funding can and will be found but there is a need to create new expertise and approaches as the industry changes.
Wish No 5: Getting Scale on Low-Cost Energy Access Roll-Out
It may sound weird and a bit counter-intuitive but there is a key link between low cost energy and voice and data services. Running entire networks largely on diesel generators is probably one reason why it costs more to deliver communications in Sub-Saharan African than in countries with better power access.
As with increasing low-cost bandwidth, there are two pieces that need to be put in place: a power supply company capable of offering reliable low-cost power to base station operators and off-grid access for low income customers.
The tower companies who might have been expected to address the power supply issues for base stations have been a disappointment. In effect, they have simply been a financial charging mechanism for outsourced services rather than addressing fundamental problems. The industry needs a private company or companies that will supply electricity at low prices to base stations. Time for some innovative approaches?
For low income customers, there are now an increasingly number of companies of a growing scale providing solar power including BBOXX, Off-Grid, Mobisol, M-Kopa and Trend Solar. Many of these companies use a mobile connection to manage customer access and Trend Solar even gives its customer a mobile phone as part of its package.
Africa’s digital future needs cheap, sustainable energy to power it and these are a couple of key ways of making that happen.
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