Africa’s data and Internet communications infrastructure has improved so much in the last decade that it’s easy to become complacent. The dual challenges of price and quality of service have not been overcome.
African regulators have never been good at imagining the future and with all the improvements they seem to have taken their eye off the ball. Russell Southwood looks at why things are stuck and what might get them moving again.
Africa’s transition to data is crucial for the next round of investment in the continent. The existence of relatively cheap Internet access and the services and content it brings with it are needed to power a second wave of economic growth.
The challenge of all challenges is that the operators in Africa’s Internet market need to be able to deliver cheaper data access than elsewhere because most Africans do not earn US or European salaries. Getting Internet access prices to US or European levels is not enough, they have to go lower.
Sub-Saharan Africa has countries that are amongst the most expensive places to operate in. So whoever Africa’s operators are or will be, they have to become pioneers in lowering the costs of both building and operating data infrastructure. Government and regulators need to understand the scale of this challenge and help operators become cost-cutting pioneers.
African regulators are not currently in a good place to make this happen. In the main, mobile operators have taken over as the market incumbents and are no longer forcing the pace of change but largely simply reacting to what’s happening elsewhere. The need for an effective, large capacity data network seems to have caught many of them off-balance.
African regulators who have pursued the opening of African telecoms markets have been slow to react to changed market circumstances. In many cases, even what were once quite competitive markets are now stuck. A brief summary of some of the difficulties may be helpful:
* Dominant Players:
A number of Africa’s telecoms markets are now dominated by a single player. Sometimes efforts have been made to declare them dominant players in regulatory terms but these have largely been ineffective. These dominant players have operated skillfully as price progressives (lowering tariffs) and in so doing have cemented their market position.
In Kenya, Safaricom has such an unassailable and central position that whatever anybody does, it usually ends up benefitting. If you need a telecoms or network partner, why bother with those who have less than 30% of the market? The recent Kenya Power partnership deal on Fibre-To-The-Home will reinforce its position in yet another market niche.
In Senegal, Sonatel is testing Free-Wi in Rufisque. Free Wi-Fi is undoubtedly a good thing but who’s paying? And this in a country where there are no independent Internet service providers, no alternative fibre providers and its two mobile competitors struggle to make it anything like a fair, competitive fight.
And then there’s MTN in Nigeria who for all their recent troubles, occupy the commanding heights of the country’s telecoms and data markets… ..Others could be added to list.
* Old school stuck:
Some of Africa’s regulators have simply not got off the blocks in terms of creating a competitive market. In these countries the dominant player is usually a decaying state-owned telco with about as much appetite for innovation as a sleeping dog. The Governments in these countries have chosen to foster an inefficient job creation scheme over being able to offer cheaper Internet and a more efficient economy.
The country that heads this category must surely be Ethiopia where the absence of any competition means that the market is probably about a third smaller than it might otherwise be. The State lacks the capital to make these financially leaky dinosaurs effective. But in this long list of countries, we must include places like Djibouti, Togo and Cameroon.
Take Cameroon where the Government has ensured that it has ownership of all the landing stations and its telco Camtel has a de facto monopoly over wholesale bandwidth. And all of these dilapidated incumbents who are without strategy, innovation or ideas want to be mobile operators.
* Last man standing “consolidation”:
More conventional industry analysts are keen on seeing “consolidation” as one answer to current problems. To be fair to their argument, Africa has more operators than many other places globally.
But what does consolidation mean? There will be less operators (two per country?) and their market power will be even greater. The last man standing theory is that if you are one of the lucky surviving operators you will then be able to hike your prices back to the level they were when the markets first opened.
With Airtel selling off some of its smaller opcos to Orange, the full scale of this is not immediately apparent. But what if this was really just the start of Bharti Airtel’s long goodbye to Africa? Consolidation will inevitably happen but then how do regulators ensure that markets maintain a competitive dynamic?
