by Frost & Sullivan’s Information, Communication and Technologies Research Analyst, Iyembi Nkanza

Introduction: The IP Revolution

The 20th Century has been the era of innovation, not necessarily because of novel concepts, but the idea of doing everyday tasks more efficiently. Keeping in touch with old friends, organising your diary, expressing and sharing your thoughts; all these activities have been made easier through the internet. Facebook, Twitter, Groupon and many other sites take advantage of the never ending desire to make life easier, , writes Information, Communication and Technolgies Research Analyst, Iyembi Nkanza, at international consulting and research firm, Frost & Sullivan.

Businesses are awake to the prospects that the IP revolution offers value in terms of marketing and brand management. Large corporates are able to engage with customers in ways that were impossible in the past. The need to stay connected at all times has boosted uptake of data products, from mobile service providers and accelerated plans, to bolster backhaul infrastructure. Mobile networks are the dominant means of communication on the continent and traditional voice/SMS platforms have been upgraded to accommodate the growing demand for high speed connectivity on the go.

Frost & Sullivan have seen a fixed line penetration of around 10% in Sub Saharan Africa (SSA), while the majority of SSA users access internet services via mobile devices. The mobile penetration rate in SSA is roughly 50%. The immediate challenge is upgrading mobile infrastructure to facilitate quality broadband services. The minimum standard is now third generation (3G) technologies, as opposed to second generation (2G). Carriers are also looking to deploy next generation technology, such as LTE, to prepare for future demand. The growth in demand has exceeded infrastructure deployment and this has created a growing market for mobile backhaul infrastructure.

Increasing data traffic has an impact on the technology required at base stations. Fiber links are the most efficient backhaul technology to provide enough capacity to handle high volumes of data. The high cost of fiber deployment is the biggest challenge in this regard, not to mention the expansive geographic landscape of African countries in SSA. In places that Fiber cannot reach, Microwave backhaul is used.

Capital limitations have forced mobile operators to consider infrastructure sharing in order to increase coverage while minimising Capital Expenditure (CAPEX). Infrastructure sharing is a relatively new practice in Sub-Saharan Africa, and Africa as a whole. Infrastructure deployment has long since been one of the highest initial costs for mobile service providers, and has become a market entry barrier for new firms, thus restricting healthy competition.

Infrastructure Sharing: "Three"s a crowd "

Infrastructure sharing is an effective practice that can be used by 2 or more mobile service providers to save billions of dollars in CAPEX. The money that is saved can be invested in new projects that will present novel opportunities. The benefits of infrastructure sharing outweigh the risks, and this will, therefore, drive market growth. Tower companies that already have a presence in Africa, such as American Tower Company (ATC), Helios Towers Nigeria and Eaton Towers, will continue to facilitate transition for service providers looking to share infrastructure. The practice is gradually being adopted in various parts of Africa, notably Ghana, DR Congo and Tanzania.

As global tower companies leverage opportunities in Africa, tower sharing is likely to become the preferred business model for service providers, predicts Frost & Sullivan. Providers will be slow to accept the transition in business model; however, once they notice their competitors realising the benefits, they will be encouraged to make the move as well. Competition will be based on product and price offerings rather than on coverage, as consumers are looking for the cheapest deals. The removal of the infrastructure CAPEX barrier will encourage an increasing number of participants to enter the market and allow for entrepreneurial innovations to drive economic growth. Value added services, tailor made for the African context, will gain prominence and create new industries, as is the case in Kenya.

The benefits of tower sharing will eventually reach low-income earners and help mobile penetration spread to rural areas which were previously untapped. Tower companies are predominantly foreign. However, the number of African-owned tower companies is expected to increase as they have begun to realise the benefits that tower sharing offers. Regulators have become more aware of infrastructure sharing and are taking steps to facilitate the practice to further governmental goals such as rural development.

The expansion of 3G and the deployment of 4G and LTE networks will continue to drive the continued improvements of backhaul infrastructure. Microwave is currently the main backhaul technology used in the SSA region with 80.0 per cent prevalence.

Undersea cables: "The loch ness monster"

In the past 7 years, we have seen an expansive rollout of undersea cables (namely Seacom, WACS, TEAMs and EASSy) enabling high speed connectivity between Africa and the rest of the world. Current broadband speeds are far behind global standards. South Africa has one of the most developed telecommunication industries on the continent, but average broadband speeds are at 2.89 Mbps, far below the global average of 10Mbps. The true impact of undersea cables will only be felt by end users, once terrestrial fiber infrastructure opens the possibility for advanced telecommunications services to reach the masses. Without such infrastructure, the potential of undersea cables will remain an elusive concept, much like the loch ness monster of Scotland. Terrestrial fiber infrastructure presents opportunities to a wide range of stakeholders, namely municipalities, mobile service providers, systems integrators and infrastructure vendors.

Kenya and Nigeria have already begun to deploy terrestrial fiber. Apart from South Africa, Kenya and Nigeria are at the forefront of the IP revolution is SSA. The Nigerian government has set up the Backbone Connectivity Network (BCN) with a mandate to be a neutral wholesale telecommunications provider in 2011. A collaborative group consisting of Nigeria"s Alheri Engineering, Phase 3 Telecoms and Dagnote Group, are rolling out 14,000km of fiber optic technology along power lines. Terrestrial fiber will underpin future advanced applications and services.

The social revolution: "If you"re happy and you know it…Tweet!"

There are two main social shifts that will drive the uptake in advanced services. Year 2011 saw the dawn of Middle East uprising, and the wave of dissent was spurred on by social networks. The immense impact of social networks is a significant driver for improved internet services and increased bandwidth capacity.

The need to stay connected 24/7 has fueled the rise of the techno savvy generation. Gamers find opponents to challenge online, high school teeny boppers can keep up, and update their friends on the latest gossip while the timid and shy can express another side of their personality on a blog. The quality of communication will have to increase, as the demand for more data intensive video interactions take the place of instant chats.

Personalisation, and individualisation, of our cyber personality has fueled the growth of social networking sites such as Twitter, Facebook and LinkedIn. Young people are accustomed to sharing their lives with friends and family online because of the ease, speed and interactivity that social networking platforms provide. The web is a diverse universe that has made it possible for anyone with an internet connection to find a place that suits their personality and interests. The line between real life, and life online, is fast becoming an undistinguishable blur.

Conclusion

The price of smart phones continues to drop, increasing accessibility to the low cost SSA market. A new Congolese developed tablet called the Way-C was recently launched in January 2012, with a retail price of $300. The social revolution and increasing demands for information is spurring investment in infrastructure that will take full advantage of undersea cables. These developments, concludes Frost & Sullivan, are signs that SSA is very much a part of the IP revolution. Technology has engrained itself into all aspects of life, underlining the fact that all human beings have a natural desire to feel connected to one another. This is an inevitable global trend that will permeate all societies, albeit at a slower rate in SSA.

Samantha James
Corporate Communications – Africa
P: +27 21 680 3574
F: +27 21 680 3296
samantha.james@frost.com

http://www.frost.com