[kictanet] Living with confusion – African operators find themselves pulled in new directions

[alice]

  From Balancing Act



  Living with confusion – African operators find themselves pulled in
  new directions

Once it was simple. There was the Government incumbent and all the other 
operators were against it. Then the incumbents ceased to be the 
incumbents and some of the new mobile operators found themselves taking 
on that mantle. With new power comes new responsibilities. Or does it? 
Once it was all about voice. Now there’s all this fancy convergence talk 
and anything you can think of sending down a phone connection will be 
sent. Increasingly operators are being pulled in new directions. Russell 
Southwood looks at three issues that are tugging from the edges.

Three news items this week touched on some of the things that are 
pulling operators into looking at where their company’s activities begin 
and end.

The pull towards content provision: This week France Telecom signed a 
“multiyear agreement” with MGM to be allowed to offer the studio’s 
movies to its video-on-demand customers. According to the reports, 
Orange is counting on video-on-demand as a new source of income for its 
fixed line business as its calling revenues go down.

Cote d’Ivoire Telecom became the next of Orange’s African subsidiaries 
to start rolling out its “livebox” product that offers voice, Internet 
and television. But all is not easy in the new world of telco as content 
provider. In Senegal, Orange had to reach a content agreement with the 
more-or-less monopoly supplier of French-language, satellite pay TV 
content. As a result, it has to peg the price of its offer to that of 
its satellite content provider. Mauritius Telecom, despite having 15,000 
people sign up for its “livebox” service again found itself talking 
unsuccessfully to what will probably become its competitor about getting 
content.

In this context, having a large parent company sign global content deals 
makes a great deal of sense. But what if you’re not part of a global 
company? How do you sort out content to stay in the game? Or do you 
simply say, we’ll sit out this one out and stick to what we know? Deals 
between Vodacom and DStv may be easy in the short-term on a reseller 
basis but when it goes beyond this, who ends up getting the lion’s share 
of the revenues?

Content is beset with a whole new range of problems that no-one in the 
African telco business seems to have thought their way through. Rights 
holders like Hollywood are not known for their generosity and too many 
of the available rights are still being given on a monopoly or duopoly 
basis. The court battles in Senegal over whether a third TV channel had 
the right to show Prison Break illustrate how far the market still has 
to develop.

The pull towards infrastructure: At least three African countries – 
Kenya, South Africa and Uganda – have Governments that are in the 
advanced stages of putting together public interest companies to roll 
out national fibre infrastructure. Although the mobile operators bandy 
about the size of sums they are going to invest in infrastructure, they 
haven’t really worked out whether as the new incumbents they should be 
building infrastructure or not.

It is one thing for MTN and Vodacom to announce infrastructure 
build-outs in South Africa but are they really going to extend the same 
principle to all of the countries they operate in? Mmm…Maybe. MTN is 
certainly putting down fibre in Ghana in order to overcome the historic 
inadequacies of both the network it acquired and that provided by the 
incumbent Ghana Telecom.

Nevertheless an exchange at a regulators meeting in West Africa 
exemplifies the problem. Two of the large mobile operators chains had 
representatives on a panel who were asked why were they not rolling out 
cross-border links, given their networks were almost touching each other 
in several countries. Their responses were almost identical: we don’t 
think there’s enough traffic to justify it and therefore it is the 
Government’s responsibility. Nobody had thought that the private sector 
might create its own “carriers’ carrier” to act as a trusted transit 
operator to solve this problem.

However, if the private sector operators sit on the sidelines of this 
discussion, they can hardly complain when Government decides to take the 
initiative and start taking responsibility through public interest 
backbone companies. The international fibres which everyone has shouted 
long and hard for will be here in 2009 and without regional 
connectivity, their impact will be frittered way. So the private sector 
really has to find a way to “put up or shut up”.

All of which makes even stranger the announcement by Namibia’s power 
utility Nampower that it has granted a large contract that will connect 
several different power grids in South Africa. The line will connect the 
electricity networks of Namibia, Zambia, Zimbabwe, Democratic Republic 
of Congo (DRC), Mozambique and South Africa to create an alternative 
route for power imports and exports to and from neighbouring countries.

Slipped rather quietly into the announcement was the fact that the 
transmission line would be fitted with a fibre-optical ground wire which 
will, apart from providing essential transmission communication, “expand 
NamPower's communication capacity”.

Is any private sector company talking to Nampower about using this 
capacity or indeed increasing this available capacity for private 
operator’s voice and data traffic? Not as far as we know….So are 
operators interested in solving these problems either individually or 
together? Mmmm…That’s a bit difficult to tell.

The pull towards energy provision: Recently MTN revealed the scale of 
money it was spending on generator fuel in Nigeria. Taken over a year, 
it was US$65 million. Try to imagine that if that is calculated on the 
basis of 5,000 base stations for one country, what the total cost looks 
like for all mobile operators across the continent.

Unlike the pull towards infrastructure described above, this is 
straightforwardly a short-term, bottom-line issue. If the operators 
could find a way of using generators just for redundancy, then the 
amount paid in this direction would drop substantially.

So what can the operators do? Well, there’s the high road and the low 
road. The low road is finding base station equipment that will not eat 
as much fuel. This week Vodafone Germany announced that it was the first 
operator to put in Ericsson’s new BTS that will make “an important 
contribution to cutting carbon-dioxide emissions” by lowering energy 
use. Compatible with all its base stations since 1995, it claims to save 
between 10-20 per cent of energy consumption “depending on the network 
traffic pattern.”

During periods of low network traffic, the feature effectively puts 
those parts of the network that are not being used in standby mode - 
overcoming the traditional practice of having radio equipment 
continually turned on, which can result in energy being wasted.

The high road is self-provisioning power transmission, either through an 
operator consortium JV or by one operator taking the initiative. The 
energy industry takes a long-time to respond to demand, sometimes as 
long as 10-15 years. So why not set up a small-scale power generation 
and transmission company that can address those base stations nearest to 
each other? Small-scale providers can generate power at scale: 40% of 
Holland’s energy needs come from small-scale providers. Then it is a 
case of delivering this power and possibly distributing it to a small 
number of other paying customers.

Is it in the immortal words of Telkom SA’s new CEO Reuben September 
(talking about his mobile strategy) is it a case of “everything that is 
feasible is desirable”? Where do you draw the line in terms of what a 
company needs to be able to do in order to thrive? For without 
addressing these kinds pulls on company time and resources,  all of 
Africa’s operators will continue to operate below their full potential.



Balancing Act
<http://lists.balancingact-africa.com/t/397/197296/123/0/>