Speak to the right people and Africa is about much more than just the digital divide

Yesteryear’s conversation in Africa was all about balancing the commercial realities of bridging the digital divide, but this year’s AfricaCom has showcased the bigger ambitions of South Africa.

Perhaps we haven’t been giving the right people the podium in the past, but the conversation in Africa has always been focused on the same thing. How do you deliver connectivity to the masses on a continent which has significantly lower ARPU than more developed regions? While this is still a priority, this year’s AfricaCom conference is demonstrating there are bigger ambitions than simply enhancing coverage.

Yesterday we heard MTN’s ambitions to create a more agile organization which operates in the OTT space and can be branded as a digital services beast, and this morning’s presentations had a smart city twist. It might seem odd that we’re discussing such advanced ideas when basic connectivity is an issue, but why not? If Africa is going to compete in the digital era these conversations need to happen now, and these individuals need to be given their time in the limelight. The smart city segment in South Africa is an excellent example.

Looking at Cape Town, Omeshnee Naidoo, the city’s Director of Information Systems, told the audience the city has a fibre spine 1000km long but the project is still at the starting gate. The infrastructure rollout is set to finish in 2021, while the team has recently signed a memorandum of understanding with Google to provide public wifi. The next step is figuring out how the initiative can now incorporate the citizens.

Johannesburg is in a similar position. Lawrence Boya, the smart city Director, said the city also has a fibre spine 1000km long, and currently more than 1500 public wifi spots. The challenge now is optimising the infrastructure and making sure government services are making use of the assets not going down the private route. Boya also highlighted the team are trying to figure out how to take the concept of smart cities down to a personal level for the citizens.

In both of these examples, steady progress is being made and the idea of the smart city might not be that far away. More government help is needed, both from a policy side as Boya highlighted South Africa currently lacks the framework to make smart cities sustainable, but also collaboration. Naidoo suggested public sector across the board in South Africa is far too siloed. To be fair to some local governments however, data sets have been opened up to the general public, providing the fuel for these new ideas.

It shouldn’t come as a surprise to be honest, but perhaps we are guilty of pigeon holing Africa. Too many people, and admittedly Telecoms.com does this too often, suggest the only challenges in Africa are focused on expanding the connectivity footprint. This is patronising and ignores the excellent work which is happening further up the stack. It’s not the case that these initiatives are difficult to find, but maybe we need to give them more airtime instead of taking the easy ‘Africa needs to improve connectivity’ angle.

We should be regulating AI, but no-one really knows how

A conundrum which has existed throughout the life of the technology and telco industry around the perfect balance between innovation and regulation.

From a technologists perspective, the question is a simple one to answer; don’t pin us back with red-tape, allow us to explore new ideas with complete and utter freedom. However, with technology becoming increasingly invasive, most sensible people would suggest there is a need to build a rulebook.

One of the main issues with regulation is the strength and depth. Striking the right balance between freedom and guidelines is an incredibly difficult task. Where the lines should be drawn is an answer which will vary dependent on who you speak to, as will the flexibility of these lines. And then of course you have the pace of change. Technology is constantly years ahead of regulation, so is it even a reasonable objective to attempt to achieve.

And then you have artificial intelligence. A technology which has great promise and is advancing faster than anything before it, but risks stripping people of their livelihoods, invading individuals privacy and compounding inherent human bias because written code. This is an incredibly complicated field, and when asked the question whether AI should be regulated, lawyers from Webber Wentzel gave a resounding yes.

Speaking to Webber Wentzel CIO Warren Hero after his presentation at AfricaCom, the issue with regulating AI is simply down to a lack of understanding and a non-existent conversation between the stakeholders in the industry. To build a reasonable legislative and regulatory foundation for AI, technologists, governments and consumer-interest representatives should all be sat around a table and contributing, but they simply aren’t.

Part of this is down to the on-going conflict between industry and red-tapers, but another factor to consider is understanding the technology itself.

“The ability to make a decision is based on the understanding of a concept,” said Hero. “Not enough people understand AI.”

Hero is 100% correct. Such a miniscule proportion of the population understand AI to the degree needed to make any decisions on the future of the technology making it is an almost impossible task. For AI to succeed, there will of course need to be rules to ensure responsible development, though there will also have to be freedoms granted. As we mentioned before, finding this balance is not simple and will require a deep understanding of the technology itself.

The issue which many governments are facing, according to Hero, is attempting to legislate and regulate in the same way governments have for generations. This might not sound terrible, but the digital economy is unlike anything which has come before, and AI presents a completely different dynamic.

Looking at the digital economy first and foremost, this is an area where technologies can continue to scale constantly. The virtual world offers no barriers, just take a look at the cloud computing segment. These companies are already incredibly influential, but how many of the worlds processes have been moved to the cloud. 10%? 5%? Less? The room for growth is exceptional, and should be treated differently to business segments of the past.

Now onto the AI arena specifically. While there are countless companies around the world who consider themselves experts in the AI world, in reality there are only a handful who dominate the space and have the scale to enforce genuine change. The likes of Google, Amazon and Microsoft has created such a strong position at the top of the ecosystem, it will be almost impossible to break the vice-like grip. This concentration, and inevitable continuation, of power is unlike anything which has been seen before.

For both of these reasons, AI (and digital in general) has to be regulated in a different manner. The trend of building new regulations and legislation on top of existing foundations will not create an environment which is healthy for the industry or the consumer.

In short, yes, AI needs to be regulated, but at the moment, there isn’t the breadth and depth of brainpower capable of doing it.

Telco competitors aren’t other telcos anymore

It might seem like an unusual statement to make, but if the fortunes of the fourth industrial revolution are going to be realised, telcos need to stop bickering between themselves.

The new competitive landscape seems like a very counter-intuitive one. The status quo for years has been to capture as many subscriptions as possible, building profits on top of connectivity, though the digital economy is so much more. This might seem like a very obvious statement to make, though the dangers are seemingly more apparent on the African continent, with the OTTs and cloud players a larger threat to a telco than other telcos.

This was a fear which emerged during the opening panel sessions at the AfricaCom 2018 show in Cape Town. Connectivity is not enough, especially on a continent where ARPU can be as low as $4 a month. There is of course demand for more data connectivity, but where is the value when you actually deploy data networks? According to Hind Elbashir, Group Chief Strategy Officer at Sudetal, not in the connectivity business.

“The OTTs have spread their wings, while we are continuing to compete in a very small place,” said Elbashir.

While the telcos are laying the foundations for the digital economy in Africa, they are continuing to focus efforts on traditional business models focused around connectivity and subscriptions. This is a limited section of the value chain, becoming increasingly crowded, and built on the race to the bottom. Value will become increasingly difficult to find and profitability will erode as the telcos fight for customers on pricing. However, the fourth industrial revolution is creating value elsewhere in the ecosystem.

Nic Rudnick, CEO of Liquid Telecom, echoed Elbashir’s point. While the African telcos are building the networks and spending all their time on securing more subscriptions, foreign players in Silicon Valley or China are swooping in to collect the more lucrative rewards at the top of the digital value chain. The OTTs are capitalising on the vast expenditures outlaid by the telcos and stealing the new value which is being created through enhanced connectivity.

But why is this more of a risk in Africa than anywhere else? That is a very simple question to answer; Africa does not have anywhere near the same scale or penetration of connectivity infrastructure as in the developed markets, while ARPUs are significantly lower, adding more pressure to the bottom line. With African telcos having to spend more CAPEX to deploy infrastructure to realise the digital economy than European or North American counterparts, while simultaneously collecting smaller tariffs off customers, it cannot afford to lose the added value created in other areas of the ecosystem.

This is a change in the industry’s landscape which has been coming for years, but the telcos seem to be struggling to capitalise on. The rules are shifting with the cloud and OTT players securing the lion’s share of newly created revenues without assuming the risk and vast expenditure of network deployment. Not only will the telcos have to transform culture and operations to reverse this trend, but also create new relationships with competitors.

Elbashir pointed to joint investments in infrastructure to reduce financial exposure and allow telcos to spread CAPEX further. Multiple joint ventures would allow for quicker expansion of network infrastructure, increasing the connectivity footprint of the telcos, but also allow talent to focus on creating strategies and products to capitalise on the created value in the digital ecosystem.

Collaboration is a key word, though we all know how difficult it can be to create. However, telcos should recognise the greatest threat is not from other telcos who are fighting for subscriptions, but the OTTs and cloud players who so easily secure revenues in segments of the ecosystem the telcos are struggling to exploit. The threat from the OTTs is a simple one, but if it is not addressed, growth is going to be impossible.

This is a new market dynamic, and while the OTTs might be a threat to all telcos around the world, it seems to be more pronounced in Africa.

Africa and the economics of satellites

Last week’s AfricaCom conference had a heavy focus on satellites but how many people actually understand the economics of satellite connectivity? We didn’t, so we asked Intelsat.

The focus on satellites at the conference is an obvious one. If comparatively miniscule countries like the UK cannot justify the expense of a fibre roll-out, how on earth is a continent like Africa going to solve the connectivity problem? The connectivity challenge is bigger in terms of mileage, and progress to date. So the answer might be out-of-this-world; satellites.

This is certainly the case for South Africa. At the same conference, Deputy Minister for Telecommunications Stella Tembisa Ndabeni-Abrahams outlined her grand plan. Satellites would deliver the connectivity which is so urgently needed in the rural areas of the country, and the country has the ambitions to own and operate its own satellite. But is this ambition economically viable?

According to Brian Jakins, Regional VP of Intelsat Africa, it might not be as easy as some people think, and this is a man in the know. Intelsat currently operate 52 satellites, 26 of which provide coverage to the African continent, including three EPIC assets, one of the most advanced satellites to date.

To launch a satellite into orbit takes between two to three years, which includes the negotiations, the build time, setting up a suitable business model and booking a space on the launch platform. And it costs between £300-500 million, for an asset which will be operational for 15 years. Jakins highlighted to us the ambition should be to own and operate a satellite when the business case is there, but it can be prohibitively expensive. The Nigerian government has found this and Jakins feels it might be the case right now for South Africa. Baby steps are needed.

The business case might not be there for owning and operating exclusively for the moment, but that doesn’t mean satellites should be dismissed. When you consider joint ventures and setting up successful partnerships, it is a perfectly viable solution considering the expense of laying physical infrastructure on the continent.

The size of Africa is another scale, and until you actually visit the rural villages, you can’t appreciate the challenge. Jakins highlighted that unlike in Europe, homes in the African villages are nowhere near each other.

“I’ve been doing business here for 24 years, and I’m still an apprentice,” said Jakins.

A village might contain a couple of dozen houses, each of which would be a couple of hundred yards apart. Trenching and laying able in these areas is prohibitively expensive, just as it is to connect the hub to the rest of the network. But Africa has a huge appetite for capacity and connectivity in the rural environments.

Another challenge, which might seem obvious once you are told but few considering straight away, is electricity. Connectivity and electricity go hand-in-hand, if there isn’t the internet, there are unlikely to be electricity cables to run any new devices you put out into the field. Solar is perhaps the only option here.

Finally, you have to consider the configuration of the antenna. Right now the industry has not advanced to the stage where ‘plug and play’ is a viable option. It might not be far away, but an engineer has to be onsite to set up the antenna. So you actually have to consider how you are going to get someone to these rural sites in the first place. Ultimately, there is a lot more to think about than just firing a satellite into space.

Satellites are certainly a good thought here, but perhaps there are a few who are trying to run before they can walk. Owning and operating a satellite might not be the best idea in the first instance, but that should not stop progress of one of the only viable options to connecting the unconnected.

Over-regulation and career politicians could spell disaster for tech

Government intervention has been a hot topic all week at AfricaCom, and it doesn’t seem like there is going to be a resolution to the problem anytime soon.

Of course there will always be a need to regulate any industry; commercial entities should not be left by themselves, they cannot be trusted; but where to you draw the line? Perhaps one of the issues we are facing in the tech space is a lack of qualified leaders.

“Technology ministers should be technologists,” said Mich Atagana, Head of Communications & Public Affairs, Africa at Google.

It’s a comment which is usually limited to the dark corners of old-man pubs, but now it seems to be leaking into the mainstream; career politicians are no good. Gone are the days where politicians used to be business men or the socially conscious out to make a difference, now we have career politicians who’s primary source of value seems to be a nice smile and an ability to speak well. They aren’t experts in their field, they have been trained for years in how to be media friendly and appealing to the general public.

Sounds good enough to win an election, but what does that actually mean when it comes to running a country; not much apparently.

Let’s use an example. In Kenya, M-PESA, the mobile money platform, was immensely successful because the regulation in the country was open enough to allow the new idea to succeed. Some might argue it was a lack of regulation as opposed to open rules, but that is irrelevant. M-PESA fundamentally changed the economic environment for the better, and opened up new opportunities for businesses and the underserved alike.

This success was enough for Vodafone to try and launch its own mobile money platform in South Africa, though here the strict regulations saw the initiative fail. This was not the only reason for the failure, traditional banking is accessible in South Africa so the need wasn’t as great, though the government wasn’t prepared to allow such a threat to the strict financial sector. The appetite to encourage new ideas and disruption was incredibly low, therefore the mobile money revolution died in South Africa.

Protecting the financial sector might have been a good decision at the time, but considering the growing euphoria surrounding mobile money nowadays, this does look like a very short-sighted and brainless. This is the problem with career politicians. They are not experts in their chosen field, therefore they lack the in-depth knowledge to make informed decisions. And these are the guys making the rules.

South Africa is the example here, but it certainly isn’t the only one. In the UK, Matt Hancock is the Minister of State for Digital and Culture. Hancock has a degree in Philosophy, Politics and Economics, before gaining a MPhil in Economics. He then spent a short period of time working for his family’s computer software company, before taking a job as an economist at the Bank of England, specialising in the housing market. He then became an economic adviser to the former Shadow Chancellor of the Exchequer George Osborne, before being elected an MP and taking various roles in business, housing, energy and social issues.

We are sure Hancock is a highly intelligent individual and he does have some very limited experience in the technology space, however he is a generalist. There is no consistent path through the technology world, yet this is the man in charge of the rules which could define the digital economy in the UK. Some might argue, including your correspondent, that being smart, approachable and having a nice smile isn’t enough to be in charge.

Over-regulation and bad decisions are two problems all over the world, but Africa is one place where the businesses are starting to speak up and fight back. Hopefully this lesson can be learnt by other countries.

Africa can learn from the South American mistakes

Africa is firmly in last place when it comes to the development of the digital society, unless you count the Antarctic, but looking towards the failures of other emerging markets might help things along.

First of all you have to address the hurdles which Africa is facing. Firstly, the network is not up to scratch. Secondly, the digital skills gap is exceptionally large. Thirdly, smartphone penetration is only around the 25% mark. And finally, local content is almost non-existent. All of these hurdles are tricky ones, unlikely to be solved overnight, but we’re going to concentrate on the final one.

This was a fleeting topic at AfricaCom, but it popped up often enough to warrant a mention. It has also been noted as the reason digitalization in markets such as LATAM, the Middle East and certain areas of Asia has been slow.

Let’s assume for the moment the rest of the problems have been solved. There is a solid network throughout the continent, the population is digitally capable and smartphone penetration is up to the levels comparative to Europe and North America. Content will become an issue.

To encourage people to be digital, there has to be a reason to enter the digital world. In the established markets we already have this reason. There is plenty of content out there to keep even the most energetic of digital bunnies busy, but this isn’t the case in Africa. When you look at the developing markets, there is very little local content generation.

This is not an issue when you don’t have a comprehensive digital platform, but it is worth thinking about as content will have to grow with the connectivity footprint. This is what failed in LATAM, the Middle East and certain areas of Asia; a lack of local content meant essentially all you were searching for was English content or YouTube. Unless you have local content, you will not give users any reason to go online.

We might be getting ahead of ourselves here, as there are still monumental challenges faced in Africa. We’ve discussed these challenges at length this week at AfricaCom, but this is one which is also worth bearing in mind.

Why is data expensive? Because we’re terrible capitalists – Safaricom

Usually telcos are quite guarded with the truth. Announcements and statements are filled with PR nonsense about aiding the greater good, but Safaricom’s new Chief Innovation Officer has been surprisingly honest.

“I don’t want to sound like a terrible capitalist, but I am a terrible capitalist,” said Safaricom’s Chief Innovation Officer Kamal Bhattacharya.

Bhattacharya was talking about the price of data and connectivity in Africa. Data tariffs might not seem expensive to us in the Western markets, but remember we have considerably more disposable income. Compared to monthly wages, data is expensive in Africa, but Bhattacharya has been surprisingly honest.

“It comes down to a commercial decision; I charge what I can,” said Bhattacharya.

What might be worth noting is that Bhattacharya is new to the job. He’s been Chief Innovation Officer for six months, and this is his first post in the telco space, having worked for IBM previously. This honesty might come at a cost or it might be seen as a refreshing change.

Either, nothing will happen because people don’t pick up on it. Or there will be public backlash as Bhattacharya has effectively admitted to holding the Safaricom customers to ransom. Or the industry will respect the own-it attitude Bhattacharya is showing. Safaricom is a commercial business, and it is focused on making money.

Let’s be honest, every telco executive probably holds the same attitude as Bhattacharya, they’ve just been media trained to give off the impression of the third rising of Jesus. They all want to make money they are just afraid to admit it.

So that’s one angle. Data is expensive because telcos want to be profitable. But why else? Operational and network efficiencies is one explanation. Another could be the tendency for customers to have a preference for prepaid plans. Both of these reasons could be down to market maturity. Networks will get better, and as data consumption becomes normalized across the continent, more will move to the more cost effective postpaid contracts.

What we have here is your typical chicken/egg situation; do the telcos wait for demand to increase before decreasing prices, or do they stimulate demand by decreasing prices. It’s an interesting question.

The telco business has changed over the last couple of years. Revenues attributable to voice and SMS have been slashed by the emergence of OTTs, and making money off data is tricky. Demand is increasing meaning more will have to be spend on the network, but the price is only going to head one direction. It sounds like a lose-lose situation.

The price will probably stay as it is for the moment, until a disruptor enters the game and changes the rules; the race to the bottom we’ve seen in more mature markets. This has led to the majority of telcos heading towards the role of utility, but there are a few operators who have made it work. Take T-Mobile US for example.

Data in Africa is still expensive right now, and the operators are keeping it that way. So either they want to keep profits high, or they are afraid of failure. Greedy or cowardly? We’ll let you make up your own mind.

African governments told to stop messing with telecoms

Two things in life are guaranteed; death and taxes. This is generally accepted by the world, but perhaps the sticky fingers of the government are asking a bit too much.

Day two at AfricaCom brought a couple of sessions with a bit of a bite. Usually your correspondent finds cringe-worthy moments too much to handle, most episodes of The Office are watched from behind a cushion, but watching three senior telecoms figure do quite a bit of government bashing while South Africa’s Deputy Minister for Telecommunications sat in the front row was quite entertaining.

“We need a new wave of investment in Africa,” said Liquid Telecom CEO, Nick Rudnick. “For this to happen, there needs to be government encouragement. In many cases, this means government should stay out of the way.”

It was quite a spicy start to the panel, catching a few by surprise and set the tone for the rest of the session. In short, governments are screwing up the telco landscape across the African continent.

Whether it is taxes on equipment or devices, attempting to build nationalised networks to create a broadband monopoly or irrelevant regulation and legislation, government intervention has been highly frowned upon. And apparently it isn’t simply well-meaning incompetence, the public sector has been accused of being too greedy.

“Some companies in the telco space are being viewed as cash cows, and governments are trying to extract as much value from them as possible,” said Aniko Szigetvari of International Finance Corporation.

It was politely worded, but essentially there is an accusation of overtaxing a successful segment, with figures quoted at 40-50% on the panel. There were a few fingers being pointed, one of which was towards tax regulatory reform, but it was all pleasantly said, with smiles hiding what we can only guess is quite deep seeded resentment.

The feeling in the room was one of frustration. Overtaxing on equipment necessary to build infrastructure has not only crippled operator ambitions to improve connectivity, but overtaxing devices has impacted the availability and accessibility of data for the consumer. 75% of the continent still use feature phones, which would be considered an impairment for the connected economy.

Another source of frustration is government involvement in funding and building networks. A trend which has been noted is the tendency for governments to try and create a government-owned monopoly business. It’s a worrying observation, contradicting successful examples of the digital economy elsewhere in the world.

“My view is that government should be building hospitals, not telecommunications networks,” said Rudnick.

“I’m not too sure I am on the side of the government,” said SafariCom Chief Innovation Officer Kamal Bhattacharya.

And we do have some sympathy with Rudnick and Bhattacharya on this point. Networks are expensive to build and expensive to maintain. In all honesty, private organizations will probably just be better than the government. And not forgetting, monopolies are very bad in every sense of the word.

Just to be clear, this is not every government in Africa, and no specific nations were highlighted, though the feeling of the room was very clear; governments are one of the biggest barriers to connectivity in Africa.

Unfortunately, this doesn’t look like it is going to change in the near future. In the very next presentation, South African Deputy Minister for Telecommunications Stella Tembisa Ndabeni-Abrahams outlined her plan to improve connectivity across the country, while also promising greater government intervention in the telco space. Perfect timing.

The African telecoms industry lacks a cunning plan

After several presentations, discussions and lectures at AfricaCom 2017 I’m still not too sure what the plan is in the African telecoms markets.

Maybe I’ve been spoilt by the boresome Brussels bureaucrats who have spent years developing a single market which offers some idea of what the digital economy looks like. They might be getting there very slowly, but the European Commission has an objective for the digital economy in Europe, and a roadmap to get there. The same can be said of North America. There is a vision which people understand. We left AfricaCom today confused over what the objective is for Africa, and whether there is a plan to get there.

Europe and North America are what some would consider single markets, so perhaps it is unfair to judge Africa under the same criteria, but it’s nonetheless a confusing, chaotic and contradictory place at first glance. Once upon a time in years gone by your correspondent’s father once said ‘if you can’t explain a plan to someone in simple language, it isn’t a very good one’. Perhaps that says it all, and perhaps it is more than some wanted to hear.

What we did see were fingers being pointed by telcos and vendors at governments, governments doing the same in the opposite direction, telcos outlining a road to 5G, while simultaneously figuring out how to connect those who struggle for 2G, under-developed regulatory systems which are very fragmented, and some of the most advanced mobile money and smart city markets in the world.

There were also discussions about LTE even though the vast majority of the devices on the market are still feature phones, and half of those who have smartphones don’t use data. Plans to train the masses on digital to take advantage of the connected economy, but no concrete evidence on how the infrastructure is going to be extended or funded. It’s all very confusing.

I also witnessed Europeans trying to sell European products, Americans their own vision of connectivity and Asians trying to integrate their own strategies. It was a mismatch of ideas and conversations all mixed together. Perhaps someone thought taking the best bits of each area and combing them all would be the perfect solution. No-one seems to have taken into consideration the uniqueness of Africa and started from the bottom up.

What seems to have been created is a jumble of objectives with no cohesion and dozens of regulatory frameworks which don’t really allow for cross-border initiatives. As mentioned before, your correspondent is a newcomer to Africa, so maybe something has been missed. Or perhaps we are simply stating the obvious, although we certainly hope not.

Africa is behind the rest of the world when it comes to digital, and it looks to be falling further behind as well. A lack of clear-cut objectives or a grand plan is certainly a worrying sign. Maybe I have missed it though. If I have, email or hunt down Jamie Davies at AfricaCom for a coffee/beer and a conversation; I’d love to be proved wrong.