Future of Broadband in Africa Christoph Stork, Enrico Calandro, Ranmalee Gamage

Future of Broadband in Africa Christoph Stork, Enrico Calandro, Ranmalee Gamage

Approach Nationally representative household and individual surveys in 12 African countries (Census Sample Frame) Basket methodology for Fixed-wired and mobile broadband data prices Annual financial reports

Share of households with fixed-lines 2007/8 2011/12 South Africa Namibia Ethiopia Ghana Kenya Tanzania 4.0% 2.6% 1.8% 2.3% 0.6% 0.9% 0.4% 7.6% 11.5% 18.2% 18.0% 17.4% Nigeria 0.3% Botswana Cameroon Uganda Rwanda 0.2% 1.8% 2.2% 0.3% 1.5% 0.1% 11.0% 15.0% Residential fixed-lines on the way out except Botswana, Cameroon, Uganda and Rwanda

Share of households with a working computer Share of households with a working Internet connection South Africa 24.5% South Africa 19.7% Botswana 15.7% Kenya 12.7% Namibia 14.7% Namibia 11.5% Kenya 12.7% Botswana 8.6% Cameroon 8.6% Nigeria 3.4% Ghana 8.5% Ghana 2.7% Nigeria 6.6% Cameroon 1.3% Uganda 2.2% Uganda 0.9% Rwanda 2.0% Tanzania 0.8% Tanzania 1.6% Rwanda 0.7% Ethiopia 0.7% Ethiopia 0.5% Less than a quarter of households have a computer and even fewer Internet access, but more households have Internet access than have fixed-lines

ITU data: Percentage of individuals using the Internet!30!!!25!!!20!! Botswana! Ethiopia! Kenya! Namibia! Rwanda! Tanzania! Cameroon! Ghana! Mozambique! Nigeria! South!Africa! Uganda!!15!!!10!!!5!!!"!! 1996! 1997! 1998! 1999! 2000! 2001! 2002! 2003! 2004! 2005! 2006! 2007! 2008! 2009! 2010!

2007/8 2011/12 Ethiopia 3% 1% Internet Tanzania 2% 4% use (15+) Rwanda 2% 6% more than doubled Uganda 2% 8% within 4 Ghana 6% 13% years Cameroon Namibia Nigeria Kenya Botswana 13% 9% 15% 6% 14% 16% 18% 26% 29% South Africa 15% 34%

Internet Access Models Hardware Billing Skill requirement Electricity Location Old Internet Computer / Laptop Postpaid (monthly Internet subscription) High (Windows + Internet explorer + Viruses) electricity mostly required at location of Internet use Work, school, Internet cafe New Internet Mobile Prepaid Low not required at home Anywhere

Where was the Internet used first? Computer Mobile phone Cameroon Rwanda Botswana Ghana Kenya South Africa Namibia Tanzania Nigeria Ethiopia 82.1% 70.8% 70.6% 70.5% 68.9% 65.1% 50.1% 45.8% 45.2% 33.3% 17.9% 29.2% 29.4% 29.5% 31.1% 34.9% 49.9% 54.2% 54.8% 66.7% Uganda 28.2% 71.8%

Where the Internet was used in past 12 months Mobile phone Work Place of education Internet cafe 74% 80% 85% 51% 35% 58% 32% 51% 33% 21% 36% 50% 31% 52% 63% 24% 45% 45% 20% 29% 72% 39% 31% 42% 21% 17% 51% 55% 23% 36% 48% 20% 10% 30% 61% 64% 71% 71% 75% 75% 78% 81% 81% 87% Cameroon Ghana Botswana South Africa Rwanda Tanzania Nigeria Kenya Ethiopia Uganda Namibia

Broadband Pricing Baskets to analyze: Monthly cost of 1 GB use per month with at least 256kbps connection for a period of 24 months (ITU basket) Monthly cost of 5 GB use per month with at least 256kbps connection for a period of 24 months. Monthly cost of uncapped use per month with at least 256kbps connection for a period of 24 months.

1 GB per month basket Fixed Mobile Postpaid Mobile prepaid Botswana 66.6 26.7 78.8 Mozambique 62.1 30.4 25.1 Cameroon 59.4 50.8 40.9 South Africa 51.512.1 12.6 Namibia 48.7 51.3 38.5 Ghana 40.8 14.46.2 Kenya 37.97.38.7 Uganda 23.8 18.7 14.5 Ethiopia 22.8 21.1 Tanzania 19.2 13.0 13.0 Nigeria 20.1 20.1 Rwanda 29.411.9

5 GB per month basket Botswana prepaid mobile not displayed: 380 USD Fixed Mobile Postpaid Mobile prepaid Botswana 133.3 133.5 Mozambique 62.1 68.0 57.3 Cameroon 59.4 50.8 100.5 Uganda 53.7 37.8 40.8 South Africa 51.5 26.6 21.9 Namibia 48.7 51.3 143.7 Ghana 40.8 36.1 36.1 Ethiopia 39.8 64.3 Kenya 37.97.3 34.1 Tanzania 19.216.216.2 Nigeria 51.8 51.8 Rwanda 29.4 25.8

uncapped GB per month basket Fixed Mobile Postpaid Ghana South Africa Cameroon 64.9 59.4 103.4 32.8 50.8 Namibia Kenya 48.7 37.97.3 122.9 Tanzania Rwanda 19.2 29.4 22.6 Uganda 37.8

South Africa: Broadband.co.za 75,000 measurements 2013 9,227 Fixed Mobile Fixed-wireless 4,753 2,716 586 863 216 156 135 262 Download Speed (kbps) Upload Speed (kbps) Latency (ms)

Options for fixed-line incumbents? The response of fixed-line incumbents is often to leave the sinking ship and start mobile services Other options exist that may be more profitable More beneficial to broader economic development goals

Focus on Corporate Developmentally, the least desirable option for African Leaves the residential market to mobile operators and hence to less competition and poorer quality of service offerings A strategy already adopted by some incumbents but also by new kids on the block such a Neotel in South Africa

Data flat rate pricing: voice free app Focus on data only through flat rate pricing, and ignore traditional voice revenues altogether Converting all existing fixed-lines into data lines would increase broadband penetration drastically in Botswana, Namibia and South Africa Flat rate pricing also solves the billing problem, something mobile operators are good in and fixedline incumbents are not

Example Namibia Telecom Namibia s revenues by segment in million N$ Post- paid services Data and IP services 297 417 Pre- paid services 452 29 240 40 204 30 183 2009 2010 2011

Data and voice flat rate simulation assuming price elasticity Technology 512kbps Speedlink Home 1Mbps Speedlink Home 4 Mbps Speedlink Business 10 Mbps Speedlink Business Total per month Total per Year Current prices N$ 24 months New Price N$ Price change Lines Revenue in million N$ 599 75 87% 37,496 2.8 699 150 79% 35,708 5.4 3099 350 89% 18,871 6.6 7499 650 91% 191,332 124.4 * based on10mbps product of TN 139 1,670

Triple Play - Premium TV content Add premium content TV and replace copper with fibre Fibre to the home (FTTH) may be able to compete if it is able to match satellite TV contentwise The competition for premium TV content would also reduce prices, bringing them closer to European levels instead of the current USD 80+ An average ARPU of USD50 still good enough for premium content and uncapped fast Internet Botswana 68.1 Cameroon 78.0 Ethiopia 78.0 Ghana 84.4 Kenya 84.6 Mozambique 63.4 Namibia 72.0 Nigeria 69.8 Rwanda 78.0 South Africa 72.0 Tanzania 83.5 Uganda 88.3 DSTV Premium Package in USD per month

Conclusion Fixed lines = value add for ADSL, contrary to Europe were ADSL has been a reason not to cut the cord The voice battle was lost by fixed-line in Africa in the last decade, the data battle may be lost soon as well Fixed-line operators mostly offer ADSL, which can no longer compete with mobile broadband speeds Fixed-line operators need to invest into new technologies, VDSL or fibre to the home to stand a chance against mobile broadband Fleeing the sinking ship and start mobile services instead may not address longer term connectivity issues and may be not the most profitable option either This should hence attract the attention of policy makers, who not seldomly represent state owned shares in fixed-line incumbents

Regulatory initiatives Carrier pre-selection and local loop unbundling will not increase competition by much for most countries Who wants to be part of a dying busies? Structural separation and making the national backbone and all end user leased lines a separate business based on open access principles may remove the biggest competitive bottle neck in Africa at present