Vodacom and Intelsat agree on Cellular Backhaul Deployment in Africa

The world’s leading satellite services provider, Intelsat, has announced a new multi-year capacity agreement with South African-based Vodacom on the Intelsat satellite fleet. Vodacom will utilize capacity to support its deployment of cellular backhaul services in the Democratic Republic of Congo (DRC) where it is currently implementing its 3G network.

With vast countries like DRC, it proves that satellite still has a place, even with the growth of fiber optic cable networks.

This agreement expands the Intelsat-based cellular backhaul infrastructure supporting wireless services in Tanzania, Mozambique and other parts of Sub-Saharan Africa. Vodacom utilizes multiple satellites on the Intelsat fleet for international trunking, corporate networking, and in-flight broadband and disaster recovery services across the continent.

Intelsat Managing Director of Africa Sales Jon Osler said that the agreement continues a decade-long support of Vodacom in Africa, and comes at a time of unprecedented demand for reliable communications access. “Intelsat’s breadth of services in the region, and expertise in supporting wireless operators, allows providers such as Vodacom to reach its business goals as it expands its presence across Africa,”  Osler said.

Safaricom’s failure to invest in fiber may be slowing its competitiveness

When safaricom announced that they were not making money on some of the data subscriptions, the question on many people’s mind was “how, with all that money and infrastructure?” For others it may have been that Safaricom wants to milk the last of your coins.

Well, apart from the modem and handset data bundles, Safaricom’s other data subscriptions are way high, the cheapest is 11,000 compared to Zuku, 1,500 and Access Kenya, 4,000. The others may fall in between. Most data services require fiber, whether its last mile, interconnecting Base stations or redundancy, fiber is critical.

Ever wondered why Safaricom hasn’t given Zuku a run for its money? Given the financial muscle, you would have expected Safaricom to be competing on the same level withZuku and Access Kenya.

Well, for starters, Zuku’s Wananchi Group owns most of its fiber to the home- but this is mainly in major towns and they have no extensive wimax network compared to Safaricom. On the other hand, Safaricom is dependent on Jamii Telecom, KDN, Telkom Kenya and National Fiber Optic Backbone (NOFBI) to deliver services. For Safaricom to make money, it will have to take into consideration the costs charged by other operators, then put their margin. This means that the costs may be higher than other operators like Telkom but it also depends on calculations.

To be clear, for the 3G network, Safaricom is in pole position because they have the extensive infrastructure courtesy of their base stations but for data, they are limping while consumers crave cheaper or affordable options. That is why when they introduced the unlimited bundle, individuals and small businesses came rushing in.

I was surprised that Safaricom gave an affordable 3G based option that seemed to suit SMEs and expected people not to misuse. Truth be told, I am not sure whether it is a marketing issue or not but Safaricom seemed to attract all the customers including those who misuse, while competition (read Orange) has similar unlimited offer but doesn’t complain of misuse.

As part of my conversation with Rita Okuthe, head of customer proposition at Safaricom, I had to ask the technical infrastructure and why cost to the end user isn’t falling. There is all the talk about fiber this and that and yet we cant seem to pay less. Read part 1 in the earlier post.

Back to the topic. What are the tech issues?

Late entry into laying fiber

Five years ago, companies were busy buying stake in TEAMS and EASSY and others laying terrestrial fiber. Safaricom has a stake in TEAMS but so is JTL. But you got to give it up to JTL because they went ahead and laid metro fiber in all major towns, then made sure that they signed with Safaricom as their anchor tenant.

That was a good idea because JTL did not seem to compete with Safaricom, they would just provide the infrastructure and maintain and Safaricom would pay rent. At some point Safaricom was on KDN but we all know the story with KDN deserves a blog post, not a paragraph.

Anyway, it all seemed to be working ok until Safaricom started getting a lot of clients and realised that the costs were high. After dislodging KDN, guys at JTL also grew horns that I am told a simple fiber survey to Safaricom takes a month and mostly because the guys at JTL have to do it. They move at their pace and there is probably nothing much you can do because options may be limited.

Safaricom may argue that they are still able to make money but late last year, the company invited tenders for laying of its national fiber infrastructure, which will give it more control and leverage to compete with the other players in the industry.

I remember asking Bob sometimes back whether it means Safaricom was getting a raw deal from JTL and whether they will migrate all the capacity. He said the they were just increasing the options because they were also using other providers but if you have your stable infrastructure most of the traffic will go there and others will provide redundancy.

A major challenge of having no fiber is carrying their capacity between Nairobi and Mombasa for onward transmission by global carriers. Two weeks ago during a press conference, I recall Nzioka Waita, Corporate affairs director at Safaricom saying that the high cost of a link between Nairobi and Mombasa was contributing to the high costs of internet access.

Just to put it into perspective, KDN charges $300 per Mb between Nairobi and Mombasa, $420 for Nairobi London, and $420 for Mombasa and London. I couldn’t get any figures from Safaricom because its the closed period but I guess the figures are indicative that the others may not be far off. Just like in any other sector with few players, the prices may not vary on the routes.

The National Fiber Optic Backbone(NOFBI) is different because companies pay $50 for a kilometer of dark fiber then they have to light it. In areas where JTL has proper coverage, I am not sure if Safaricom is opting to light or just go with JTL.

On the last mile, Safaricom may own the infrastructure but in between there are other costs to other infrastructure providers. Compare this with Telkom Kenya which owns its fiber and has terrestrial network and in other areas it is served by the NOFBI, which it operates on behalf of the government.

Because all the base stations are linked with fiber, in some cases microwave, which attracts license fees, you can now see how the cost calculation gets higher for Safaricom.

We discussed 3G technology evolution and how software upgrades allow Safaricom to push more capacity within the same spectrum e.g recently launched HSPA+ but the question of lower costs is a thorny one; if you are pushing more capacity within the same spectrum, shouldn’t that mean lower costs? Well, Safaricom just like other operators will say that they are investing in this technology and the benefits are yet to come.

Growing international content vs. local content exchange

I have been asking this question and I am yet to get someone to give me an idiot centric answer. Make me understand and you can assume or believe I am an idiot, that way, you can start far and drive or walk the point home.

Safaricom says that it doesnt matter whether the content being accessed is local or international, it will still affect the network on the end user or access part and if anything, the costs incurred on setting up and maintaining the network do not equate to any savings that may be saved by local peering (exchange of content between ISPs).

My argument is that you pay $300 per Mb on the international transit, if 1,000 of us can save the company that by hosting locally (assuming it works), then you can reduce maintenance costs and pass them down to end users. I keep giving examples of South Africa where locally hosted content is relatively cheaper because its lesser cost on the ISP.

Even though Safaricom owned up that most of the content accessed on the unlimited offer was international, it was argued that there was no way for a consumer to know whether the site is hosted locally or not, and therefore the cost may not be an issue for the customer.

My argument was that I may be an idiot but I will notice that on month one the bill was lower and the other was higher and if the reason is that I was playing games hosted locally vs hosted abroad, then I will have a choice. Again, I may be an idiot but I surely know the sites I visit.

Yes, infrastructure has grown locally and some of the content like Youtube videos may be available locally through its global cache shared at KIXP, but is this it? Does it mean local content has no role to play in lowering connectivity costs in the country?

Safaricom has invested more that $ 2.4 million (sh. 2 billion) in their cloud service. Let us see how the marketing exercise unfolds.

So, it may not be a proper explanation for Safaricom data costs, but looking at it from their side, you may understand why. But I may be wrong.

Safaricom to lay own fiber….

I must admit that CJ, the guy who owns Jamii Telecom is a master businessman; he laid fiber in all major towns when companies were wondering whether to do it or not and when others were focussing on the end user market, he focused on the corporates, they hire his infrastructure to push products to the end user.

Having brains with no connections is almost useless and that is why CJ had both. He managed to partner with Safaricom, they did not have to lay fiber of course because they dilly dallied when companies like Wananchi and Access Kenya were laying and also because JTL had country wide infrastructure.

It looked like a great deal, maybe it still is but those who have tried to get fiber from Safaricom will tell you, it takes too long (30 days or thereabouts) for them to survey and deliver fiber which means that prospective customers get frustrated and move on to others.

In the many things I do, I met a frustrated customer who just wanted to know why it takes that long. Even before you ask Safaricom, you also know- if the infrastructure belongs to someone else, then the decision on efficiency is entirely on them coz you can only push them that far.

I am not sure of the financial arrangement but I am sure Safaricom is paying them well to have exclusive use of the infrastructure but it could explain why Safaricom is unable to compete with Wananchi and Access Kenya. JTL recently pushed their fiber to Karen and Valley Arcade but the others are spreading at even a faster pace.

Zuku has been vilified because of crappy customer support and slow speeds in some areas but people also at times do not understand the co-relation between paying lower fees and quality of service, but that debate is for another day.

For the outer areas like Uthiru, kinoo.. etc and other areas where Zuku is not crowded, the people paying 1 or 2k enjoy good service and are happy.

For Safaricom, the low end market is dependent of wimax, and with the spectrum issues, network architecture and the peculiar ways that Kenyans use internet, it cant offer very low prices that compete, for those of us wanting to pay 4k and less for uncapped internet, not the 3G modem.

The only way for Safaricom was to lay their own fiber, which means they can control the speed and efficiency and the costs. Someone told me that laying of the fiber will simply move it from just being a recurrent expenditure to an asset, or something like that, you know accountants, plus I wasn’t listening very carefully 🙂

So, when Safaricom was announcing their results last month, I was following online and I tweeted Bob Collymore asking whether they will stop using JTL fiber once they get they get their own. He said it was not a matter of either or, it was just to increase the options, which is good for end users because it means redundancy.

Without digressing too much, I have always wondered why companies cant just share infrastructure. I will not suggest that the government or city council should have invested in a fiber that all can buy from but just think about the amount of digging you have seen across Nairobi roads for the last four years. The latest was Soliton, laying for Ecofon, a new provider. Don’t forget there is the National Fiber Optic Backbone (NOFBI) that Telkom Kenya manages and sells $50 per km of dark fiber- this should be a post on its own, on how companies expect to access free- talk of “tunaomba serikali” syndrome 🙂

So, I am wondering whether laying of own fiber will make Safaricom compete more in the lower end market. If you are in the upper end, I am sure you are sorted. You can also read any of these posts done before.

You can now expect Safaricom to start offering you connections to your house or small office at 2k…. in two years. I mean good stable service, not modem 🙂

Access Kenya, Airtel Partnership-what does it mean to consumers?

For the last two years, the debate has been on lowering the cost of connectivity, consumers feel we are paying too much while operators feel that they need to recoup their investments and therefore the costs must remain high.

Even in cases where the cost has gone as low as Ksh. 2,500 for a fiber link, the speeds have been painfully slow, forcing many to opt for the expensive connection. Some have wondered when more companies will invest in services that ride on fiber, which in turn will drive down the costs of other services.

Small and Medium Enterprises and other bigger companies that have been suffocated by big IT budgets may be smiling soon, with the announcement that Airtel and AccessKenya are in partnership, for the mobile company to ride on AccessKenya’s fiber network of about 300 buildings in Nairobi and Mombasa.

The two companies issued a press release.

Here is the intro:

“Airtel Kenya, have signed a contract that grants Airtel access to Access Kenya’s extensive fibre optic network to provide connectivity services for Airtel’s fixed line voice services, also known as E1.

In the deal, Airtel Kenya will buy E1 circuits from Access Kenya’s fibre optic network in over 300 building sites in Nairobi and Mombasa to connect their customers. By taking up the service, Airtel is now set to leverage Access Kenya’s extensive fibre presence to reach more customers, more buildings and to provide highly reliable services on Access Kenya’s network. “

For many of us wondering what is an E1 and do not want to know more about megabits, circuits etc, it is the digital equivalent of the old telephone lines; an office would have one or two numbers then several extensions.

Safaricom has been using Jamii Telecom Network and has been providing an E1 link at the cost of Ksh. 31,000. The connection allows the company to then pay bills at the cost of normal mobile calls, which significantly reduces costs.

The better thing with an E1 line is that unlike old days when you needed to call and then be transferred to an extension, you can direct to the extension.  It also provides a hunting or pilot line, if the line is busy, it can always be forwarded and picked up by another person, whether they are in the office or not.

So, what does it mean?

On their own, it would have been a challenge for Airtel or Access Kenya to challenge the market penetration of Safaricom (am avoiding saying dominance). The sheer number of wimax base stations put up by Safaricom compared to competition, is impressive; there are about 2,500 country wide and am not sure if Access Kenya has 100 but again, we are talking E1 on fiber.

So, the question is; between Jamii Telecom and Access Kenya, who has more fiber? But then, a company can have extensive fiber but is unable to market and in most cases customer care doesn’t guarantee customer retention.

In this respect, it may be premature to argue that the union will result in sleepless nights for other players but it’s a step towards the much needed competition in data services.

In consumer perspective, the marriage means that there will be more choice; ideally, Telkom Kenya was supposed to be providing more fixed line and E1 services but the company seems comfortable with government business that it is not exploring other options in the corporate sector.

We can now expect the costs of connection and installation for E1 to go down and for more affordable products to be in the market. Maybe there will be a service that provides for 15 extensions instead of the current 30, which would translate to affordability for smaller companies.

Its funny how it was expected that France Telecom’s entry to the market would translate to Telkom Kenya taking on the market and providing extensive services riding on its extensive copper network within the city and the fiber network.

How about homes?

Before there was fiber, all the talk was how fiber optic would sort out all problems but when fiber came, talk was that it was not possible to reduce internet costs further and at the same time push infrastructure to new areas.

Having three fiber optic cables-SEACOM, TEAMS and EASSY- and all the extensive terrestrial fiber should mean cheaper connectivity. But we don’t have many companies vying for the home and SME market, most want to target corporate, which is understandable because they pay big money and will not keep clogging the customer care center with problems because they have internet IT departments that can do basic trouble shooting.

Access Kenya was for a long time the default home internet provider by in the last two years, cracks have started to emerge within the leadership and there has been a exit stampede with employees headed out. At Access Kenya, they knew that targeting up market homes was not going to last (most infrastructure is not in Eastlands, and you can guess why).

Safaricom is currently Access Kenya’s rival for the home market but if there is one thing we must give Access Kenya is their network. They have invested well and they have no problems with clogged base stations. Its not the same for Safaricom.

Safaricom recently stopped selling the cheapest packages that was going for 6k a month. Last year they introduced a 4k package, it was over subscribed and they stopped selling it. Why? The base stations could not handle.

At times I like arguing like someone who has no clue about corporate politics; instead of Safaricom returning huge profits, why not invest on a stable network and push it even further? Well, am told its not as simple as that.

We may say whatever we want to say about Safaricom but with their network, it is still the company to beat. They have invested in new areas, broken ground and demystified some of these issues.

Why E1 and not internet?

When I read the news, I wondered why Access Kenya and Airtel had united only on E1 and not internet? I may not be the most conversant in internet engineering but I have always wondered, if you have fiber that is capable of carrying 100Gbps why would a company insist on carrying 10Gbps yet nothing changes? But again, there is the issue of breaking even and balancing books.

Maybe the two companies are planning to sell internet capacity together and share the infrastructure costs. If Access Kenya has connected 300 buildings, then it would make sense for Airtel instead of laying its own fiber, it can concentrate on marketing and hopefully reduce capital and operational expenditure.

So, can we expect costs to come down? Time will tell