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Are Africa Telco Strategies really working?

In his article “The Bane of “Consultants” on African Telcos fortunes”, Tom Makau states that investors have made a big mistake by formulating a single strategy for “Africa” assuming there exists a homogenous economic entity called the “African market”.  The African continent as far as geo-political boundaries, economic zoning has widely varying tax policies and regulatory environments.

Consequently, the future of telecom operators in Africa is bleak , if telecommunication operators(such as Orange and Bharti Airtel’s)do not adapt to the changing landscape by changing their operating processes and find out what value proposition their existing and potential customers requires states a report titled “Africa telecoms at a crossroads”.

According to Makau, African telcos continue to take strategic investment decisions based on reports that predict that voice services are set decline while data growth will continue to explode through rapidly growing Internet and smart device penetration.  Operators have therefore invested in 3G networks in countries which have low penetration of 3G enabled phones/devices and are now investing 4G-LTE “not because they see any commercial sense in doing so, but because it’s the ‘in thing’ to do”.  In addition operators have not made ‘value addition’ to the heavy investments they have made in fibre optic cable, ‘dumb pipes’ which content providers such as Google and Facebook use at no cost!

Unfortunately, as the “network of networks’ grows, capacity constraints are reached, causing congestion, this is referred to as the fisheries problem or the tragedy of commons which may be resolved by investing in additional network capacity, internet traffic management, employment of usage-sensitive charging system or responsive pricing/smart market pricing. 

In the USA network operators such as Verizon and AT&T perceive Internet firms as ‘freeloaders’ that are accruing profits at their expense.  Operators have called for an end of content providers ‘free lunch’ and have advocated for traffic management and responsive pricing would limit the open nature of the internet.  On the other hand Internet firms want an accommodating regulatory doctrine that requires network operators to open their data-transmission lines without favor to any type of content.

The telecoms regulator in the USA, the Federal Communications Commission (FCC) has articulated four non-binding principles also referred to as the “Four Network Freedoms”; these include entitlement of consumers to access the lawful Internet content of their choice; entitlement to run applications and services of their choice, subject to the needs of law enforcement; entitlement to connect their choice of legal devices that do not harm the network; and entitlement to competition among network providers, application and service providers, and content.

In my opinion, the net neutrality debate will soon shift to Africa where governments and the private sector have invested millions of dollars in building fibre networks in a bid to making internet access universal and affordable.  For example, in Kenya the government has contributed to the investment of The East African Marine System (TEAMS)and a national terrestrial fibre network, as the country seeks to be a middle income level nation by implementing Vision 2030.  Despite creating several incentives for innovations in local content generation, ‘bandwidth-hungry’ applications from international content providers continue to use up these ‘subsidized’ ‘dumb pipes’.

How then can African telcos make money?  According to Makau referring to Prof. Clayton M. Christensen book ‘The innovators dilemma‘: Markets that do not exist cannot be analyzed.  Hence, African operators are left to trust their gut feeling!

Disclaimer: Views expressed on this article (except those reference or quoted) are the author’s own

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