Africa's IoT network: Are we building it the wrong way?

Africa's IoT industry can learn from mistakes made in telecommunications infrastructure.

For most people in rural Africa, having access to cooking gas is an expensive dream. A dream that is being realised by the deployment of IoT by letting users pay daily, through mobile money, for LPG use through a smart meter affixed on the gas cylinder. Pioneering this innovation are companies such as PayGo Energy and M-Gas in Kenya and KopaGas in Tanzania.

Africa is beginning to see more use cases for the internet of things, not as the developed nations would, but for solving local problems. As more telecom companies upgrade their networks to handle 4G and 5G, the prospects of having a robust IoT sector holds more promise now than ever before.

With 600 million mobile subscribers expected by 2025, Africa will see a rise in what is termed as mobile IoT. Just as the telecommunications systems have grown over the last 20 years, IoT is set to become a major industry changer in the coming years.

But experts are warning that if not modelled properly, the IoT sector could face the same fate as the dwindling telecom tower business, where individual companies created their infrastructure only to be redundant and expensive.

Business models around IoT are being crystallised across the continent, even though the infrastructure for this is still wanting. It might seem like a problem, but it could be a clean canvas for nations to redraw and reimagine the deployment of IoT infrastructure, for a more efficient rollout.

So what are some of the lessons the IoT landscape can learn from other failed models of infrastructure development?


The problem with siloed infrastructure

Take for example the telecoms tower industry, now being overtaken by third party independent players. To fight competition, telecom companies rushed to set up their infrastructure to run their networks and this has, for some, caused major overhead costs that sometimes failed to have any returns.

Population density has been the foremost issue with setting up telecom receivers and in the end, a huge rural population, which are largely sparse, are left behind. Some countries have set up a universal fund to bridge this divide.

To be commercially viable, companies have to choose densely populated areas over the vast rural areas. This is a problem that could affect IoT roll out too.

However, according to Hamilton Ratshefola, the Country General Manager for IBM South Africa, new business models along the deployment of IoT networks could offer the solution.

"IoT is a very funny business, just like the telecom business," he explained. "When we started networks for cell phones, you had to put up masts to do coverage and you have to upgrade them. It was good in the beginning but as time went by MTN and Vodacom started selling off their masts. It is a waste of resources for me to put a mast at a place where my competitor also has a mast."

"Now imagine in the IoT space if someone said, rather than you having your infrastructure to be able to give signal why don't we have a joint effort to put IoT devices across our countries and rent it out to all the companies that want to use the infrastructure," he said.

This would be an opportunity for a company ready to invest in a capital-intensive venture that would eventually pay off by renting out the infrastructure. This, in turn, would enable innovators and companies to deploy their solutions without worrying about the physical overhead costs. "There is a need for consolidated approach in putting up IoT nodes," he added.


Call for infrastructure sharing

To be realistic, the first pioneers into the IoT field will have to fund their infrastructure. Already companies such as MTN and Vodacom in South Africa are putting up their infrastructure. Safaricom and Liquid Telcom both have a private infrastructure for IoT in Kenya. The CAPEX for such endeavours weighs in heavily on the balance sheet.

But as the use of IoT becomes ubiquitous, the need to eliminate duplication will become more evident.

"As we move from 4G to 5G, the cost of capital becomes an issue," the South African IBM Chief explained. "Every few years you have to sink in capital to build a new platform. IoT devices are at a certain speed today, in a few years it is at a better speed so you have to uproot what you have and put new ones."

His explanation has plagued most of the fast-developing technologies such as satellite and telecommunication devices. For developing nations, they find themselves at a crossroads of trying to deploy a new standard, but before they could fully implement, a new system is on the horizon. In turn, communication services remain expensive in these developing regions.

"Industry sources cite that Africa's telecommunication companies (telcos) can potentially yield overall cost savings between 15% and 30% and reduce capital expenditure up to 60% by combining resources and reducing individual infrastructure needs," Funke Opeke, CEO, MainOne said in a 2018 infrastructure consolidation plea. He estimated the divest from the cell tower business saw 40,000 towers sold to third party entities between 2010 and 2018.

A report by International Finance Corporation concurs that this is the best move in deploying capital intensive infrastructure including IoT nodes.

The report said in part: "Integrated connectivity providers can sell their assets and leaseback access to them to improve their cash flow, potentially reducing investment risk related to infrastructure expansion. This benefit could be significant for resource-constrained companies seeking to expand their use of digital infrastructure. Recent estimates suggest that network operators' cash-flow can increase as much as 31 per cent."

The expensive deployment of nodes for IoT could be leveraged if there's a concerted effort to limit the use of resources.

Therein lies the stumbling block for sharing infrastructure: competition. The telecom industry is a competitive one and without enough users, a company can go under quickly. However, competition has been the major hindrance to achieving harmonious infrastructure unity.

But, the IFC report claims that sharing infrastructure for telecom and IT companies could inevitably increase profitability: "Likewise, after the three largest MNOs in the Nigerian mobile market transferred their assets to independent tower companies, the price of mobile Internet access as a percentage of gross national income per capita declined by 3 percentage points (pp) per year, compared to just 0.4 pp the year before."

A balanced playing field for shared infrastructure, especially by regulators could bring the players on to the table. For mobile infrastructure, the lessons are landing in fast for most players as they seek to quickly offload their infrastructure. This does not have to be replicated in the IoT space. Most of the third-party cell tower companies are in a good place to deploy nodes.

It is a big business opportunity that will allow IoT to have exponential growth over the coming years, changing the fortunes and opening new ways of doing business.