Africa may not see affordable connectivity soon

The rapid adoption of connectivity in Africa has been tipped to be one of the fastest growing globally. But the downside is that the cost of the internet is still a huge challenge for many.

There is no argument that there has been a great reduction in the price of the internet over the past few years. But experts predict that the cost is still too expensive for most African users.

In Research ICT Africa’s report on African data prices in 2014, most African countries are competitively reducing their prices to the end user. But investments to provide high speed internet is the bottleneck that stops price reduction for internet providers.

“Data pricing … in the top performing countries is competitive and, in some instances, their quality of service is high. For many of the operators this has required significant investment in the upgrades of their infrastructure despite limited access to high demand and ‘digital dividend’ spectrum required for LTE services,” the report states.

There are various companies including telecom companies that are rushing to reap the benefits from providing internet connections in Africa. In Kenya for example, Safaricom, the top telecommunication company in East Africa announced a great jump in profits for its data service.

The company recorded a 59% increase in profits to clock Kshs 14.8 billion (US$ 148 million) for the year ending 31st March 2014. This made it the top growing company sector.

During a discussion at the East Africa Com held in Nairobi earlier in May 2015, many company experts said that they are still recouping the investments made in laying out infrastructure to deploy data.

“In a business sense we are trying to recover the high cost of capital that is required to roll out the data services. I believe most of our costs match the business case in terms of getting our return on investments,” Yana Kipkech, the Head of Radio Networks at Orange Telkom Kenya said.

Kipkech argued that the cost is still reasonable in most African countries when compared to the value it brings.

Ken Munyi the Managing Director at iWay Africa Kenya, a pan African internet service provider, thinks there has been a gradual reduction in the price of data costs.

“It is important to underline that there has been a considerable reduction in prices. The challenges we have had, at what level is that reduction down to the level of affordability?” Munyi posed.

The data wars that have been witnessed in Kenya have highlighted the affordability of mobile broadband services. Airtel Kenya and Safaricom have been in a war of data prices, in a bid to lure more users and drive up profits.

Right after Airtel launched its UNLIMINET promotion - to give users unlimited daily data bundles at Kshs 50 (US$ 0.5) - Safaricom also revised its prices to reflect its competitive offering.

Although this is not a sustainable way of lowering data prices, it allows more users to explore the use of the internet without their bundles running out.

Mohamed Tangasawi, Head of Carrier Relations and Regulatory Director at Zain Sudan, said that users who find value in broadband will be willing to spend more on the service.

“The customer will be willing to pay more whenever he is getting the benefit,” he said. Tangasawi gave an example of how people in Africa are purchasing smartphones and tablets to access the internet on the go, because they find value in that. So service providers should concentrate on lowering the cost of their services and there will be more users opting in.

But there is evidence that internet prices would have greatly come down, but for the ISPs.

Silvio Do Carmo, Managing Director of PCCW Global for Southern African Development Community and East Africa said that before the fiber cables landed in Africa, prices per megabit for data would cost US$1000 and now that has shot down to between US$20 and US$60 per megabit.

He said that this reduction was felt in the near-sea countries but the challenge is to build the infrastructure to capture the population inland.

For prices to come down, Do Carmo advised that companies need to share the infrastructure to get to the end users faster.

“But there is also the underlying support infrastructure [such as electricity for servers] that puts a ceiling on cost reduction,” Raymond Machari, the CTO of AccessKenya, an ISP said.

Now the executives are urging various government regulators across Africa to engage service providers in reducing some of these costs. This could be achieved by either providing stable underlying infrastructure or even reviewing the tax proposition to internet service providers.


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Vincent Matinde

Vincent Matinde is an international IT Journalist highlighting African innovations in the technology scene.

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