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SCIENCE-FOR-THE-PEOPLE  January 2006

SCIENCE-FOR-THE-PEOPLE January 2006

Subject:

InternetAfrica: looking forward five years from now

From:

"S. E. Anderson" <[log in to unmask]>

Reply-To:

Science for the People Discussion List <[log in to unmask]>

Date:

Sat, 21 Jan 2006 15:47:51 -0800

Content-Type:

text/plain

Parts/Attachments:

Parts/Attachments

text/plain (277 lines)

FROM: Balancing Act  <www.balancingact-africa.com/news/current1.html>

Imagining the future: Africa looking forward five years from
now

The start of the year always sees many predictions for the coming
year and a certain amount of gloating from those who feel they
guessed right last time around. Some predictions are easy. They
are just about pointing to something that is about to take off.
The start of Africa's broadband markets would be a typical example.
Other predictions are less easy to make. However, making predictions
in Africa is so much harder because so much depends on the often
unpredictable mix of Government action and commercial strategy.
It always seems to be a case of "if this happens, then that can
happen". So this week we try to look forward to what the future
might hold in three to five year's time.

These are not predictions but are an attempt to identify a number
of key things that need to change in Africa in order for the
Internet and telecoms sectors to continue growing and for them
to play a significant central role in the economic growth of
the continent. All of them require everyone involved to be able
to make the leap of imagination that will enable a different
tomorrow.

So let's try and imagine a future in which:

* The cost of international bandwidth falls to near European
levels: Those involved in the EASSy consortium are already talking
about a wholesale price of just over US$1000 per mbps. It could
be perfectly possible for the consortium to accept external donor
financing and bring the price down to the US$500-1000 range.
By itself, cheap international bandwidth will not make a change
but unless the continent can get below the US$1800-2000 per mbps
'floor price' that can be achieved on satellite, it will continue
to pay more than its competitor developing countries. In a continent
with widely dispersed rural populations, satellite must continue
to have a role to play but it is not the answer to getting more
competitive, high-volume bandwidth.

* The cost of domestic calls goes down to US0.5 cents a minute:
It's happened elsewhere and if the mobile companies are to continue
getting business growth for the foreseeable future, they will
need to continue to produce lower prices in order to widen their
markets. Sadly the worst of the mobile companies are still just
"harvesting" the abnormally high rates of return that their high
prices have bought with them and have forgotten that as "new
incumbents" they might need to make real innovations as the market
changes. The mobile companies are now nearing completion with
network investment. It's relatively cheap to connect a mobile
subscriber whereas rates are still high. For a fixed line operator,
it's relatively expensive to connect a subscriber but the rates
are relatively cheap.When the vast majority of people make a
cell phone their main form of voice communication why does it
command a premium in terms of rates? Convergence will put this
strange paradox under close scrutiny. How can it make sense to
offer a mobile service where the phone is locked to the local
cell? The history of the rise of Reliance in India gives a clue
as to how this situation will begin to break down.

* Cost of calling friends, family and international business
contacts abroad comes down to 5 cents a minute: At present, this
kind of call in all too many African countries costs US$1 a minute
using the incumbent telco. Truly competitive prices in the "grey
market" show that this can easily go down to US$7-10 cents. If
the interests of Africa's consumers (whether as individuals or
in organisations) gets put first, then both regulators and operators
would be really seeking to lower these prices. Low-cost broadband
enabling voice offers can deliver this promise.

* VoIP is legalised across the continent: Using VoIP will allow
the possibility that incumbent telcos could work with the ISP
sector to create an IP-based network that allowed locally-owned
service businesses to flourish and to contribute to economic
growth. The steady roll-out of fibre networks across the continent
- with alternative infrastructure providers (like power companies)
and carriers' carriers - will allow IP-carried calls to be made
between African countries at a far lower cost than switching
them via satellite to Europe or North America. The prices just
have to come down below those currently offered on satellite.

* The cost of reasonably-specified laptop comes down to between
US$100-200: Nicolas Negroponte's "supply-led" dream is unlikely
to succeed but someone will make the breakthrough before too
long. A Chinese company has taken over IBM and it's likely that
before too long its business strategists will turn their minds
to how they can create new business in emerging markets. No-one
is arguing that cheaper computing devices will overcome illiteracy
levels but there is still such a large, unsatisfied market out
there amongst those that are literate.

* All government offices are connected and have access to both
VoIP calling and Internet: So much of the development of connectivity
elsewhere relied upon the creation of a "critical mass". Government
(and not always national governments) have a key role to play
in creating that critical mass. It's small wonder that the considerable
number of "pilot projects" have found it hard to flourish if
there is no-one to connect to at the other end of the e-mail
or the phone call. A small seaside municipality in South Africa
- Knysna with only 50,000 inhabitants - gives some idea of how
things can be done. Working with the private sector, it has connected
up all government offices and local inhabitants can make free
calls for enquiries to the municipality. If local authorities,
why not groups of hospitals or health clinics? Schools?

* Every university student has low-cost access to the Internet:
The fuel for change is transforming people's sense of what can
be done through ideas. The growth of cyber-cafes has already
demonstrated that the younger generation of Africans is thirsty
for knowledge. Buying bandwidth in bulk can provide this and
the pioneering University bandwidth consortium in East Africa
may yet blaze the trail. Imagine the next generation of Africa's
elite understanding computers and using the Internet as if this
was as natural as going back to visit their parents in their
home village. Imagine Africa's political elite skipping a generation
so that the current generation of pensioners can enjoy their
twilight years entertaining their grandchildren rather than resisting
retirement.

* Transferring money electronically becomes easier than carrying
large amounts of cash: It is now easy to buy mobile minutes and
transfer them to your mother in an up-country village. These
minutes are a transfer of money for money is simply something
that people accept has value (gold, paper, coins etc). A mobile
company has the capacity to store and facilitate the transfer
of cash. If they want to innovate (perhaps in partnership with
the continent's deeply uncompetive banks), then instead of talking
about accounts for the "unbanked", those at the bottom of the
pyramid could "bank" money as minutes. And before you know where
you are, they've established a "financial history" and...well
you can write the rest of the story.

* Investment is encouraged in the low-cost, rural voice challenge:
Africa's regulators have become so used to taking money off operators
for licenses that they are perhaps unprepared for the next phase
where they will have to provide incentives to find business models
that work commercially in areas where a market is barely functional.
Thus far they have mostly given this task through Universal Access
funds to mobile operators or incumbents. Neither could be said
to have focused on lowering their cost base to enter these markets.
The low-cost voice challenge will probably be met through using
emerging mobile VoIP technologies. The innovators could be small-scale
local innovators who interconnect with the larger operators.

* All of Africa's incumbents are either privatised or behave
in a commercial manner: It is impossible to have markets that
operate in favour of the consumer if the incumbent remains a
protected area. Employing several thousand staff too many involves
paying money that could be spent positively in other ways. Without
a commercial imperative, the incumbents will not grasp the potential
they have with any speed. Some of the monopoly SAT3 consortium
members have failed to sell much of their share of the fibre
bandwidth despite having the markets in which to do so and no
real competition.

All of the above would produce a competive continent that might
bid for outsourcing and call centre work and develop its global
markets for other products and services. Without it, there is
little chance of large parts of the continent participating in
the global economy. If you can imagine even some of these things
happening....then maybe, just maybe Africa will be a different
place in five years. And we're not going to make a prediction
because only you have the power to bring it about. 
==============================

ISSUE NO 287
Apple makes a comeback in Africa with the halo effect of the
iPod

Although Apple is an established niche brand of computers in
the developed world, it has been almost invisible in Africa.
Now you can spot Apple laptops in the hands of a number of ISP
"movers and shakers" and of course the ubiquitous iPod has done
much to raise the brand's profile. One sign of this growing presence
has been the opening of an Apple Centre in Morocco's capital
Rabat recently. This week Isabelle Gross talks to Apple's main
African distributor, Jihad Bou Samra of Micro Conseil International.

With more than 20 million units sold worldwide in 2005, the iPod
symbolises Apple's ability to recast itself. Few companies have
been so successful at turning their businesses around through
a single successful new product offering. About 40% of Apple's
net sales in 2005 originated from the sale of iPods and other
music related products and services. This represents around $5.5
billion, and there is no sign of demand abating. Although the
company recognises that competition will intensify in the future
as hardware, software and content providers increasingly work
together to offer competing products, so far Apple has maintained
its competitive advantage by more effectively integrating an
entire solution including the iPod hardware, the iTunes software,
and the distribution of third-party content via its iTunes music
stores.

So far this business strategy has paid off, and enabled the company
to capitalise on the convergence of digital consumer electronics
and the computer. So, how does the company perform on the computer
side, its core business? According to Jihad Bou Samra, Head of
Sales at Micro Conseil International, the Independent Marketing
company in charge of distributing Apple products and services
in emerging markets, sales of Apple desktops and laptops have
increased by around 30 to 50% in the last two years. He further
explains that the increase of computer sales is linked to the
success of the iPod which has generated a renewal of interest
of customers towards all Apple/Mac products, and in particular,
its computer range. This “halo effect”, as he calls it, has attracted
new customers which are primarily looking for stability and quality.
The “switchers” as he labelled them are customers that no longer
wish to have to deal with viruses and bugs designed to cripple
Microsoft-based systems.

Besides reliability, Apple’s computer range has always relied
on innovative designs aimed at appealing to creative professional
customers and the education sector alike. It is probably for
this reason that the Apple stand attracted so much interest at
the recent World Summit for the Information Society in Tunis.
As Jihad Bou Samra explained, customers were interested by the
design peripherals like the mouse, but were also seduced by the
quality of the iMac’s screen. The magnetic quality of Apple's
designs also provides the perfect opportunity to introduce potential
customers to the company’s wide range of creative and educational
software, comprising desktop publishing, video editing, wireless
networking and student information system software.

Despite the obvious allure of Apple's quality and design, one
of the main criticisms levelled at the company’s products has
always been price. In this area too, explained Jihad Bou Samra,
the firm has taken steps to be more competitive, and current
Apple computer prices are now in line with those of mainstream
manufacturers. If one compares equipment with similar characteristics
from Apple and Dell for instance, the former is no longer so
much pricier than the latter. The firm is also diversifying its
product range to target the low end of the computer market. In
January 2005 it introduced the Mac mini, a desktop personal computer
with a starting price of $499, and in July it went on to update
its Mac mini line-up by expanding it to three models and by increasing
the memory to 512 MB. The Mac mini had a very positive impact
on the market, explained Jihad Bou Samra, and as the eMac is
exclusively sold to schools, the Mac mini has become the entry-level
computer in the Apple computer range.

To maintain this double-digit growth in Africa, Apple relies
on two independent marketing companies to shift its hardware
and software, dividing the Continent between them. Micro Conseil
International distributes Apple in North Africa, West Africa
and some East African countries, while South Africa and the neighbouring
countries like Namibia and Malawi for example are covered by
CORE, a company based in South Africa. In each country, selected
local resellers ensure the availability of Apple products and
services. The size and the number of distribution channels vary
according to the size of the market in question.

According to Jihad Bou Samra, finding the right distribution
channel is not always easy, and also takes time. An Apple-appointed
reseller in Africa has roughly the same obligations as a similar
firm in Europe. The agent needs a team well-trained in Apple
solutions, so as to ensure accurate advice and high quality customer
support. The retailing of Apple products and services also requires
specific IT knowledge, and a certain level of marketing input
is also needed to promote the hardware and software. On the other
hand, Apple provides the marketing material and training support
via its website and corporate training program and has a hotline
dedicated to resellers. For the moment, Apple’s African network
appears relatively sparse when seen in the light of its retail
strategy of rolling out stores across the USA and some European
countries. But this is perhaps only to be expected, given that
in 2005 supplies in its home country still accounted for 60%
of its total net sales.

It is still questionable whether Apple’s flexible distribution
structure and attractive product range will be sufficient to
compete with Microsoft's efforts to push its products on the
African market (the translation of its operating system into
Swahili is one of many examples of Microsoft’s initiatives on
the Continent). A new Apple product with a “halo effect” as great
as the iPod’s would undoubtedly be welcome bonus in the next
few years. 

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