Under the heading of its new report Survival Strategies for Fixed-line Telecommunications Operators in Sub-Saharan Africa, Research and Markets is strident in its advice to the fixed-line sector. Michael Schwartz comments...
Under the heading of its new report Survival Strategies for Fixed-line Telecommunications Operators in Sub-Saharan Africa, Research and Markets is strident in its advice to the fixed-line sector. Michael Schwartz comments.
The new report is thorough, looking at the challenges (although not any opportunities, a telling omission) the fixed-line industry faces. These range from market drivers and restraints through the more overtly financial revenue and expenditure forecasts and eventually the broader present and future strategies.
To ensure confidence in their recommendations, Research and Markets analysts examine the roles of different technologies. Copper-wire, fibre-optic, dial-up, ADSL, ISDN, WiMAX, CDMA and MPLS are all assessed for the help they can or can not give.
After reminding their readers of what they don’t need reminding - Sub-Saharan Africa has the lowest fixed-line penetration rate in the world - the analysts lay one crucial factor firmly at the feet of the existing operators, namely the latter’s low investments in copper-wire network infrastructure in the past.
The report-writers then consider a factor which has previously been highlighted in Developing Telecoms - the vandalism to copper networks and its logical extension, the stealing of wire. This has, we regret, led to some rather stereotyped views about emerging-market telecoms, namely that it is riddled with corruption and that extra costs are incurred for hiring security personnel and equipment. Result - no investment.
For the authors, and one respects their point of view, the “key growth drivers for wire-line telecommunications are the increasing demand for data and Internet services, cost-effective deployment of fixed-wireless technologies, and the introduction of fibre-optic cables.” There would, it seems, be some hope for the future. Add in the corporate customer and you do emerge with a substantial revenue contributor, especially in data and Internet services and fixed-wireless technologies.
And yet one must still look to the future. And if you are a supporter of copper wire, get ready to be crushed. For the writers of this report, “fixed-wireless technologies, such as WiMAXand CDMA, have overcome the requirements of capital-intensive copper-wire infrastructure investments to achieve less time-to-market of new services. Additionally, fibre-optic cables will reduce costs and increase bandwidth capacity of Internet services in the next three to five years.”
There it is at its most explicit. Copper has been by-passed, rendered obsolete. And that only if it stays in place and doesn’t go walkies. I’ve got a nice consignment of wire for you, guv’nor, and no questions asked.
Tribal loyalty is paramount in the kingdom of copper, “Corporate customers continue to prefer superior fixed-line services to mobile services.” Take away the corporates and where would fixed-line be?
Well, the analysts do state that traditional fixed-line operators are trying to fight back. They are “in the process of deregulating.” At that point it all goes wrong because the sentence just quoted continues, “and migrating to mobile and/or fixed-wireless technologies.” The battle seems lost.
Follow the parallel strategies of deregulation and innovative mobile offerings and you may be able to retain existing customers as well as attract new ones. There is then the incentive of joining up with those fibre-optic cables that have gone live along the east and west coasts of Africa. The majority of these fibre-optic cables have followed the East African coast - the West African coast cabling has been singled out for fully justified criticism in regard to some prices estimated to be 24 times higher than those paid by Western Europeans.
Any more bad news?
As if there wasn’t. The dearth of reliable power supply is hampering network performance. Furthermore, high incremental costs of fixed-line infrastructure are inhibiting the network rollout and market monopoly is restraining competition. Slow deregulation means slow network growth.
It gets worse.
The lack of physical infrastructure such as power plants and diesel generators in sub-Saharan Africa limits wire-line network expansion, which requires a sizable investment to ensure the quality of the network performance. And this from analysts who are supposed to be objective and measured in their reasoning...
And so to conclusions and recommendations. According to Research and Markets, traditional incumbent operators should gradually migrate to fixed-wireless and/or mobile technologies to diversify their service portfolios. Combining the quality of fixed-line services with the mobility of wireless ones will give fixed-line operators a competitive edge to increase customer loyalty and consequently service uptake. Finally, fixed-line operators must enhance the quality of customer services, which will help retain existing customers and attract new ones.
A survival manual for fixed-line? Only if it is not already too late.