Tuesday, August 31, 2010

Looking for a fast growing market? Think Internet in Africa

As promised, I will start a series of postings about the ICT market in Africa. Today I will start with the Internet situation in Africa.

In 1991, the CERN (not Al Gore) publicized the new World Wide Web project, two years after British scientist Tim Berners-Lee had begun creating HTML, HTTP and the first few Web pages. It really became more accessible to the public with the first browser (Mosaic, do you remember?) in 1994. Even more we had to wait for Yahoo in 1995 to make it more useful. Internet has been a major driver for business in developed countries.

But until recently, Internet was generally not available in Africa and when it was, the cost was high and access was unreliable. This is probably why some people call Africa “the last frontier”.

Well, things are changing and at an incredible pace! Africa is finally getting broadband access to the Internet. This year alone, three major broadband ocean cables have been connected (EASSy, Glo1 and Main One Cable).

These projects are expected to increase Internet access in the region while significantly reducing the cost. Analysts project that the new cables will help reduce broadband prices by up to 90% over time. The effects are already being felt in Ghana where the monthly cost of the access it buys from larger telecommunications carriers drop more than a quarter to $1,625 per megabit per second, from $2,250, in recent months. And a new wave of investment is coming that will vastly raise the bandwidth available in West Africa by mid-2012. The carriers, fearing they could lose customers, have started cutting prices ahead of the new cables landing in the country.

In 2008, 32 million sub-Saharan Africans, or 3 percent, had Internet access in 2008. But that number was growing at almost twice the world average rate. Internet growth in Africa has been phenomenal and has not shown any signs of being diminished by the worldwide slump in the economy. As of June 2010, penetration of Internet in all Africa reached 10.9%, representing a 2,357.3% use growth for the 2000-2010 period!

What is the meaning of all this?

First this will reduce the cost of doing business both in Africa and between Africa and other international parties. It opens the door for the big opportunity of Internet services to be delivered to or from Africa. Here is a good study on the Global Opportunity in IT-based Services from the World Bank.

Second the increasing numbers of broadband cables will bring more capacity, allowing for more sophisticated media based Internet services. An example is Pixel Corps, a US-based digital media firm and a specialist in computer graphics and video production. Pixel Corps has entered into a partnership with the government of Rwanda to start one of the best media production academies in the region. The goal is to train hundreds of African artisans capable of state-of-the-art media development to produce content for their community as well as content for the rest of the world.

Third, increasing number of cables will also deliver more reliability to communications in Africa. Undersea cables are prone to being damaged by fishermen and earthquakes and take weeks to repair. When SAT-3 broke last summer, it took several countries completely offline for a while, and Nigeria lost 70 percent of its international capacity. Here is a good cable map for Africa (and the world) providing technical information about bandwidth, availability and landing points.

Fourth, Internet will provide better access for Africa to the global market. It can help “unlock” landlocked countries and help them come out of poverty. In his book “The Bottom Billion”, Paul Collier identifies “landlocked with bad neighbors” as one of the main reasons for poverty. Thirty eight percent of the people living in the bottom-billion societies are living in landlocked countries. While Internet cables are mainly connecting coastal countries, those cables will also connect land-locked countries in East and Southern Africa. This should provide a unique opportunity for those countries to “unlock” themselves and get access to the global market.

While in the past the West coast of Africa was mainly targeted by those cables to connect Africa with North America and Europe, there has been an increasing tendency in recent years to expand submarine cable in the Pacific Ocean on the East coast in part a response to the emerging significance of Asian markets in the global economy and to major investments in Africa by China and India.

But challenges are remaining.

One challenge is what telco companies call "the last mile", that is to bring Internet to the people's homes or to the businesses. This requires the fiber cables necessary to carry the signal from the shores inland which still requires significant investments. Some countries are moving faster than others. Rwanda's president Paul Kagame told the International Telecommunication Union (ITU) 2009 Summit in Geneva, Switzerland that over half a billion US dollars has so far been invested in communication infrastructure, 70 percent of which was private investment. Rwanda has deployed fiber optic network to serve the capital Kigali and the major cities across the country.

Another challenge is to provide affordable and easy to use devices to access the Internet content. New emerging technologies that bring Internet access to phones will help the region bypassing the need for a computer (including the need for electricity and access to the network) when connecting to the World Wide Web.

Finally, there is the challenge of the Internet content itself which is mostly irrelevant to local populations, not speaking about the fact that it is in another language. This will require Africa to start creating its own content that can help address local needs. An example of a new technology that makes content more easily accessible to underprivileged people while at the same time giving them the possibility to create their own content is the SpokenWeb developed in India.

It is now up to the African innovators and entrepreneurs to grasp this opportunity.

NB: Some of the information used in this post came from Yahoo News.

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