9 January 2016

East Africa: EA States to Roll Out Faster Internet Speeds but Rules Pose a Hurdle

East African governments are intensifying investments in fast speed (4G) Internet but navigating the regulations of each country could pose a hurdle for those targeting seamless services across the region.

Tanzania and Uganda have adopted a first-come first-serve allocation model; Rwanda a state-led option, while Kenya has taken on an open sharing model that leaves smaller players and new entrants at the mercy of the country's three leading operators -- Safaricom, Airtel and Telkom Kenya.

The spectrum will be allocated equally to the three Tier 1 operators.

"The different guidelines in the region could hamper the expansion of the One Network Area for data services. The region needs to adopt the same spectrum for 4G in order to provide seamless service for travelling customers. The countries may also then have to look at a pricing regime that lowers the cost of access to data for roaming customers," said Adil el Youssefi, Airtel Kenya chief executive officer.

Policies

Rwanda, Tanzania and Uganda have more operators on the 4G spectrum because of policies that give access to all investors.

In Tanzania, Tigo, Vodacom and Milicom have acquired the 4G spectrum and are in the process of rolling out across the country. Vodacom Tanzania launched 4G in 2013 while Tigo started 4G LTE technology in Dar es Salaam in April last year, targeting to spend $120 million in upgrading its 3G network.

In Uganda, MTN, Smile and Vodafone Uganda are offering 4G voice and data services under a policy that allows an unlimited number of operators as long as there is no degradation of services or interference.

"Market-based approaches such as lotteries or auctions can only be considered in circumstances where the demand exceeds the supply or where the portion of spectrum is considered to be of high economic value," reads the policy for Uganda.

In 2014, Rwanda started a public-private-partnership (PPP) with Korea's KT Corp called Olleh Rwanda networks (oRn) and they look to take 4G to 95 per cent of the population by 2017. Under the terms of the deal, KT Corp should invest $140 million in the nationwide LTE network after it was granted spectrum, a licence, and access to the public fibre-optic backbone.

The target is possible through partnerships with mobile network operators like MTN Rwanda, Airtel Rwanda and Tigo Rwanda and Internet Service Providers (ISPs) in the country.

"We look forward to providing exceptional digital experiences and value to users of 4G services through various innovative solutions," said Yoon Han-Sung Yoon, chief executive officer of Olleh Rwanda networks. Rwanda is encouraging mobile operators and other ISPs to extend access to end users.

Pricing formula

The Communications Authority of Kenya (CA) is working on a pricing formula that will inform how the three players will sell at least a third of their 800Mhz spectrum to ISPs and Mobile Virtual Network Operators.

"The task is about to be concluded and stakeholders will be informed once this is complete. Each of the three Tier 1 operators will reserve 30 per cent of the installed capacity for other players," said CA in an e-mail response.

CA estimates the average peak rate is 100Mbps, meaning the Tier 1 operators will be required to each reserve 30 Mbps for other operators. In 2014, the authority sparked an uproar after it allocated Safaricom a fraction of the 800Mhz bandwidth on a trial basis to deploy 4G Internet in Mombasa and Nairobi.

The 800Mhz enables an operator to roll out 4G services affordably because it provides good network coverage with fewer base station unlike the 1800MHz bandwidth, which requires more base stations for quality indoor services. There are also enough devices with 800MHz capability that allow consumers to acquire the gadgets at cheaper prices.

However, 4G devices remain costly across the region, limiting the number of consumers in high-end, urban areas. Operators across East Africa want governments to consider tax waivers on 4G handsets as this would enable them to offer value added services like streaming.

CA said Safaricom would be required to return part of the spectrum it was allocated for piloting so that it can be allocated to Airtel and Telkom Kenya. Each operator would then be required to invest in infrastructure to enable the services to reach customers.

"The next issue will be to see how CA will establish licencing," said Steve Chege, Safaricom's director for corporate affairs. CA had asked Safaricom to pay $56.25 million, instead of $75 million, for a block of spectrum in the 800MHz bandwidth. Mr Youssefi said the pricing should be on the basis of an operator's market position and industry best practices.

"It is our expectation that cost will not present another barrier to spectrum access by operators," said Mr Youssefi. Partnerships with vendors are expected to drive the uptake of 4G in Kenya, which is lagging behind other EAC countries.

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