London — At this year's AfricaCom, a speaker on the Connectivity Stage nailed some of the dilemmas facing the satellite industry in Africa and elsewhere. The presentation was refreshingly honest and dealt with issues hardly ever raised by the larger operators. Russell Southwood listened to Tsachi Dahan, Owner, Baylink about whether VSAT will end up challenging or complementing terrestrial and reflects on the changes he talked about.
Before the current spread of fibre across Africa to almost all capitals except Asmara and Conakry, satellite was the only way to distribute bandwidth. Now there is widespread fibre to and within urban areas (which make up 80-90% of current demand in most African countries), the satellite companies have seen the tide go out on their former markets.
International cellular backhaul has been replaced by international fibre cables and large parts of domestic cellular backhaul have gone over to fibre. There is still a significant market for domestic cellular backhaul from the edge of the network or remote areas. There are also remote enterprise locations like mines and oil installations that have always paid a premium to be connected.
There are always the rural areas but to make a business model in these areas - with either voice or data - the price of satellite connectivity has to be low. There are some countries like the DRC (which is as big of Europe but has almost no roads) where the poor operation of the fibre connection make satellite essential. 03B reseller Raga Sat has a large wholesale business because former incumbent OCPT is incapable of operating the fibre link to Kinshasa effectively. But that said, Africa is a huge place with scattered populations so there must be some level of demand in the foreseeable future.
Finally there are things like Government and donor projects (for example, Avanti's connectivity for DFID's Girls Education challenge in Kenya) and also low bandwidth operations that lend themselves to satellite like banking ATMs and in the future Internet of Things applications.
Some have attempted to sell the equivalent of household or SME broadband but prices are still at a level that makes it effectively a premium product.
Some satellite operators (like Eutelsat) have a large market in broadcasting and others like SES have launched satellite broadcast platforms, most successfully with SES in Ghana. Likewise Kana TV in Ethiopia has shot to number one in the audience rankings on a satellite platform. But in the main, the rapid growth of new channels has been with terrestrial DTT distribution platforms.
Over the last years, satellite prices have continued to fall from US$3000 per MHz to US$5-600 per MHZ. Dahan said he believed that prices would continue to fall for at least the next 2-3 years.
This downward trend will be reinforced by the use of High Throughput Satellite for broadband distribution. Also on the far horizon are LEO (Low Earth Orbit) constellation satellite projects like One World, Telesat and Space X. Potentially LEO offers a much lower latency and might well compete effectively with fibre. Although antennas already exist, there are issues about standards and cost.
Dahan said:"The satellite companies are putting their heads in the sand." The business model is about to be upended as prices go closer to almost where fibre was two years ago.
Dahan talked about two types of sea that operators could get into: the red sea where the sharks were fighting over price or the blue sea where operators did something more than simply sell capacity.
His own solutions to getting into the blue sea were simple but modest. He summed it in up in three ways: local presence, local partners and local services. He also argued as many have in this changing market for the role of integrators as the "middleware" between distant operators and people wanting bespoke delivery. The question was then whether the big operators would simple buy up the integrators or not.
He also talked about the equivalent of selling a service (content, health, etc) rather than just connectivity. This is a parallel to the debates within mobile operators: how do you get higher margin service income when bandwidth has become a commodity?
However, the bigger strategic challenge - implicit in everything he said - remains. What are the satellite products that will sell in sufficient volume at fibre or near fibre prices? Whatever way you look at it, there will have to be a growth of data need in non-urban markets. This will need to be a combination of infill for holes in data network coverage and far better delivery to those still without voice and data.
Seen and heard at AfricaCom 2017
- Fibre: Mike Van Den Bergh, PCCW talked about investing in a cable with Algerie Telecom to connect it to other international cables... .Angola Cables is on the final stretch for implementing its South Atlantic Cable Service to Brazil... There are three contenders for the new east coast cable - Africa 1, Vodafone's project and Liquid Sea from Liquid Telecom... Vodafone has a shareholding in Africa 1 so will the two combine? Will Liquid have enough cash to fund both Kwese TV and Liquid Sea?
Getting on the programme: Formerly known as a mobile company, Safaricom wants to be known as a digital services company... Vodacom's three Board priorities are IoT, Insurance and driving digitalization... Broadly similar story with MTN... Liquid Telecom (in association with Kwese TV) ran a competition for start-ups in the content area (more detail in a later issue).
- Content: OnTap has signed a deal with Africa's largest TV and film distributor Cote Ouest... One of Africa's largest programmatic ad exchanges Twinpine (owned by Terragon has one Nigerian publisher with 3 million uniques monthly... Terragon wants to make use of the data it has from its digital ad sales work... One of the largest global football content providers, Perform is working with the Binu platform to offer a zero-rated, low bandwidth offer that includes video... Daniel Price, Perform said they had seen a dropping off in SMS volumes as regulators tightened up consumer protection... You Tube is seeing an increase in the number of channels that are getting large volumes of views... Ethiopia now has 30 TV channels: 50% local and 50% international... .Mondia Media has launched a live streaming service called Viewplus (showing South Africa tennis and music events) which is attracting tens of thousands of users.
- Digital Divide: Noises off: Facebook's Open Cellular project will be launching its two low cost base stations, including one that will handle LTE... The cost of wireless backhaul and the distances it can cover - across several vendors we talked to - continues to fall in price... Blockchain and GPS start-up RippleNami which aims to help people know where things are is launching a cattle tracking service in Kenya with the backing of KCB and Mastercard.
- Talk the latest jargon like a pro: Digital transformation, lean and agile, Internet of things (IoT slips gently off the tongue) replacing cloud, machine learning, artificial intelligence, bitcoin, blockchain, pivoting, smart cities and the fourth industrial revolution. Combine all of those words in one sentence or presentation and your peers will admire you and look up to you. However, beware. The value of words and their meanings can go both down as well as up over time.
- Random stuff: Apparently the battery costs for IoT devices have fallen to US$10 from US$15-20... Standard Telecom in DRC has been bought by GLT... SmardTV has a box that can deliver streamed content to five users without data costs for around US$20-25 a unit.