15 February 2019

Africa: Hitting the Low-Spot in South Africa - Toomuchwifi's Ian Thomson On Delivery Better Data Deals for the "Have-Nots" and the Scary Margins of the MNOs

London — Sub-Saharan Africa's data prices for users are all over the place and bear no relation to individual wealth in different countries. As a result, there are a number of companies looking to find a business model at the lower end of the price range. Russell Southwood talked to CEO and Co-Founder of TooMuchWifi about why he launched the company and how it works.

The idea for TooMuchWifi came from Thomson's co-founder Jonathan Endersby. He started with the problem of trying to get his domestic worker's daughter cost-effective access to the Internet. His own background included providing internet for high-end hotels and he couldn't find anything that seemed right from MNOs.

The two of them got a small sum for an angel investor to put together a prototype. The initial idea was to set up a modem with a large cache capacity and run it as a "walled garden". But as they developed the idea they reached the conclusion they "didn't want to do anything unless it was a premium solution."

The challenge is that data pricing in South Africa is designed for the "haves" and is over four times as expensive as the same data in Nigeria, a country that has many more problems in terms of the physical delivery. Indeed as Thomson breaks it down for me, it is the "have-nots" that the pricing structure punishes:

Average 1 GB Purchase Price from mobile Operators: R120

Most purchased denomination: R10

Cost /GB at R10 Purchases: R420

In other words, if you can only afford R10 purchases, you are paying four times what you would if you could afford a GB purchase. TooMuchWiFi's average delivered price is R13 per GB so it's easy to see the scale of margin the MNOs are adding.

So in less than a year, it raised US$370,000 to launch its low-cost bandwidth to low-income communities business. It decided to target low-income urban areas:"These were densely populated, inconsistently serviced, and largely devoid of sources of internet beyond mobile networks". Based on that R10 purchase, people in these communities were paying 5-7 times the price charged to wealthier connected consumers.

The solution was to take fibre-backed wi-fi into township homes and businesses. Working with partners, they adopted a technology-agnostic approach to delivery including fibre, LTE and TVWS.

It began with a remote community of 15,000 people. In 2017, it started out using community representatives to sell capacity, refining the model in the following year by improving how they operate with partners and getting better quality delivery. It offered R10 and R20 vouchers through its community reps and buyers were offered a low footprint app for larger, future purchases. The app has had 5,000+ downloads on the Android Play Store.

"Our Wifi signal is available right there where our audiences are, be it in the hair salon, barber shop, spaza, tavern, on the way to school or even at home

Our Wifi routers do smart caching of frequently used content, giving users a smoother, faster experience." The company talks about driving "hotspot location selections, bringing internet to the most popular locations and giving TooMuchWifi a community endorsed footprint."

The golden thread is to provide high-quality service to a group of people used to getting the short end of the stick. With this approach it has built a significant base of users in the tens of thousands that gives a clear indication that they have tapped into an un-served market, which it believes may be as many as 8.5 million people in South Africa alone.

It is currently raising money to scale up in South Africa:"We can do it very quickly. We don't care about whose backhaul we use. We buy from anybody: Seacom, Liquid Telecom, etc and there are hundreds of wireless ISPs that have under-ultilised backhaul. We're happy to partner with them in tougher markets. All this allows us to move fast. We're urban at the moment but we could easily deploy into small towns but we'll expand through the larger cities and towns."

It provides an overview of: Main Platforms Used and Advertising revenues; Social Media Platforms; Voice and Messaging Services; Media Platforms; Audio-Visual Services; Music Services; Payment and e-commerce Services and Other Digital Services. It covers the 11 Top Digital Landscapes in Sub-Saharan Africa: Nigeria ; South Africa; Kenya; Tanzania; Ghana; Ethiopia; Cote d'Ivoire; Angola; Senegal; Cameroon and Uganda. The report concludes by looking at the new type of business models required to promote new digital content and services.

If you're interested in either report, email me on info@balancingact-africa.com and I will email you details when it is published.

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