From Balancing Act Living with confusion – African operators find themselves pulled in new directions Once it was simple. There was the Government incumbent and all the other operators were against it. Then the incumbents ceased to be the incumbents and some of the new mobile operators found themselves taking on that mantle. With new power comes new responsibilities. Or does it? Once it was all about voice. Now there’s all this fancy convergence talk and anything you can think of sending down a phone connection will be sent. Increasingly operators are being pulled in new directions. Russell Southwood looks at three issues that are tugging from the edges. Three news items this week touched on some of the things that are pulling operators into looking at where their company’s activities begin and end. The pull towards content provision: This week France Telecom signed a “multiyear agreement” with MGM to be allowed to offer the studio’s movies to its video-on-demand customers. According to the reports, Orange is counting on video-on-demand as a new source of income for its fixed line business as its calling revenues go down. Cote d’Ivoire Telecom became the next of Orange’s African subsidiaries to start rolling out its “livebox” product that offers voice, Internet and television. But all is not easy in the new world of telco as content provider. In Senegal, Orange had to reach a content agreement with the more-or-less monopoly supplier of French-language, satellite pay TV content. As a result, it has to peg the price of its offer to that of its satellite content provider. Mauritius Telecom, despite having 15,000 people sign up for its “livebox” service again found itself talking unsuccessfully to what will probably become its competitor about getting content. In this context, having a large parent company sign global content deals makes a great deal of sense. But what if you’re not part of a global company? How do you sort out content to stay in the game? Or do you simply say, we’ll sit out this one out and stick to what we know? Deals between Vodacom and DStv may be easy in the short-term on a reseller basis but when it goes beyond this, who ends up getting the lion’s share of the revenues? Content is beset with a whole new range of problems that no-one in the African telco business seems to have thought their way through. Rights holders like Hollywood are not known for their generosity and too many of the available rights are still being given on a monopoly or duopoly basis. The court battles in Senegal over whether a third TV channel had the right to show Prison Break illustrate how far the market still has to develop. The pull towards infrastructure: At least three African countries – Kenya, South Africa and Uganda – have Governments that are in the advanced stages of putting together public interest companies to roll out national fibre infrastructure. Although the mobile operators bandy about the size of sums they are going to invest in infrastructure, they haven’t really worked out whether as the new incumbents they should be building infrastructure or not. It is one thing for MTN and Vodacom to announce infrastructure build-outs in South Africa but are they really going to extend the same principle to all of the countries they operate in? Mmm…Maybe. MTN is certainly putting down fibre in Ghana in order to overcome the historic inadequacies of both the network it acquired and that provided by the incumbent Ghana Telecom. Nevertheless an exchange at a regulators meeting in West Africa exemplifies the problem. Two of the large mobile operators chains had representatives on a panel who were asked why were they not rolling out cross-border links, given their networks were almost touching each other in several countries. Their responses were almost identical: we don’t think there’s enough traffic to justify it and therefore it is the Government’s responsibility. Nobody had thought that the private sector might create its own “carriers’ carrier” to act as a trusted transit operator to solve this problem. However, if the private sector operators sit on the sidelines of this discussion, they can hardly complain when Government decides to take the initiative and start taking responsibility through public interest backbone companies. The international fibres which everyone has shouted long and hard for will be here in 2009 and without regional connectivity, their impact will be frittered way. So the private sector really has to find a way to “put up or shut up”. All of which makes even stranger the announcement by Namibia’s power utility Nampower that it has granted a large contract that will connect several different power grids in South Africa. The line will connect the electricity networks of Namibia, Zambia, Zimbabwe, Democratic Republic of Congo (DRC), Mozambique and South Africa to create an alternative route for power imports and exports to and from neighbouring countries. Slipped rather quietly into the announcement was the fact that the transmission line would be fitted with a fibre-optical ground wire which will, apart from providing essential transmission communication, “expand NamPower's communication capacity”. Is any private sector company talking to Nampower about using this capacity or indeed increasing this available capacity for private operator’s voice and data traffic? Not as far as we know….So are operators interested in solving these problems either individually or together? Mmmm…That’s a bit difficult to tell. The pull towards energy provision: Recently MTN revealed the scale of money it was spending on generator fuel in Nigeria. Taken over a year, it was US$65 million. Try to imagine that if that is calculated on the basis of 5,000 base stations for one country, what the total cost looks like for all mobile operators across the continent. Unlike the pull towards infrastructure described above, this is straightforwardly a short-term, bottom-line issue. If the operators could find a way of using generators just for redundancy, then the amount paid in this direction would drop substantially. So what can the operators do? Well, there’s the high road and the low road. The low road is finding base station equipment that will not eat as much fuel. This week Vodafone Germany announced that it was the first operator to put in Ericsson’s new BTS that will make “an important contribution to cutting carbon-dioxide emissions” by lowering energy use. Compatible with all its base stations since 1995, it claims to save between 10-20 per cent of energy consumption “depending on the network traffic pattern.” During periods of low network traffic, the feature effectively puts those parts of the network that are not being used in standby mode - overcoming the traditional practice of having radio equipment continually turned on, which can result in energy being wasted. The high road is self-provisioning power transmission, either through an operator consortium JV or by one operator taking the initiative. The energy industry takes a long-time to respond to demand, sometimes as long as 10-15 years. So why not set up a small-scale power generation and transmission company that can address those base stations nearest to each other? Small-scale providers can generate power at scale: 40% of Holland’s energy needs come from small-scale providers. Then it is a case of delivering this power and possibly distributing it to a small number of other paying customers. Is it in the immortal words of Telkom SA’s new CEO Reuben September (talking about his mobile strategy) is it a case of “everything that is feasible is desirable”? Where do you draw the line in terms of what a company needs to be able to do in order to thrive? For without addressing these kinds pulls on company time and resources, all of Africa’s operators will continue to operate below their full potential. Balancing Act <http://lists.balancingact-africa.com/t/397/197296/123/0/>