22nd September 2019

Bandwidth wars in Zambia – The digging is not yet over!

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A turf war to lay fiber-optic cables directly to homes in Zambia’s largest cities is delivering faster speeds and cheaper prices. Several companies are using various technologies to set up fiber networks in the suburbs and central business districts in Kitwe, Lusaka, Ndola and Livingstone. In this frenzy, some are digging trenches and laying fiber cables underground, others are erecting poles and running an aerial network, while rumours of plans to use sewage and drainage systems routinely surface.

In Kitwe, Lusaka, Ndola and Livingstone some suburbs have undergone several rounds of trenching and almost everyone in the sector agrees that there must be better co-ordination of digging and installation to minimize disruption.

Large telecommunication companies such as ZAMTEL, MTN and Airtel have not been able to adequately match the demand for fiber in the wealthier areas, which has created opportunities for companies such as CEC-Liquid on the retail side and Smartnet on the dark fibre and wholesale side. CEC Liquid for instance, has an ambitious plan underway to run fiber past 10,000 homes in Lusaka and aim to expand to the Copperbelt and Livingstone under the Fibroniks brand.

ZAMTEL long had rights of way, copper cable and junction boxes in all the older, wealthier, low-density suburbs in every town and city in the country. This infrastructure is estimated to connect over 100,000 homes and offices in the country. In these same suburbs, Internet is considered essential and ZAMTEL have done a creditable job running fiber to the junction boxes while leaving the local loop the traditional copper and have used this arrangement to deliver ADSL.  However, ZAMTEL has failed to turn this into a decisive advantage in the broadband war in the Zambian suburbs. A big outage in February caused them to lose a lot of clients and their connection of clients can be slow and error-prone.

ZAMTEL is struggling to compete with nimble new entrants, like Hai with its Fibroniks offerings and on the commercial side Smartnet with its dark fiber local loop services who are already delivering faster connection setup, better support and higher speeds.

Airtel and MTN have metro fiber connecting their base stations and what is not clear in their IHS deals, in which they have sold their base stations,  is whether this fiber is in IHS hands or still with them. However, the smaller players do not think MTN and Airtel are a significant threat as their strategic plans, capital expenditure budgets are all approved far way in India or South Africa or in the case of ZAMTEL have to be approved by a board.

If ZAMTEL, MTN and Airtel ever intended to do Fiber to the home, they may have waited too long to roll out fiber optic connections to homes and now there is a land grab going on. There is an opportunity for an ADSL displacement model which can rapidly scale.

The fiber to the home comes with it another paradigm shift for another industry which may be decimated by IP technology. The pay TV market dominated by DSTV mostly delivers content using VSAT technology. With the fast internet speeds, people can begin accessing their media from the internet, which means that a high-speed fiber line could replace a DStv subscription or ADSL. The potential for client acquisition is high as DSTV has over 200,000 subscribers in Zambia and ZAMTEL has copper into 100,000 homes and offices. The potential market for triple play is around 300-500,000 homes. The market for fiber to the home and business is huge, as Zambia has lagged behind its peers in true broadband penetration. The opportunity to gain a significant portion of this market is due to sluggishness in investing in fiber to the home or the cabinet by the Telcos.

This failure to offer residential fiber has afforded other operators the opportunity to step into the lucrative end of the market and start connecting high-end homes willing to pay for high-speed always on access.This opportunity has created a frenzy of digging across Zambian cities as other players see the potential in these other underserviced suburbs and ZAMTEL has reacted by finally speeding up its roll-out by using overhead poles and trying to blanket previously unserviced areas.

The competition between the players and the demand from customers means increasing fiber penetration will ultimately decrease costs for the end user by making fiber a utility and not just a luxury.

An increase of fiber will be a necessity for Zambia’s economic growth as it will increase productivity the government through the regulator ZICTA should put in place policies that will ensure faster fiber deployment and thus give Zambia a competitive advantage in the region.

Players and would be players have been talking about the cloud and internet TV for years but didn’t have the infrastructure to support the concepts. A multitude of business plans, presentations, and concepts that envisage a connected Zambia have been aired but have all been dashed by several factors particularly cost. The scenarios they envisaged are finally coming to fruition because new competitors have forced content, application and infrastructure providers to speed up the deployment of new offerings.

It may be hard to imagine now, but in the near future fiber deployments to surge in areas outside the main cities of Lusaka, Kitwe and Ndola. The capital costs of deployment are falling and the barriers to entry have been removed. A town like Chipata or Chingola or Mufulira may have rich pickings for a small operator to provide IPTV and Internet access. By tightly focusing its service in one metropolitan area, it is possible for a small operator to capture 2,000-5,000 subscribers paying K350 a month for a bundled triple play and generate K1-2 Million a month. The costing and mathematics are beginning to make sense.

It is possible we will see an attempt to bundle pay TV, Internet and voice (if ZICTA allows by reducing the cost of a fixed line voice license) in a town like Lumwana or Solwezi or Chipata or Chingola or Mufulira to buy perhaps a 100MBps bundle from a wholesaler like Liquid or PCCW, run fiber to the home and using GPON or even intelligent switching coupled with a STB. On a K15 million capital budget and a very strong sales and marketing effort, if they can get  2,000-5,000 subscribers payback maybe 18-36 months and thereafter a return on investment of 10-11% may be possible.

So before you relax the digging is not yet over !!!

Written by “The IT Guy”