In many ways, Africa can be seen as the Wild West of network services, though not so much an outpost as a boomtown. Large global operators have woken up to the fact that this continent is the last remaining growth market for pure network services and are entering the space to pick the fruit whilst they are still low on the tree.
The biggest driver in the wholesale Ethernet market is for data access layer services, which is in turn driven by the global operators setting their sights on Africa. Historically, these players would pack an African site into a big global deal that they are working on, without going after the African market exclusively. However, we have seen that change in a dramatic way of late.
A few years ago, none of the top 10 IP transit providers had any points of presence (PoPs) in Africa, now half of them have at least one PoP. We receive requests on an almost weekly basis from new carriers who we have not worked with before to enter into discussions for access services.
Generally, these carriers are wary of deploying more than a single set of infrastructure in a new country, and prefer to rely on third parties, such as Workonline Communications, to reach their end customers.
Although a number of telecommunications providers have done well in cornering the African market, the opportunities for new entrants remain enticing.
It is not a market waiting to be grabbed, it is a market that needs to be developed. Because the industry is so dependent on infrastructure, the effective demand does not arise until someone takes the initiative to dig up the roads and highways and install the physical infrastructure.
The current footprint of decent quality telecommunication networks on the continent is so sparse that if you install a node in a previously unserved area you have a brand new market to go after. This does not happen in the US, Europe or most of Asia, where in any given building, there are at least 3 or 4 carriers that are able to reach you with decent quality infrastructure.
South Africa is leading the continent with growth in the enterprise market and the ultra high-end residential broadband market, but penetration varies greatly across the continent. Interestingly, the penetration in a country is not necessarily correlated to GDP, but determined by factors such as the regulatory environment and geographical location.
Carrier Ethernet is the extension to Ethernet that enables network providers to deliver Ethernet services to customers, and is promoted by the Metro Ethernet Forum (MEF). For Africa, the adoption of Carrier Ethernet 2.0 represents a game change.
What the MEF provides to the wholesale market, which is unique in the networking world, is the standardisation not just of technology but of the behavior of an actual service. This means that an MEF certified service behaves in a predictable way that is well documented and which is well understood by both parties to an agreement, before that agreement is even negotiated. This dramatically reduces the amount of time it takes to close agreements with third party carriers.
The advantage of having a standardised set of services that are known to your customer base ahead of the sales pitch is very valuable, particularly when operators are talking to each other.
I believe that the next phase of the MEF’s work should be to drop the Ethernet-only approach and apply those service definition standardisations to other types of services, such as IP-based services, VPN services, broadband services not running over Ethernet, etc. This would be useful for carriers, as we do not solely provide carrier Ethernet.
With the protocols in place, the only hurdle for new entrants is the availability of infrastructure, which has a direct impact on the percentage of a region that a carrier is able to cover. This is now changing due to the significant investments that are being made into the development of long-haul fibre routes.
However, unique challenges per region still persist. Load shedding, for instance, has a massive effect on infrastructure development. Every time we build a site we have to put three times more money into batteries than is typically necessary, which ends up contributing to as much as 40% of the cost of a new site. Companies that want to operate in Africa have to be adept at taking these challenges on board.
Ben Maddison, co-founder and director, Workonline Communications