Held Back by Inadequate Spectrum

Details

Published on Wednesday, 14 November 2012 12:30

The sub-Saharan Africa is the fastest-growing mobile market, with an average annual growth rate of 44 percent since 2000, according to the GSMA. Mobile connections stand at 475 million, compared to just 12.3 million fixed line connections, representing the highest proportion of mobile versus fixed line connections. With necessary spectrum allocations and transparent regulation, the industry could fuel the growth of 14.9 million new jobs in sub-Saharan Africa between 2015 and 2020. “Mobile has already revolutionised African society and yet demand still continues to grow by almost 50 percent a year,” says Tom Phillips, chief government and regulatory affairs officer, GSMA.

“To create an environment that supports and encourages this immense growth, it is imperative governments work in partnership with mobile operators to enable the industry to thrive throughout the region, ultimately providing affordable options to connect its citizens.” The region has some of the highest levels of mobile Internet usage globally. In Zimbabwe and Nigeria, mobile accounts for over half of all web traffic at 58.1 per ent and 57.9 percent respectively, compared to a 10 percent global average. 3G penetration levels are forecast to grow by 46 percent through 2016 as the use of mobile-specific services develops.

Economic Impact of Mobile

The rapid pace of mobile adoption has delivered huge economic benefits for the region, directly contributing US$ 32 billion to the sub-Saharan African economy, or 4.4 percent of GDP. Approximately 3.5 million full-time jobs are attributed to the mobile industry, which has also spurred a wave of technology and content innovation. More than 50 ‘innovation hubs’, which develop local skills and content in the field of ICT services , have been created, including the Hive Colab in Uganda, the iHub in Kenya, and Limbe Labs in Cameroon. Safaricom’s M-PESA mobile money transfer service in Kenya has achieved greater scale than any other service in the world. Today, there are more than 80 mobile money operations for the unbanked across Africa compared to 36 in Asia, the second most popular region for these services.

Spectrum ‘Crunch’ Threatens Region

Despite investments of US$ 16.5 billion over the past five years (US$ 2.8 billion in 2011 alone) across the five key markets in the region, mainly directed toward the expansion of network capacity, sub-Saharan Africa faces a looming ‘capacity and coverage crunch’ in terms of available mobile spectrum. The current amount of spectrum allocated to mobile services in sub-Saharan Africa is amongst the lowest worldwide. Some countries apportion as little as 80 MHz, compared to developed markets where allocation for mobile exceeds 500 MHz. With mobile Internet traffic forecast to grow 25-fold over the next four years, there will be a considerable increase in network congestion unless governments across the region take steps to release new spectrum in line with the recommendations of the ITU’s World Radiocommunication Conference (WRC).

This includes capacity in the digital dividend (700-800 MHz) band and the 2.6 GHz band, and also liberalising existing licence agreements to allow the deployment of high-speed UMTS and LTE networks in the 900 and 1800 MHz bands. The combined aggregated effect of the spectrum release of the digital dividend, 2.6 GHz and the refarming of 1800 MHz would have a positive impact on job creation: an additional 14.9 million jobs could be created between 2015 and 2020 in the key six markets in the region 3. Mobile industry growth could also generate a GDP increase of US$ 40 billion, representing 0.54 percent of total GDP, in the region by 2016. Meanwhile, failure to harmonise spectrum allocations in the region could add up to US$ 9.30 in handset costs for African consumers.

Chris Williams, Deloitte telecommunications partner, comments: “In many sub-Saharan African countries, mobile broadband is the only possible route to deliver the Internet to consumers. However, to maximise the potential gains, governments need to support the development of mobile broadband through the provision of appropriate spectrum. The current spectrum allocations lag behind those of developed countries and, unless increased, seem likely to raise costs of provision, challenge investment decisions and increase network congestion.”

Taxation and Regulation Could Stifle Further Growth

High levels of government taxation and new regulation also threaten to limit the growth of mobile services across the region. Africa has the highest taxation, as a proportion of the cost of mobile ownership, amongst any developing regions, with taxes on handset and mobile devices much higher than elsewhere. There is also a worrying trend of new taxes being introduced on essential mobile services; for instance, the Kenyan government recently announced a new 10 percent tax on money transfer services, threatening the economic viability of the service in the future.

Meanwhile, approvals for tower and fibre deployment have been identified as the single biggest obstacle to investment by the mobile community in sub-Saharan Africa. As capacity increases and such deployments are required to cope with substantial traffic growth, complex and uncoordinated national and local regulations and approval processes, especially with regards to rights of way, could be simplified to aid this process. Tackling stifling regulation, addressing high taxation and implementing a harmonised approach to future spectrum allocation will further boost the success story of mobile across the continent. There is not only the potential to lift millions out of poverty, but also the opportunity to ensure that Africa benefits from global economies of scale in terms of both network technology and mobile devices.

---The GSMA