The announcement by Telkom recently that it plans to replace almost 300 of its unprofitable copper-based exchanges with wireless 3G and LTE services is good news for the telecommunications industry.

 

If anything, it’s an attractive offering that will not only improve connectivity speeds for businesses and consumers, reduce lag and high latency of copper-based ADSL, but will also see Telkom rolling out its MSAN network technology to offer 20Mbps and 40Mbps FTTH and VDSL services in major metropolitan areas. Telkom’s remaining exchanges will be maintained in their current state.

 

The move to 3G and LTE will offer the market a competitively priced product that will provide a better broadband Internet service, with LTE as the preferred last-mile access service specifically for voice.

 

Testing already conducted by Connection Telecom on Telkom’s LTE has been incredibly promising, with increasingly lower latency being experienced. The other major benefit of taking the LTE service route is that it can be deployed in a matter of days rather than the traditional six to eight week promise from the incumbent.

 

Another important point to consider is the fact that coverage by Telkom for LTE has improved dramatically in recent months, with the greater Gauteng and Cape Town city centres already covered. First prize, of course, would be a wider roll-out of fibre and LTE for backhaul capability.

 

Fibre has inherently greater capacity than LTE, which means that when a Gigabit fibre connection is installed at a high-density business park, for example, it can be easily distributed within that environment and provide greater connection speeds than anything seen before. If the same exercise is attempted with LTE, one would reach capacity fairly quickly when compared with fibre. However, where access to a remote site is required, then LTE makes better sense.

Cellular phone usage has grown exponentially, and with the increased popularity of smartphones that can access the Internet and social media, which requires connectivity, mobile operators are finding themselves increasingly unable to cope with the sheer volumes of data traffic. Compounding this issue is the added burden of data from a variety of 3G modems, which also use up capacity. This not only affects the speed of data, but the quality of voice calls, since voice is also run on the 3G network. And this trend is not localised, but is something that is proving to be a challenge across the globe.

 

Long Term Evolution (LTE) has been seen as the solution to 3G data overload. However, red tape around LTE spectrum in South Africa has resulted in much of this spectrum remaining unallocated to telcos and thus unused, and the potential for this data medium is as yet untapped. This means that Telco operators need to look at alternative methods in the short- to medium-term to reduce data traffic on their networks, so that the integrity of voice calls can be preserved and customers retained. 3G offload onto Wi-Fi offers a viable solution for telcos to deal with the data overload on mobile networks, particularly in high traffic volume areas. Wi-Fi is an open spectrum technology which is designed specifically to handle data traffic, and the technology is available to offload data usage onto Wi-Fi, freeing up 3G and 2G networks for voice traffic and improving customer service quality.

 

LTE is in the process of being deployed, and there are some trials being run in South Africa currently. However, this robust 4G technology can not yet fully be utilised until the regulatory debate surrounding spectrum allocation can be resolved. In the interim, telcos need to look at alternatives to improving both data and voice quality on their networks, and one viable way of doing this is to offload a portion of data traffic onto an open spectrum technology such as Wi-Fi. 

 

One of the challenges around maintaining supply of data in line with ever-increasing demand is that market pressures around data costs are driving pricing down, which means that revenue streams are practically flat but that capacity needs to continually grow. Operators are therefore faced with the conundrum of keeping up with demand in a market that is not profitable given current models. Wi-Fi access points provide a solution to this challenge as well, as the cost of deployment is far lower than the cost of creating additional 3G capacity, with the added benefit that Wi-Fi uses unlicensed bands so there is more spectrum available and operators can more easily acquire additional frequency. Evolution in Wi-Fi technology too has made it more applicable to large areas, and even for outdoor coverage, and the upcoming 802.11ac standard is set to increase the speed, range and coverage of Wi-Fi enabled devices. 

 

Wi-Fi began with very small capacity of 50 kilobits, and we are now up to 600 megabit speeds. The new 802.11ac standard will increase this to 1.5 gigabits, with devices already being tested and commercial roll-out of this standard set for 2013. This makes Wi-Fi even more applicable, taking it from a hotspot technology to a solution that can deliver full mesh networks to encompass wider indoor and outdoor areas. Layer 3 routing on the new standard improves networking capability and network protection. The upshot of this is an improved customer experience and the ability to deploy coverage over wider areas.

 

Cloud technology also adds to the viability of Wi-Fi networks in a commercial sense, as a large proportion of the controlling and network management tools can now be delivered as a cloud services, meaning that multiple access points can be delivered using a centralised controller. This means that a controller is not needed for every site, further driving down the cost of deployment. Controller-less technology also allows for instant access points to be created, reducing the cost of rollout. In terms of management solutions, this also means that a single management platform can be used for multiple access points.

 

This in turn enables remote management, further driving down costs. However, it is important to bear in mind that this requires an open standards management tool that provides cost effective access for multiple-vendor solutions with different Wi-Fi protocols. In this way, existing investment into Wi-Fi technology is protected, and a migration to newer protocol devices can be conducted without the need for a rip and replace approach, which raises costs. New protocols and technology make Wi-Fi an increasingly viable option for wide area data coverage.

 

Wi-Fi data services also present an opportunity for fixed line operators to compete against mobile operators, by deploying Wi-Fi hotspots to pull traffic onto their network. This technology is particularly effective in congregated areas such as shopping malls, business parks, central business districts and even sports stadiums. Public access Wi-Fi technology is gaining traction internationally, for example in Sweden where fixed line carrier TeliaSonera has more than 25 thousand Wi-Fi access points and up to 15% of data traffic is carried via Wi-Fi. While this is not necessarily related to 3G offload, this example proves the viability of Wi-Fi as an option for data access.

 

The exponential growth of data usage is something that is only set to continue, which means that there is no single medium that can handle the sheer volumes of traffic that will be required in years to come. Wi-Fi networks are just one way of offloading data from congested networks to ensure service can be delivered all around. There are opportunities aplenty for new players to get involved in providing data capacity for increasing demand, without taking away from the core business of existing operators.

 

3G offload onto Wi-Fi is a technology that can viably be integrated as part of network rollouts to deal with rapacious demand for data. However, as with any new solution there are challenges involved in incorporating multiple technologies onto a single network. The customer requires continuous quality of service, a seamless handover, and single billing for data no matter what technology is utilised. Carriers looking to implement 3G offload need to ensure that their solutions will seamlessly hand the user off between 3G and Wi-Fi, and that operators can easily incorporate this into billing. Integration and backend should be seamless, otherwise adoption rates will be low and investment will be wasted. A sound business model for charging of Wi-Fi data roaming also needs to be built to ensure profitability for operators as well as high levels of customer services.

 

With intelligent hardware and software that provide open standards technology to integrate with existing servers and billing, and centralised cloud management that ensures a Wi-Fi network becomes a part of the existing service, carriers and operators can easily leverage the potential of 3G offload. Working with a partner that can deliver a fully integrated solution, from planning and installation to deployment, backend integration, support and maintenance, further simplifies this process. Using 3G offload onto Wi-Fi to deliver a portion of data requirements can result in cost reductions of up to 60% on traditional 3G deployments, leaving room for profitability as well as improved customer service.

 

Construction of the $650 million West Africa Cable System (WACS) began in 2009 and was completed in April 2011. On target, a little over a year later (11 May 2012) the first traffic ran over the cable... from South Africa and Namibia, two countries which probably have the most advanced terrestrial fibre network in sub-Saharan Africa and the highest rates of Internet connectivity and most smartphones. Botswana and Zambia now also have connectivity from the WACS (via Namibia's terrestrial backbone) but elsewhere in West and Central Africa, connectivity is likely to only arrive in 2013. And only for some. The missing link: terrestrial backbone networks.

Of course there are other considerations, like licensing, frequency allocation for microwave backbone connections, the business case to launch ISP and effective 3G cellular network services -- i.e., capital cost, time to return on investment, average revenue per user and affordability. And there are other more basic challenges. Building the enabling environment, both physical and regulatory, cannot be "leapfrogged". Happily there are big drivers, interesting and lucrative business models to choose from, and alliances forming to speed the process.

Tremendous benefits; enabling environment

Tremendous benefits come with greater access to communication and global connectivity. Access to information and communication enhances business interactions, quality of life (e-health and e-learning), improve livelihoods (access to mobile financial services), open up new employment opportunities for individuals and stimulate greater investment in the country. But to realise these benefits, other enabling factors such as road, rail and air transport infrastructure is needed. Still top of the list for some governments is reliable access to utilities like water and energy, the networks and facilities necessary to exploit e-health and e-learning applications, and the regulatory frameworks for empowering services, like access to banking and financial services.

The cost of connectivity will undoubtedly drop, as cable landings in countries like Namibia, the DRC, Congo and Togo provide the first direct connections for these countries to the global submarine cable network and direct fibre links to international bandwidth. Until now, these countries have had to make use of cross-regional backhaul provision, third-party providers and overseas operators that all charge a premium for the copper and/or satellite connectivity they provided. In total, there are 15 cable landing points on the WACS cable route, boosting bandwidth availability and setting the scene for price reductions.

For example, in South Africa, bandwidth costs dropped to about 15 percent of what they were within three years of the arrival of the Seacom cable system. The WACS cable, which has much higher capacity than Seacom, will boost bandwidth access by a further 40% in the country. Within a month of being tied into WACS connectivity, wholesale prices to telecommunication providers are again dropping in South Africa. 

And as the cost of a smartphone drops beneath R1000 in South Africa, the 3G connectivity that local network providers are building out will be put to good use. The business case is very different in the rest of Africa.

Africa's challenges need to be understood. In Africa, the majority of people cannot rely on copper cable for that matter (because there is very little). Nor do many have access to the Internet. Business communication often only takes place through face-to-face meetings. There are very few company websites and where these do exist they are hosted overseas – and the existing links to the world via third-party carriers and service providers are expensive and offer limited speeds.

While South African's cannot imagine life without their mobile phones or the Internet, in Africa demand for broadband is not yet being driven by consumers. The majority of projects are being driven by governments and network providers who want better electronic communication and international connectivity. There is also a lot of pressure from multi-national companies (particularly those in the mining and oil industries) who have typically had to build their own communications links. This makes expanding into Africa an expensive proposition, something governments want to address to make foreign investment more attractive.

The way forward

The way forward is to accelerate the completion of the landing stations for the submarine cables and, then build out the terrestrial broadband networks. This is typically controlled and managed by government where countries have not liberalised their telecommunication sector and have not yet an effective telecommunication regulator. The challenges include rights allocation for the laying of fibre, as well as licensing and spectrum allocation for wireless backhaul links. The licensing process in some environments can easily take between 6-12 months. 

As things stand, cellular network service providers in African countries rolling out new services may have already overplayed their hands. In anticipation of global bandwidth availability, which could be some way off, they aggressively launched and marketed 3G services that now do not live up to expectations due to very limited international backhaul capacity. There is some relief on the horizon, however.

New telecoms models for Africa

Pan African carriers such as Gateway Communications and Liquid Telecom are building out fibre and microwave networks aggressively along main transport routes and into key urban centres throughout East, West and Central Africa. There is also the hope that new wireless technologies, as well as new infrastructure sharing and leasing models will rapidly increase connectivity and access to bandwidth. 

Infrastructure build-out is very capital intensive and typically has a long payback period. Nonetheless, telecommunication is a big revenue generator. Governments know this and so do network and service providers. With the high cost of infrastructure construction in remote parts of Africa, infrastructure sharing has happened much more quickly than in South Africa. Multi-party relationships and infrastructure outsourced models are springing up, and to ensure payback through usage , 'open access fibre' strategies in Africa see leasing of infrastructure to multiple service providers.

There is also an opportunity for a lower cost greenfields roll-out of all-IP Long Term Evolution (LTE) technologies, the next generation evolution of 3G. LTE offers a massive boost in capacity and high-speed data throughput over older 2G and 3G technologies.

Cloud and SaaS will boost uptake 

Carrier neutral data centres for the hosting of cloud services are among the infrastructure components African countries would do well to invest in. Software as a Service (SaaS) is likely to be a big seller in Africa where the cost of software for the individual or even individual company is likely to be prohibitive. These per user, per month software models will lower barriers to entry, stimulating entrepreneurship, the growth of SMEs and national economic growth – and eventually inclusion in the global economy.

With greater broadband availability and throughput there is also the lure of multi-media for media distribution and broadcasting. There is poor penetration of broadcast services in Africa because satellite based transmission is not cheap – wireless broadband and fibre based IP networks offer new opportunities to these market segments. It's a revenue opportunity and again, something governments would want to support as a platform for health, governance and other public service messaging.

An important, empowering aspect of bandwidth availability is the multitude of mobile applications that will for the first time make services, like cellphone banking (mobile money transfer, e-wallets), available to low-income earners. This will drive uptake, and see new alliances formed between sectors – i.e., network service providers will need to partner with banks or obtain their own banking licences.

For new applications to become successful they need a strong commercial engine and penetration into Africa's large mass markets is something many organisations are seeking. Mobile players could act as pathfinders; with their growing knowledge of local requirements they could present interesting partnership opportunities.

Business and government must partner

There's no doubting the evolution and empowerment that broadband connectivity brings. For African countries there are many models to choose from and commercial opportunities abound. But government and business will need to work together to scale the opportunities and make them viable. At present, doing business in Africa is expensive and risky - with the right policy and regulatory environment, and with the right government strategies and support in place for the development of a communications backbone, much can change in five years. There are likely to be some quick wins, but there are no quick answers.

Long Term Evolution (LTE) technology is the next step up from 3G. This all-IP network technology will give users three times the wireless throughput and increase network capacity considerably. It's much needed in South Africa as the uptake of bandwidth hungry smart devices – smartphones, tablet PCs, etc. – grows and the backhaul capabilities of the networks become increasingly stressed. However, LTE technology is not compatible with 2G and 3G – it calls for a totally new technology installation and rollout. For new players, the first investment will be high but in the long run the cost per Megabit per second (Mbps) will make this an attractive solution.

With every major network provider in South Africa trialing LTE technology and ICASA looking like it may soon finalise the spectrum allocation issue, 2012 may well be the year of LTE. But trialing LTE is not the same as rolling out an LTE network, or offering an LTE quality service. Without doubt it's the direction every network provider needs to take, but there are challenges and considerations. An evolution rather than a revolution is on the cards.

The big challenge is to exchange the Telkom copper currently used on the backhaul with fibre. While there is now a lot of fibre rolled out, primarily by the big network players, smaller players are also rolling out fibre and presenting a new "open fibre" model. This model essentially opens up use of the fibre to any network provider with a need, for a fee of course. The technology used by these smaller players is going to be an important influencer as network service providers will want to easily integrate to and across these networks.

Current trends are leaning toward use of technology from vendors who represent the entire digital echo system in their product set. Samsung offers a good example with its end devices for consumers (smart phones and tablet PCs already equipped with LTE chip sets) as well as other carrier grade equipment and solutions.

Of course, few networks will migrate completely to LTE in the near terms. While this technology is per Mbps of capacity cheaper than the 3G technologies to install, it remains a significant investment. It is after all not a complementary network, but an additional one. Network providers will want to sweat their existing assets, most likely deploying LTE in metropolitan areas to service the large broadband demand here, and using current CDMA/WCDMA technologies for voice. In addition, older WiMAX technologies could be put to good use if redeployed to rural areas. Alternatively the reuse of Wimax frequencies (3.5Ghz) on LTE can have very positive impact on the network, eliminating the need to pay additional frequency costs. In this way, the networks can evolve, introducing new technologies to users of smart devices with the quality and speed of service that they desire, but also targeting new users and introducing new services and products to them as infrastructure build-out and demand allow. They will also have the providers of open fibre and specialised telecoms services to rely on to close gaps.

Smaller, new and hybrid telecoms players now on the scene may well change the traditional playing field and offer strategic advantage to existing local and international players entering the South African market.

The picture is bleaker for Africa due to lack of high capacity backbone infrastructure that the Broadband solutions rely on. Countries such as the Democratic Republic of Congo, Zambia and Ghana are moving towards LTE technology with many other countries trialing LTE. But the LTE challenge for Africa is much higher. While the landing of the EASSY, WACCS and SEACOM undersea cables means there is a huge amount more bandwidth capacity available to the continent, fibre reach to the shore to access that bandwidth is slow. In addition, budget to acquire and install LTE is limited. Nonetheless there is huge opportunity here, especially for greenfields players to launch with pure LTE offerings.

The big players in South Africa have the appetite to move to LTE – indeed are being driven to this new technology as their cells fill up and gaps are left in their RF coverage. For network providers, a hybrid technology strategy followed by the full launch of a LTE network is on the cards. My advice for consumers: ensure any new end devices you acquire are LTE ready as LTE services are likely to be here by the second quarter of 2013.