Why fibre service providers need to head downstream

Workers lay a fibre optic cable at Chepkanga on the Eldoret-Iten road on June 18, 2015. PHOTO | FILE | NATION MEDIA GROUP 

14.April 2018

• Laying of cable in Nairobi and other major towns has targeted upmarket residential and businesses areas only.
• Given the informal nature of most businesses in Nairobi’s “River Road”, it is assumed that the owners would not spend like those in upmarket .
• These neglected businesses and residential areas offer a huge untapped potential for high value connections.

In the past half-decade, Kenya has seen a surge in high-speed broadband adoption with the country’s internet users growing exponentially.

In 2010, the Kenya National Bureau of Statistics (KNBS) said the total available bandwidth capacity was 202,720 megabits per second (Mbps). In 2016, this number had grown to 2 million, a nine-fold increase in broadband capacity.

During the same period, fixed fibre optic data subscriptions to homes and businesses have grown, reducing the cost of connectivity, and allowing more homes and businesses to be connected.

EASTLANDS

However, despite this triumph in the number of internet adoption across the board, many high-populated parts of Nairobi city centre, generally referred to as “River Road” and mainly residential Eastlands area, still remain underserved by the high-speed fibre grid. The divide is worse in smaller towns and rural areas.

Laying of cable in Nairobi and other major towns has targeted upmarket residential and businesses areas, leaving out places not considered economically attractive. It is assumed that upmarket areas will adopt services faster and spend more.

Given the informal nature of most businesses in Nairobi’s “River Road”, it is assumed that the owners would not spend like those in upmarket areas. However, there is no evidence that, provided with infrastructure, these businesses would not match upmarket businesses in monthly spend.

GDP

These neglected businesses and residential areas offer a huge untapped potential for high value connections that can not only reap benefits to service providers, but also yield more contribution to the country’s gross domestic product.

On the business front, this vast and busy area of Nairobi that includes Moi Avenue, Tom Mboya and Ronald Ngala streets moving outwards to Kamukunji and Gikomba marketing districts are characterised by small and micro businesses that form a huge part of the city’s economic output. 

A research conducted by the Communications Authority of Kenya and the KNBS in 2016 looking into how businesses access the internet in their operations found a lower capacity down the scale.

While 97 and 92 per cent of large and medium enterprises reported using fixed broadband, the proportion was much lower among micro-enterprises at 71 per cent.

SIM CARDS

This further translated into limited connectivity within small and micro businesses. While 93 per cent of large businesses reported having a local area network, only 40 per cent of micro-enterprises reported the same.

This is important because research has shown that for internet connectivity to have transformative value to users, size and speed matters beyond just connectivity.    

The Alliance for Affordable Internet, a coalition of countries in Africa to which Kenya is a major participant, recently advised African countries to revise measurements for evaluating internet connectivity from merely counting the individual number of SIM cards purchased but also looking at how many users can afford 1 Gigabyte (GB) of data per month at less than 2 per cent of their monthly income.

EVOLVING

This is because 1GB of data spread over a month is the amount considered to provide meaningful value to the user. Higher internet speeds and broadband capacity would mean faster transactions for online marketing – popular by the vast number of clothing, beauty and make-up accessories shops spread in downtown Nairobi.

Sustainable high-speed fibre networks also lay the foundation of evolving business practices such as teleconferencing and cloud computing to take root. For some businesses, interconnecting their small shops (exhibition stalls) will allow them to save on manpower, general running costs and allow them to open more shops.

For the big telecom infrastructure players, laying the fibre will allow them to get faster returns but smaller businesses can overlay over these services. For instance, with the reduction in connectivity costs, smaller wifi companies have come up, providing even cheaper services to users paying Sh2,000 or less per month.

GEOPOL

In the home Internet space, demand for high-speed fibre has been boosted by the increased subscriptions to multimedia streaming services.  Service providers such as Netflix and ShowMax have ramped up their offerings in Kenya to tap into this demand. Media monitoring site Geopol recently found that users are increasingly using their smart phones as second screens in their homes.

The vast population in Nairobi’s Eastlands provides a big opportunity for service providers to plug residential estates such as Buru Buru, Umoja, Doonholm, Ruai, Kasarani, Mwiki and Kayole to high-speed fibre networks.

AIR CONDITIONED

It is high time service providers, both the existing ones and new market entrants, shifted their focus downstream.

Ability to spend can no longer be determined by air conditioned offices or well paved residential roads. It is time to test Nairobi’s “River Road” area in terms of spend and ability to adopt new technology.

The writer is the CEO, Fireside Group rebecca@fireside.co.ke

SOURCE