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Airtel launches an m-health insurance service in Burkina Faso, following success in Ghana 30 Aug 2014

Despite fresh investment in Burkina Faso’s telecom sector, new technologies have been slow to take hold. Delays in the development of a 3G service have hobbled the potential of broadband services. Nevertheless, the poor state of fixed-line networks have meant that in recent years the number of fixed-line subscribers has fallen steadily as customers migrate to the limited services available from the three mobile network operators. The fixed-line incumbent Onatel, majority-owned by Maroc Telecom, operates the country’s fixed-line network, a CDMA2000 wireless network, a fibre optic backbone and one of three GSM mobile networks, Telmob.

Mobile telephony has experienced strong growth since competition was introduced in 2000 by Celtel/Zain (now Bharti Airtel) and Telecel International (now Moov). Although market penetration remains below the African average, is continues to grow steadily, including a 30% growth in the number of subscribers in 2012 alone.

Onatel’s FasoNet is the country’s leading internet service provider, dominating the broadband market with its ADSL and EV-DO offerings. Penetration rates in this sector are still extremely low and services remain expensive despite some price cuts since 2011. Being landlocked, Burkina Faso for long depended on expensive satellite links for its international bandwidth, though in recent years connectivity has been facilitated by transit fibre links through neighbouring countries which have access to the region’s international fibre optic submarine cables: the four submarine cables which land in Ghana have reduced the cost of international bandwidth. A number of Burkina Faso’s other neighbouring countries also have access to multiple international cables. However, consumers and the country’s entire economy will only benefit from lower broadband prices if Onatel passes these cost savings on to them and also to other ISPs on the wholesale level.

The mobile operators have entered the underdeveloped internet sector by offering mobile data services using GPRS and EDGE technology, but third generation (3G) mobile broadband technology has not yet been introduced except for Onatel’s EV-DO fixed-wireless service. An international tender for a new combined fixed and mobile licence was unsuccessful in 2010, but a much-delayed fourth mobile licence and 3G licences for all operators are expected in 2014, with Viettel emerging as a bidder early in the year.

For detailed information, table of contents and pricing see: Burkina Faso - Telecoms, Mobile and Broadband - Market Insights and Statistics

Videotex had a bitcoin-like facility 29 Aug 2014

Back in the 1970s a precursor of the internet was launched, known as videotex. It looked very much like the broadcasted teletext service, but it operated as an interactive online service. BuddeComm was involved, first in Europe and later in Australia, in ‘websites’ for companies who wanted to run services over these videotex networks. We set up the Telebank service for the Commonwealth Bank (the first national online banking service in the world), and we set up sites for some 25 airlines. In all, we either set up or ran more than one hundred such services.

When the internet started to emerge from the academic and defence environments and move into the commercial markets, with developments such as www and web browsers, we of course moved along with it; but we were very critical regarding one missing element. Videotex had a charging facility that allowed service and application providers to instantly charge for their information and their services – without the need for credit cards, paypal, etc. There was a so-called price per page that services providers could put on their information ‘pages’ and that was charged via the billing systems of the network operators (in most cases telecom operators). This allowed for charges as low as 1ct per videotex page and a maximum of 99ct per page. The size of these ‘pages’ was limited to a grid of 40x24 characters.

While not ‘digital’ in the exact sense of the word this was in fact a form of payment that is now emerging in the world of digital payment. Also unlike bitcoin these payments systems were based on the national videotex systems, it was not an international system.

Bitcoin is in essence the latest form of an international digital payment. This could bring back to the online market what videotex in a rudimentary way was delivering to the service and application providers all those years ago – an easy and secure micro-payment facility that bypassed credit cards and PayPal systems.

Obviously, as we already see, it will be those same financial institutions who are going to offer these new forms of electronic payment next to their credit card and other payment facilities. But at the same time, as was the case (albeit in a very limited form) with videotex, it will also allow for new players in this tightly controlled financial services market and they will be a welcome addition to the competition.

Ironically it was mainly the telcos who operated those early forms of electronic payment over those videotex systems, via their telephone bills, and these same companies would give anything to be in control of such a crucial and lucrative e-payment business model today.

Paul Budde

Global Digital Economy - E-Commerce and M-Commerce Key Trends and Statistics

Cote d Ivoire - VipNet prepares for commercial LTE launch, offering competition to Orange 28 Aug 2014

During the last few years Cote d’Ivoire has benefited from strong economic growth, with GDP having grown by 9.8% in 2012 before slowing to 8% in 2013 and an expected 8.2% for 2014.

Although it has two competing fixed network operators, the country's telecommunications sector is dominated by mobile telephony, with South Africa’s MTN and France’s Orange leading the market. The launch of three additional ore GSM networks between 2006 and 2008 – Moov (owned by Etisalat of the UAE until it was sold to Maroc Telecom in May 2014), KoZ (operated by the Lebanese Comium Group) and Oricel Green Network (backed by Libya's LAP Green) – has accelerated market growth and pushed mobile penetration well above the African average. Two additional operators have been licensed and are preparing to enter the market, but problems with frequency spectrum allocation have caused continuing delays. Some consolidation can be expected in this crowded market in the future.

The internet and broadband sectors have remained underdeveloped. This is partly the legacy result of high international bandwidth costs caused by the incumbent having monopoly access to the only international fibre optic submarine cable serving the country. This was addressed in recent years, with the landing of a second cable in November 2011 and with up to three more cables expected to land in the near future. Significant reductions in retail pricing for some of the existing ADSL, WiMAX and EV-DO wireless broadband services can already be observed.

The biggest game changer, however, has been the introduction of 3G mobile services. Following years of delays, the first 3G licence was finally awarded in March 2012 and the first 3.5G mobile broadband service has been launched, offering up to 42Mb/s using HSPA+ technology. The extensive geographical reach of the mobile networks will now make the internet accessible to a much wider part of the population. With a national backbone network including more than 20,000km of fibre optic cable, Cote d'Ivoire is in a good position to translate these improvements in competition and infrastructure into a booming broadband market and digital economy.

Further changes are expected by the end of 2014 following the commercial launch of LTE services from Orange and VipNet, which will see a significant increase in mobile broadband availability.

For detailed information, table of contents and pricing see: Cote d Ivoire (Ivory Coast) - Telecoms, Mobile and Broadband - Market Insights, Statistics and Forecasts

2Degrees – the Emperor is wearing no clothes 28 Aug 2014

Five years on and to a certain extent it is a bit of a wonder that the company still exists. It actually is one of the few surviving so-called ‘late mobile entrants’ in the world – companies that entered the market when more than 70% market penetration had already been achieved by others. Most operations launched, similar to 2Degrees but in other parts of the world, have since been gobbled-up by others or have simply disappeared.

It looks like it will only be a matter of time before this happens to 2Degrees.

But why such a sombre analysis on the 5th anniversary of the company? The company’s PR machine tells a different story. However, even before the company was launched – it had a very long gestation period – we questioned the viability of a third player in the New Zealand market because of the  dominance of Vodafone and the incumbent telco Telecom (now Spark).

The New Zealand mobile telecom situation in general is somewhat analogous to the tale of the emperor wearing no clothes. There is such a lot of pretence going on. For example, the pretence that Vodafone and Spark are more or less equals. We have said for many years that is a charade – but for the grace of Vodafone Spark’s market share would not exist. If Vodafone were to grab more market share, as it easily could do, the regulator would simply have to step in, and this is what Vodafone wants to avoid at all cost – it is one of the most profitable Vodafone companies in the world. It dominates the revenue share in the market, but to keep the peace very few people will talk about that. New Zealand is a small market. Everyone knows everyone else, and they are in one way or another dependent on each other, so being too critical is not the thing.

So you should be nice and congratulate 2Degrees on their 5th anniversary and rave about the 25% SIM market share they have been able to capture. The reality, as we have said many times, 25% market share of what? It represents no more than 10% of the mobile revenue in the market, so also here, the emperor is wearing no clothes. And, even worse, the customers they represent are at the lowest level of profitability in the country.  Revenues generated from most of these customers are marginal at best, something that is also reflected in a decrease in the cash flow of the company.

Of their one million or so customers perhaps as much as 80% are people visiting the country, many only for a few weeks or months. And travellers often also have to use their SIM to roam over the Vodafone or Spark networks, as 2Degrees’ coverage is very limited, especially for tourists travelling around the country. This means extra costs for 2Degrees.

On the issue of infrastructure, 2Degrees is stuck with only one-third of the data capacity of the other two players, and it is not economically viable for them to extend the coverage. There is no business case for the company to invest in more network capacity, and having to utilise the networks of the other operators means a competitive disadvantage.

Again repeating comments we have made in the past, if the country believes it is in the national interest to have effective competition in the mobile market the only way to achieve that is to change the market structure through regulatory intervention. By pretending not to notice that the emperor is not wearing any clothes New Zealand will just continue to have one of the highest mobile comms charges in the developed world and innovation will always run a few years behind its trading partners.

Over all the years we have discussed these issues nothing has happened at a regulatory level to improve the market structure in New Zealand, and this would indicate that it is most unlikely the government will step in any time soon to address the situation. That being the case, it is with considerable certainty that we predict very little future for 2Degrees, and this is a very sad story indeed – from the perspective of economic development, competition and jobs.

As can already be seen in other countries – for example, China Mobile and several of the European operators – mobile ARPUs are at best stagnating but more likely declining; and the financial warnings sent out by the mobile operators across the Tasman bear similar messages.

In other words, New Zealand will see a very similar development in perhaps one or two years’ time. In such a hostile environment the only longer-term scenario will be for Spark to buy 2Degrees, in order for them to finally improve their position in the marketplace; they could operate 2Degrees as a low-cost brand. We do not envisage any overseas investor being interested in buying the company, not even at a discounted price.

Paul Budde See also:

FttP - Rest of the world is wrong but Australia is right? 27 Aug 2014

At the same time that most countries around the world are issuing studies and plans leading to extending their roll out of Fibre to the Premise (FttP) networks, Australia’s Coalition Government studies and plans, time after time all indicate that FttP is the wrong way to go and that the MtM (Multi Technology Mix) is so much better for the country.

Tellingly, on the same day that the latest report raving about the MtM and slamming FttP was issued, the American University Community Next Generation Innovation Project (Gig.U) launched their report highlighting the social and economic benefits of FttP. Their aim is to stimulate the creation of gigabit communities. Cities and communities all over the USA are putting plans in place to become a ‘Gig city’ as they see this as critical for their economic and social development. The FCC also firmly believes in these ‘Gig’ developments and has thrown its support behind these developments. We already saw similar developments in many of the European countries with, for example in the Netherlands now nearly half of the cities linked to FttH networks. Scandinavia, South Korea, China, New Zealand, Hong Kong, France and many more countries all have plans in place aimed at extending FttP infrastructure in their countries.

Why then are the Australian reports so different from those coming from other countries as well as the many reports coming from ICT companies such as IBM, Cisco, Ericsson, Google, Microsoft, Intel and the list goes on? These all rave about the social and economic benefits that FttP infrastructure can deliver to society.

Put simply it is all about the outcome you want to achieve in your report and based on that outcome you formulate the questions.

Obviously the cost benefit analyses of those countries that support FttP do put more value on the gains made by digital productivity, innovation and the opportunities for new economic and social developments. These analyses are not hard science and as such they are very subjective. The Australian cost benefit analysis – in order to confirm the political message – conveniently downplays all of that and by doing so it is not too difficult to come up with that ‘terrible’ negative cost benefit for FttP.

In line with this, the forecasts made in the report regarding the broadband speeds required by Australian users are also totally out of wack with surveys taken by others in Australia and around the world. According to the Australian Government we seem to require only half of what is forecasted than people in other parts of the developed world.

How can you make these low speed requirements predictions over a 25 year period with the enormous ICT developments that are currently taking place around the world, wouldn't you want to err on the side of overestimating rather than underestimating these requirements, if these predictions prove to be wrong where do we find the extra $20 billion or so to complete the roll out to a proper FttP infrastructure?

The latest Vertigan report states that if demand for the services increases MtM can be upgraded to FttP, the reality however is that NBN Co will not have the money for such extra investments as per the government policy - their funding will be further squeezed. There is no room in the Government’s plan to fix the under capacity if the predictions prove to be wrong.

The original FttP plan was to lift Australia from the bottom of the OECD ladder of broadband quality to the top, we can now be certain that Australia will continue to linger on at the bottom for decades to come.

If the government was truly interested in independent reports the outcomes would have been more in line with those produced in the rest of the world. Also, if the Government was really serious about its claim of future proofing the broadband infrastructure it would put much more emphasis on FttP as the end goal. Surely we can walk a MtM path that will lead to FttH, there are several other countries doing that as well, but these countries still see FttP as the end goal and not MtM. In such reports you can still support FttP and praise its virtues while at the same time develop a path towards that ultimate goal through MtM. However, there are no plans, no investment strategies and no vision on how to move Australia on from MtM to FttP; a development that is inevitable. Under the current plans Australia will be stuck in a half way house for quite some time.

The report also talks about the delays in the roll out of FttP. In the meantime however, we have not seen anything happening on the MtM front, other than one highly publicised pilot project on the NSW Central Coast, this despite the fact that when in opposition the Coalition promised that a roll out of the MtM  would start in 6 months time.

In the end it comes down to what the vision is you have for the future of your country. Those countries that believe in a  future where digital infrastructure is important, who are keen in stimulating the transformation of their economy and who want to create an environment for innovation will be looking towards FttP. Those countries without such ambitions are happy to be the followers rather than the leaders.

Yes you can achieve many benefits over MtM infrastructure, but by following that path you don’t give the country a chance, to lead, to innovate, or be at the forefront of the digital developments.

I am not shying away from stating that my bolder ambition for Australia would be to lead and innovate and it’s sad to see that this opportunity – as it was put forward by the previous government – is now slipping away, putting us back again as a mediocre country in ICT developments. This also reflects other government policies in relation to, for example health care, education, energy and the environment, all areas where a high quality digital infrastructure could assist the country in transforming its economy. This would lower the costs of these sectors while maintaining and improving the lifestyle of its citizens. In my opinion that is what the difference between FttP and MtM is all about, it is a question about what you see as the vision for the future of the country.

Paul Budde See also: Australia - National Broadband Network - Developments and Analyses 2014 Australia - National Broadband Network - Cost Benefit Issues Australia - National Broadband Network - Infrastructure Analysis Australia - National Broadband Network - NBN Co 2.0

Drone companies become hot property in 2014 27 Aug 2014

Google’s entry in the drones market is indicative of the level of interest in the drones sector. While it is still unclear where this market will lead; Google’s purchase of the start-up Titan Aerospace in April 2014 along with a later purchase of Skybox Imaging can only make us wonder considering Google’s heavy interest in mapping via Google Maps and Google Earth. Titan Aerospace makes solar powered drones which can operate at high altitude and Skybox Imaging offers high-fidelity photo images with corresponding analytics collected via tiny satellites.

Google is not the only Internet-based firm showing significant interest in this sector with Facebook also acquiring a high altitude solar-powered drone company called Ascenta in March 2014. Both companies claim the purchases are made with the aim of using the drones to provide internet access to remote areas around the world – but in reality the potential real-time data collecting and surveillance possibilities of such equipment are yet untested and unexplored.

Agriculture applications in particular offer huge opportunities for drone usage along with telecommunications; defense; mapping; emergency services (police, fire-fighters, disaster response); weather monitoring; resources exploration and environmental analysis.

Kylie Wansink, Senior Analyst – Global and Middle East Markets

For related information, see separate report:

BuddeComm Intelligence Report - Smart Transport, Smart Vehicles and Drones.

NBN retail competition at lower margins 26 Aug 2014

With the increase in NBN FttH connections we also see an increase in competition.

Changeovers like this are rare opportunities for the retail service providers (RSPs) to try to increase their market penetration through churn. The NBN is a significant disruptive development in the market which will deliver both winners and losers. With close to 50 RSPs operating in the market the race is on. The NBN provides certainty and stability and the RSPs will no longer be held hostage to Telstra; with greater transparency also comes greater price competition and with (broadband) access being a commodity, prices and margins are set to decrease further, which in turn will lead to further industry consolidation.

At the moment, however, there is still considerable uncertainty about the competitive environment on the NBN. We see significant policy changes in the direction of a multi-technology mix (MtM) with great uncertainty regarding wholesale regulation on HFC and VDSL networks. But also the regulatory framework is set to change on the FttH network – most likely to the benefit of the RSPs – with lower costs and therefore potentially slightly higher margins.

With a uniform wholesale price all players now have the same starting point. On the copper-based network there was a significant divide between those RSPs who operated their own DSLAMs, and so had higher costs but also significantly higher margin, and those who didn’t. In competitive exchanges this level of competition has led to the DSLAM operators being able to, combined, grab broadband market shares of around 75%.

But the resellers of the Telstra service also haven’t fared badly, as Telstra, desperate to defend its customer base, has provided resellers with attractive wholesale margins, since they deliver Telstra higher wholesale income than it obtains from the DSLAM operators. But reselling is a risky business as, with one stroke of the pen, Telstra can wipe out these margins, something that has happened frequently in the telecoms industry over preceding decades.

But this is all set to change. The major difference in margin between the old and the new environment will  be between the current on-net bundled products and the new NBN products, as on the latter bundling makes less sense since all services will be delivered on an IP basis (voice and data).

So the first thing that is happening is a major decrease in fixed voice revenues – this is particularly the case with SMEs changing over, in the process often halving their voice costs. For the data-only operators this simply means extra revenue, but for Telstra, Optus, Macquarie Telecom, M2 and others heavily depending on voice revenues it will lead to a serious decrease in voice ARPU. On the positive side we see the NBN as a significant game-changer in the SME market – there are great opportunities here for the competition as Telstra holds a 65% market share. The NBN will, for the first time in any meaningful way, open up this market for competition. Similarly, as above, for the other RSPs any extra voice income coming from this market will be a positive, and, with an attractive marketing message: ‘we can halve your business voice costs’, the competition is in a prime position to profit from this change.

On the broadband side we see that many users opt for the higher bandwidth packages and that potentially means a slight increase in broadband revenues, the NBN will also further drive up fixed broadband penetration, which will deliver new customers to the market.

Nevertheless it will be the main players who will dominate the NBN market, although, given that the playing field will be levelled, those companies with lower operating costs such as TPG and M2 (Dodo) have an efficiency advantage and are going to be net winners, as their decline in margin will be significantly less.

Paul Budde See also: Australia - National Broadband Network - Wholesale and Competition Australia - National Broadband Network - RSPs Pricing and Products Australia - National Broadband Network - Telstra Australia - National Broadband Network - Surveys, Statistics and Forecasts

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