Beefing up mobile-phone and internet penetration in Africa

WITH ITS SNAZZY technology hubs and army of bright young programmers, Kenya can rightly claim to be east Africa’s tech startup nation. It was here that mobile money first took off, and it is here that off-grid solar power is making its biggest impact. Even the election in August was meant to be a showpiece of tech wizardry, with voting stations automatically beaming the results via mobile internet to a computer in the capital, Nairobi, to prevent tampering. But it turned out that about a quarter of the country’s 41,000 polling stations did not have mobile-phone reception and sent in incomplete results, leading to allegations of vote-rigging. That helped persuade the courts to order a re-run.

Most other countries are far worse placed. On average, not even one in two people in Africa has a mobile phone, and many have to walk for miles to get a signal. The economic costs of this low penetration are enormous: every 10% increase in mobile-phone penetration in poor countries speeds up GDP growth per person by 0.8-1.2 percentage points a year. And when people get mobile internet, the rate of growth bumps up again.

Apart from being useful in their own right, mobile phones enable a range of other innovations such as mobile money that improve lives and speed economic growth. A study in Kenya by Tavneet Suri of MIT and Billy Jack of Georgetown University found that M-Pesa, the mobile-payments system, alone lifted almost 200,000 families (about 2% of Kenyan households) out of poverty between 2008 and 2014.

If phones are powerful tools for alleviating poverty, broadband internet is even more potent. Jonas Hjort, of Columbia University and the International Growth Centre in London, and Jonas Poulsen, of Uppsala University, looked at African economies before and after they got connected, between 2006 and 2014, to the big undersea internet cables that now cocoon the continent. They found that connection caused a huge jump in employment in areas that were able to access fast internet as companies set up websites or used e-mail to sell their goods abroad. Not only were people much more likely to have jobs, those jobs were more likely to be good ones. The study also found that once countries got fast internet connections, the number of new startups rose and companies increased their exports. “I’m a firm believer in the hypothesis that some of these transformative technologies can help Africa leapfrog,” says Mr Hjort. One example of how this also works for entrepreneurs is found in Nairobi’s slums, where the arrival of fast internet connections led to the emergence of a cottage industry selling video-editing services abroad.

Broadening out

For all the good the internet can do, its reach in Africa is still limited. In some poor countries, such as Niger, Burundi and South Sudan, less than 5% of people have access to mobile internet. Across the continent as a whole only a quarter of Africans can get the internet on their phones, according to the GSMA. Even fewer have access to fast broadband delivered by cable; the International Telecommunications Union (ITU) says that under one in 100 people in Africa has cable internet, compared with about a quarter in rich countries. Those who do mostly live in big cities such as Johannesburg, Lagos or Nairobi. And even there the internet is expensive, partly because the data have to travel thousands of kilometres through cables under the sea. TeleGeography, a research firm, reckons that the wholesale cost of internet connectivity in Johannesburg is about $9 a month for each megabit per second of capacity, about 20 times as much as in London and about ten times as much as in Los Angeles, even after big falls over the past few years (see chart)

When these fat cables are connected to mobile-phone towers and the data beamed out, the costs rise yet again. The ITU calculates that in poor countries the average cost in 2016 of the smallest mobile-internet package was equal to 14% of the average national income per person, putting it out of most people’s reach. That forces users to buy their internet access in small chunks, sometimes for as little as five cents at a time, which they then hoard, turning on their phones’ data connection to send messages and then off again. “People use the internet in ways that we would not recognise in the West,” says Andy Halsall, chief executive of poa!, a Kenyan startup offering cheap internet access. “Here you wouldn’t click on an advert or update an app because it will use up your day’s allowance of data.”

Three complementary developments promise to help spread affordable phone and internet connections to all but the most remote villages. The first is a huge increase in the capacity of the undersea internet cables connecting Africa to the rest of the world. Since 2015 the total bandwidth available has more than doubled and next year it will increase again as several new cables come ashore. The effects of competition on prices are already being felt. The cost of a connection between Johannesburg and London is now less than one-fifth of what it was in 2014, according to TeleGeography. In other African countries prices have dropped even more, says Nic Rudnick, the chief executive of Liquid Telecom, Africa’s biggest broadband internet company. “You can now take a megabit of data from London or Paris and deliver it to Lagos for about $2,” he says. “Just a few years ago that would have cost you $600.”

That still leaves the problem of getting fast internet from the backbone out to homes and offices. Much of this last-mile connectivity relies on mobile-phone networks, but crowded and expensive radio waves are keeping the costs of mobile internet high. “Fibre-optic cable makes up the arteries of the internet, but wireless is the capillaries,” says Steve Song at the Network Startup Resource Centre. “But there is this massive bottleneck because regulators are struggling to make spectrum available.”

This provides an opportunity for a new breed of startups that are disrupting mobile-phone and cable internet companies by offering Wi-Fi internet access. Wi-Fi signals can carry a lot more data per second than those used by 3G or 4G phones. And Wi-Fi equipment is cheap because it is mass-produced by many competing firms. Radio transmitters able to beam Wi-Fi signals over a distance of up to 50km cost less than $1,000, compared with hundreds of thousands of dollars for those used by mobile-phone firms. And unlike the spectrum used by mobile phones, which is usually auctioned off and then taxed, the radio waves that carry Wi-Fi are free. That allows firms such as poa! to sell internet packages with unlimited downloads in Kenya’s slums for as little as 50 cents per day. Other firms, such as BRCK, which also builds its own rugged wireless networking equipment, hope to push costs low enough to provide connections without charging the consumer, relying on advertisers instead.

Cheap mobile-phone calls and internet access, in turn, will pave the way for innovation in all sorts of areas, from farming to health care to manufacturing. Start with agriculture.