Beefing up the broadband in Kenya

For the Kenyan journalist Wambugu Kanyi, writing for a local daily has never been easier - and cheaper.

He can now send stories and digital photos from any location - no matter how remote - as long as the area has a signal from a local mobile phone company.
“Entry and cheap access of modems from the mobile phones services providers have made it easier for writers and other mobile business persons to work freely. No longer do I have to rush to get to places with cyber cafes,” said Wambugu, a Nyeri-based correspondent for a Kenyan daily, the Star.
Armed with a laptop and a modem, Wambugu completes and files a story from the comfort a hotel table - taking tea and chatting with friends. The landing of an optic fibre cable at the Port of Mombassa in June 2009 has made Internet access in the country faster and better in business transactions.

Gaining hi-speed connections
Unlike the cyber cafes that require fixed line connections in most cases, the use of modems has made an increasing number of Kenyans work convenient as they move. And with it has come competition for the data business among the many players in the Kenyan market. With a drastic reduction on average per user rate (ARPU) pegged on voice service, mobile providers are hard pressed to maintain profits. Data has become the new arena for increased revenue.
The four mobile phone services providers – Safaricom, Zain, Orange and Econet Wireless - have an estimated 18mn subscribers. But the traditional Internet Service Providers (ISPs) are not amused with the intrusion into their core business and are out for the bare buckle with the mobile providers. According to the Telecommunications Service Providers Association of Kenya (TESPOK), the estimated Internet users in the country average four million. The country has an approximately 50 Internet Service Providers (ISPs). Broadband Internet users are estimated at 120,000 with the cost of two Megabits IP backbone connection at US$1,200 per month.
Today, glossy magazines, roadside billboards, newspapers and the electronic media are full of advertisements as mobile phone service providers hawk their broadband modems with accompanying freebies of mega bites (MB). With its huge subscriber base estimated at 13mn, Safaricom Limited - the biggest mobile phone company in East Africa - has become the front runner in the broadband modem market. (ends)
Since the inception of the Safaricom modems in 2008, the prices have fallen from a high of Ksh12,000 (US$160) to as low as Ksh2,999 (US$40) today. Virtually many laptop and PC owners in the country can now purchase a modem as their prices drop by the day. The company’s 2009 half year report indicates that distinct data users grew to 1.8mn by September 2009 The service provider has 180 dealers with a national distribution presence of 500 retail shops for modems. Safaricom recently partnered with a local bank-Equity Limited - making the acquisition of laptops and broadband modems more affordable as demand has significantly grown. The bank loans money for the purchase of the laptops while Safaricom provides the modems for instant Internet access.
Targeting small businesses and homes, Safaricom promises firms signing up a 12-month contract some freebies, among them, free connectivity for a month, equipment for premises and installation of equipment. They also get free domain registration, web hosting, email hosting and two 3G Broadband modems laded with 40Mb of data each. But other mobile phone service providers have also joined the fray. Zain Kenya - the second biggest by subscriber base has introduced two modems – one of 500MB and another of 1GB.
“The demand for our data services exceeded our most optimistic expectations. This was primarily driven by our prepaid data bundles,” said Michael Okwiri, Zain’s communication manager. In the modem market, the level of speed ranges from as low as 3.6 megabytes per second to as high as 21 megabytes per second. Availability of bundles in small denominations has also endeared customers to the modems.A bundle of 40MB which Safaricom sells at Ksh250 (US$3) will allow for chatting, checking emails or browsing and can last up to two weeks. Heavy utility use such as research, bulky downloads and uploads of data need higher bundles.
Telkom Kenya - through its Orange brand has registered more than 100 per cent increase in the uptake of modem based Internet services. “The modem has become our business lifeline. We no longer have to transact business from the office. We can instantly communicate with our dealers in foreign countries in real time and get orders irrespective of where we are,” said Sally Mwikali, a dealer in sisal baskets (Kiondo) for export.
Mwikali buys the products from women groups all over the country and travels frequently as the market demands. She has to keep in touch with her markets in South Africa, Japan and the United States even while in remote Northern Kenya. But the entry of the modems has made competition in the data market stiff with the ISPs becoming restless. It has forced ISPs to review their pricing to remain competitive in the data market. Cyber café operators are equally alarmed by the new development. Elias Gitonga of NairobiNet - a local ISP - observed that mobile phone operators with a large pool of clients and financial muscle to peddle their data services are threatening to make ISPs irrelevant.

More users
With the ISPs having sold the broadband Internet connection through cyber cafes, the entry of modems has made a rising number of Internet users browse easily from their houses and hotel rooms.
“We have noted a 10 percent decrease cyber café customers since the entry of the modems. We believe the modems are negatively impacting on our business,” said Patrick Mwangi a cyber café attendant in Nyeri town, Central Kenya. To make themselves relevant with the imminent competition, ISPs increasingly adding value to their businesses to boost their revenue. Reports indicate that many ISPs are also diversifying from their core business to cushion themselves from reduced earnings.
Telkom Kenya has introduced a new service that allows Internet access through existing landlines, saving users substantially in installation costs. Swift Global has said it would focus on disaster recovery and Voice Over Internet Protocol (VoIP) services. The firm is banking on a franchise to cut operational costs by 20 per cent in order to maximise profits. AccessKenya has acquired Saroti Solutions, a medium sized generator of business online. Kenya Data Networks (KDN) has partnered with Family Bank to increase access to the Internet. UUNET Kenya intends to start offering television services via the Internet. Another ISP, Africa Online with corporate and home markets has since its acquisition by Telkom South Africa has been focusing on expanding its network. Wananchi Group has lowered the cost of its Internet offering by 50 per cent. It has also launched a service that targets the small business segment.

Mwangi Mumero

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