Further investment needed to fund data business boom

Undersea_cableInvestment in undersea fibre optic cables, expansion of mobile networks to rural areas and the increasing number of East African owning smartphones, have boosted data business in the region, writes Mwangi Mumero

In the last few years, East Africa has benefitted from the laying of undersea optic fibres – namely Seacom, Teams and Essay – all of which have boosted internet connectivity across the region.

Recently, another submarine cable – Lower Indian Ocean Network 2 (LION2) – was launched. The cable, owned by France Telecom-Orange and other partners, will connect the island of Mayotte with broadband connection for the first time while reinforcing connectivity in the East Africa region.

The 2,700km-long fibre optic cable uses the wavelength division multiplexing (WDM), which officials claim is currently the most advanced technology for submarine cable.

Fast internet connectivity has raised the capacity for data handling creating room for IT start-ups across the region.

Experts have, however, noted that the data business in the region has rode on the fast expansion of mobile networks and the presence of smartphones.

The latest reports from the Communication Commission of Kenya (CCK), the country’s telecom regulator, show that 75 per cent of the 14.3 million internet users in Kenya access the internet through mobile handsets, making 3G connectivity the preferred mode of access due to its relatively high speed.

Due to the high cost of smartphones, mobile operators like Kenya’s Safaricom have entered partnerships with phone makers to increase access.

Two years ago, Safaricom signed a deal with Huawei to launch the Ideos mobile phones powered by Google Android, which have performed well in the market.

“Year-on-year sales, particularly of mid-range smart phones, have increased and data usage is expected to increase,” noted Safaricom CEO Bob Collymore in a recent interview with local media.

Most of the deals involve mid-range phones priced between US$100 and $300 with analysts warning that they must be made more affordable to increase data usage.

Smartphone models such as the latest iPhone, BlackBerry and Samsung Galaxy, remain beyond the reach of most East Africans, but deals with the telecom companies are expected to push prices down.

“With an iPhone 3, I can access emails, download music and chat online without having to carry my laptop around. It also reduces risk of theft as a phone can be safely tucked away in my pocket”, says Jane Rotich, one of the few Kenyan university students lucky to own a smartphone.

Rotich, however, observes that prices must come down for many of her college mates to afford them.

With a young IT savvy generation of students and newly employed workers, social networks such as Twitter and Facebook have become a focal point where fun and business compete.

“Music, photos, messages and video downloads on social media have made a smartphone a necessity,” says Nick Waitathu, a local business journalist.

“Vital contacts are also done on social media, making such a phone an important business tool.”

With the voice market in East Africa close to saturation, firms have been targeting the data market, thereby increasing their broadband capacity.

Mobile operators in Kenya such as Safaricom and Orange Kenya have invested heavily into 3G technology to tap into this emerging market.

“Data consumes more broadband than voice or text,” asserts Peter Wanyonyi, a telecoms analyst. “Firms will initially be faced with broadband issues as smartphones increase and demand more bandwidth.”

Beyond the mobile companies, three other firms – Jamii Telecoms, Kenya Data Networks and Access Kenya – have enabled the country to attain 3 per cent broadband penetration, although rural areas lag behind due to underinvestment.

“We do have farming applications such iCow and M-Farm, which are aimed at rural areas, but East Africa needs to create relevant technology that will leverage the whole community to move towards industrialisation,” says Kahenya Kahunyu, an IT columnist for The East African.

To achieve increased growth in the data sector, analysts say that investment must be made in the development of local content.

Recently, the Kenya government secured an additional $55.1 million to scale up digital inclusion, content development, e-government and shared services.

The new funding will increase financing under the Kenya Transparency and Communications Infrastructure Project to $169.5 million.

“The additional finance will enable the country to consolidate initiatives it has made in the ICT sector, including the open data initiative,” notes Johannes Zutt, World Bank country director for Kenya.

In the recent past, the country has been instrumental in the development of software that has revolutionised business. M-Pesa is one mobile money transfer platform that is being emulated across the world following its huge success in the country.

Growth in data business in the region has also led to further investments in data storage and backup solutions.

“Africa is more vulnerable to data loss due to power fluctuations that destroy computers hardware, theft, low PC penetration and sharing of computers, which lead to virus infections that infect files,” observes Carla Viezee from File It Africa, one of the data backup service providers in the region.

With an initial investment of $24,000, the company aims to support East African companies with safe storage and backup, and create a mobile office that can be accessed from anywhere.

Another firm, Secure Data Solutions, offers data conversions services, online access to record management applications and computer media storage services that target large corporates, government and small and medium enterprises (SMEs).

Mwangi Mumero

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