Favourable Market Conditions in East Africa to Drive Broadband Internet Growth

Broadband developments in East Africa are leading to a favourable business environment for Internet service providers (ISPs) to leverage their revenue capacity. Continued reductions in Internet cost, regional economic growth averaging close to 7 per cent and government support are some of the key factors supporting broadband growth in the region.

New analysis from Frost & Sullivan finds that the markets earned revenues close to $164 million in 2007 and estimates this to reach close to $788 million in 2014.

East Africa has missed out on submarine cables as there has been no landing point for them. As a result, Internet services have been prohibitively expensive since countries have had to rely on expensive satellite technology for international connectivity.

"Current deployments of submarine cable systems are however set to provide much needed broadband connectivity in the region, positively impacting the cost of Internet services," notes Frost & Sullivan Research Analyst Letticia Mulenga Nkumbula. "Both Kenya and Tanzania are going to have a landing point of their own, thus putting the region at an advantage."

Liberalisation of the telecoms sector and the introduction of converged licenses in the region have led to increased competition among ISPs. This has caused a reduction in telecom tariffs, resulting in a positive effect on the subscriber base.

ISPs are not only feeling the competitive pressure from within their operating environments, but mobile operators are now pushing their data services deep into the ISP client base as well. This has introduced a new wave of competition in the industry that compels ISPs to redefine their position in the industry if they are to remain competitive.

"In the Internet market, mobility and the ability to provide faster data transfer rates are some of the key competitive factors," remarks Nkumbula. "Mobile telecom operators are also offering similar value prepositions, which are becoming attractive to business clients that have originally been serviced by ISPs and fixed line providers."

The level of aggressiveness demonstrated by mobile telecom operators in the data space means that ISPs need to look beyond their traditional offerings of Internet services. There is a need to include additional Internet solutions and more Internet content in order to expand their offerings and defend their market.

Posted to the site on 22nd January 2009