Proof of Concept for Rural Infracos

“It’s easy to underestimate how much money is in these rural areas,” suggests our next interviewee Dion Jerling of Connect Africa. Rural farmers and communities may not have the population density to attract coverage from licensed MNOs, but a new breed of Rural Infraco is emerging to connect and deliver services to rural Africa. Connect Africa has two low power, low tower base stations installed in Zambia, helping them perfect a business model and long term roadmap that targets 2,000 sites across rural Africa in the next 30 months.

TowerXchange: Please introduce our readers to Connect Africa - where do you fit into the telecoms infrastructure ecosystem?

Connect Africa are happy being described by TowerXchange as a ‘Rural Infraco’. We tend to describe ourselves as a ‘Rural GSM Carrier’ - we focus on the rural telecoms market, providing the infrastructure to carry  traffic on behalf of an existing licence holder.

TowerXchange: What are the origins of Connect Africa?

Connect Africa has been operating for 10 years, mostly under the radar.

We started our proof of concept in South Africa with a mobile services model - a van with a booster antenna driving from remote village to village, working with Vodacom Community Services on airtime sales and added values services. This was supplemented by MOUs with various municipalities and provincial governments, who used our vehicle to transport health, education and municipal extension officers to the communities we serviced. Correctional Services showed particular interest - our vehicle could carry the necessary biometrics for parolees to check-in.

As demand for these mobile services grew beyond what we could provide in a few hours per week, we developed a mobile trailer concept that could be dropped off for days at a time, until we reached a tipping point when a permanent connection could be justified.

TowerXchange: Tell us about Connect Africa’s recent activity in Zambia and what you’ve learned.

Four years ago we moved our focus to Zambia when we established five satellite payphone service sites in the Mumbwa area (Central and Western Provinces) with one in Zambia’s Kafue National Park, a remote area poorly connected by infrastructure.

We consulted local chiefs and trained local operators to ensure good integration with the local community. The technology was provided in partnership with Iridium Satellite and Thuraya, powered by zinc-air fuel cells, which cost less than a lead-acid battery. This power solution also gave local micro-enterprises the opportunity to offer recharging services for fuel cells, which can power four LED light clusters (which provide enough light for a typical home) for four hours a day for a month. Recharging a zinc-air battery would cost less than the price of candles for a month, and the power can be used and sold to charge other small electronic devices such as mobile phones.  The commercialisation of the zinc-air fuel cell concept is on-going and we are keeping an eye on it as a possible solution for our base stations in remote regions where cloud cover often impedes solar power solutions.

We initially forecast turning over around US$50 per week on the payphones at US$0.40 per minute, the same as the cell rate in Zambia at the time, so we put a US$250 credit on one phone - it was used up in two days - leaving us with a vending challenge! It would take a week for funds to clear with the satellite operator before the credit would be transferred to the pay phone - all part of the learning curve in rural Africa.

It was also interesting to note that within three months a macro base station had been erected by one of Zambia’s biggest MNOs at the same site. The site was admittedly on a main line of rail but we like to think we contributed to “rural coverage” being fast tracked back then.

The satellite payphones portion of our project came to an end when the satellite firms had to increase their economy rate from US$0.40 back to US$1, but we’d achieved what we needed, and were able to propose a network of service centres to our project partners MTN Zambia, combining electronic vending and distribution plus mobile money.

Base station vendors Vanu subsequently contacted us. They were looking to field test their SuperPico base stations in Africa and together we implemented a trial site in Lusaka and one in the farming district of Mkushi.  The SuperPico has since been superseded by Vanu’s CompactRAN and we now have two of these base stations that have been running for over three months. Running on a power requirement of just 80W they are ideal for a solar+battery power supply and provide a coverage footprint of up to 5km radius.

TowerXchange: Where is your rollout plan now, what are the next steps and what is your long term vision?

Connect Africa has a full CORE, EMS and sufficient CompactRAN BTS in stock to move onto the next phase deployment in Zambia.  We’ll use results from this deployment to perfect our model and frame commercial agreements that works for everyone.

We want to get up and running on a solid commercial basis and only then look at new countries although we are exploring several opportunities that have presented themselves in the region. Our long term roadmap is to deploy 2,000 sites in the next two and a half years. Our partnership with Likusasa, one of Africa’s leading telco infrastructure specialists, gives us a strong implementation capability and access to new regions.

TowerXchange: What is Connect Africa’s business model and how does interface with Universal Service Funds, for example?

Connect Africa has developed a zero capex, zero opex business model to offer operators a rural network based on a revenue share. Connect Africa works on a revenue share, per minute, or managed service model - the exact combination depends on the preferences of the operator. We would own the infrastructure, and would effectively lease it on a traffic rate to the operators.

We can adapt our business model to accommodate Universal Service Funds - we can do the installation, operations, management, backhaul and service centre, but they (the USF) own the infrastructure.

The Universal Service Fund (USF) model is interesting - if it works it would be the perfect solution, but in reality execution is proving challenging. As such, we decided we couldn’t hang our hats on USF - we needed solid commercial agreements.

TowerXchange: What’s your view on the maturity of the Rural Infraco category?

There is a huge rural infrastructure market, targeted by Connect Africa as well as several similar operations. It is only recently that technology has evolved, through the likes of Vanu and Altobridge, to the point that it should be feasible to sustainably provide rural GSM coverage.

This sector, rural coverage, is still in its infancy in Africa with very few working solutions actually deployed and generating revenue. The Rural Infraco model is even newer and, like all disruptive innovations, we have to force a mind shift in a very traditional business environment. There is much talk about rural coverage but very little being done about it.

TowerXchange: What are the main obstacles to the Rural Infraco business model achieving scale in Africa?

Our biggest challenge remains the caution of tier one operators about revenue sharing business models. Operators are used to and comfortable with their traditional infrastructure models but there is growing interest in towerco and managed services solutions. Deploying US$200,000 traditional macro infrastructure in low ARPU rural environments does not make sense and, to date, the rural market has been of little or no interest to them.

Innovative newcos like Connect Africa have a challenge to be credible. There is still a skepticism among operators as to the revenues to be generated in rural areas - understandable when one considers that they are used to high urban revenues. We are where towercos were three years ago - evangelising a transformational business model, and climbing a steep learning curve.

Technology is no longer an obstacle. Low power, solar PV solutions are now proven in the field. One of our advantages is that Connect Africa is technology agnostic - we can work with the tier one OEMs or small, niche, low power equipment manufacturers - and we can even partner with other Rural Infracos.

Regulators and politicians are also now waking to the fact that rural areas have been underserviced for too long so, despite some initial hurdles experienced with USFs, we can expect some support for sustainable rural coverage solutions from them too.

This nature of this clever low power technology probably explains why we find CTOs more receptive to our business model. The innovative business models are however more challenging and pushback frequently comes from the commercials being questioned and ExCo being hugely protective about sharing the technical heart of their business - sharing revenue is unpopular and active infrastructure outsourcing is unprecedented. But rural towers in rare greenfield sites are great for marketing messages and for regulator relationships.

With GSM licences coming up for renewal in several key markets with aggressive rural coverage targets, it’s a good time for operators to consider zero capex, zero opex business models that extend their rural coverage in return for a share of the revenues from traffic generated and delivered.

TowerXchange: How can Rural Infracos raise capital?

It’s tough for Rural Infracos to raise funds until we sign substantial contracts - Rural Infracos need a lot of patience and deep pockets!

With a business model based on revenue sharing, we have open-ended, unpredictable cash flow, which makes it difficult for banks to lend against. We’re at the initial stages, putting our hands in our own pockets to rollout on a manageable scale in one or two countries, proving the model, and then seeking to attract finance.

TowerXchange: Tell us about the power solutions you’ve used and capital outlay required per site.

We have low power requirements - 80w for a single sector 02 TRX omni-directional installation and 180w for a tri-sector 02dTRX installation. To date we’ve mainly used solar - four 24v panels and a set of batteries is usually sufficient, but we’ve dabbled with zinc-air fuel cells and will consider any alternative energy solution that works.

Standard macro base stations are simply too expensive to be commercially viable in the low ARPU, rural locations we’re targeting. We can deploy one of these low power base stations, along with a Service Centre providing added value services directly to the local community at a cost that will ensure sustainability.  Maintaining and adding value to a rural coverage network is what we do.

There are several credible outdoor lightweight BTS vendors worldwide. The OEMs have stripped down versions while Altobridge, VNL and Vanu all have smaller units.  Vanu has developed and built their CompactRAN from new and they’re all proven in the field.

TowerXchange: Please explain your Service Centre concept and how it adds value.

The Service Centre is how we add value to local communities and to our clients. Our Service Centres provide a point of presence for the MNO, for the government and agricultural services, for banks and for insurance companies, all struggling to reach small scale farmers.

There is a considerable cost associated with providing a service centre so the economics, staffing and management have to be carefully controlled and monitored.

The experience of rural “telecentres” in Africa has not been good and we are looking to change that.  Our rural coverage solution is the catalyst for this change.