Early next year, the West Africa Cable System (WACS), an ultra-high capacity fiber optic submarine cable system that will link countries in Southern Africa, Western Africa and Europe, will be switched on, and with one stroke bring a huge of amount of new capacity to Africa. The system will play a key role in reducing digital divides across the region and connecting Africa with the rest of the world, but this is by no means the only new network. The Eastern Africa Submarine Cable System (EASSy) — an undersea fiber optic cable system connecting countries of Eastern Africa to the rest of the world — was switched on in the last year or so. Fiber is coming into Africa by the bucketload. The question is, will this impact the satellite industry’s opportunities to grow in this market?
Africa remains one of the great unknowns for the satellite industry. On the surface, it seems like a great market for satellite — countries with developing middle class populations coupled with a lack of terrestrial infrastructure, as well as many people living in rural and remote regions should spell good news for satellite. Yet, while there are growth opportunities to be had, the scale of them is perhaps not clear. The demand for more exotic and data-intensive services on wireless devices will only increase demands for bandwidth in the region, and not just in urban centers — small towns and villages across the continent will want them.
Certainly, this onset of new capacity will take away customers who had previously earmarked to use satellite capacity rather than fiber, particularly on the backhaul side. A wireless operator like MTN, based in South Africa, has a huge presence across many markets. Just as many operators, it is evaluating its future needs for satellite capacity, and it is not definite that these needs will increase. It is the leading investor in the WACS system, yet to cover its needs in Africa, it will still need satellite. But how much?
The general feeling is that, with demands for capacity on a significant upswing, there is still plenty of room for satellite. As Phil Braden, COO of Gateway Communications said in an interview, “Our research shows that around 54 percent of the African population is never going to get connected to fiber.” This shows that the African opportunity is not going away anytime in the near future.
While the onset of fiber could reduce the overall demand for satellite capacity, an emerging pay-TV market offers increasing opportunities for satellite. DTH has proved remarkably resilient, and in Africa it could start to make a real impact. New DTH operations coming from the likes of The Wananchi Group are optimistic that they can grow the DTH markets across the region.
One of the key questions is which market, backhaul or DTH, offers the most potential for satellite. While both could be considered growth markets, the gradual introduction of pay-TV services across the region could be a catalyst for satellite capacity demand. However, with ARPUs likely to be low for pay-TV services, this will not be an easy market to crack, even if the opportunity for pay-TV is greater than ever before in the region.
So, satellite’s future is somewhat unclear. Yes, there are opportunities, and yes the demands for bandwidth are increasing. But it seems with so much fiber coming into the region, Africa may not be the “dream” market for satellite that many are touting it to be. The good news is, it should still be pretty good.
