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Why Counterfeit or Cheap Equipment Is Never A Bargain
The other day a friend called me complaining how his new workshop equipment he recently imported has increased his power bill six fold and that all the benefits of purchasing this new equipment are being eroded by the huge power bills. upon my inquiry, he told me that he had purchased the equipment from a Chinese supplier. I paid his workshop a visit one fine weekend and the findings enabled us come up with a solution and his most recent power bill is close to half of the high bills he was paying. By half I mean KES 95,000. This was however still higher than what he had budgeted for. My friend was a victim of counterfeit equipment. I will try to discuss how cheap counterfeits are not always a good choice.
Some Electric Power Basics.
Figure 1.0: Current and Voltage separated by angle theta
Electric power is derived from the product of Current (I) and Voltage (V) That is Power=IxV or IV. This however assumes that the alternative Current (AC) Current and Voltage are both rising and falling at the same time (in phase). To take care of the fact that this assumption is not always correct, the formula becomes for Power becomes: Power=IVCosø where ø is the angle separating the Current and Voltage as seen in the figure 1.0 and Cosø is the Cosine of the angle. The smaller the angle, the closer Cosø is to 1. So if ø is zero then Cosø =1. The value of Cosø is also called Power Factor (PF)
We would therefore expect Kenya Power to supply electricity whose Current and Voltage separation angle is zero. This is usually not the case and under normal circumstances, the value for Cosø is about 0.8 (about 36.7 degrees separation between V and I). The sad thing is that Kenya power calculates bills in Kilowatt hours (Kwh) where 1 Watt = (one unit of volt times one unit of current (1Vx1I). So if you consume 240 volts at 13 units of current (Amps) for one hour then you will have consumed 3.12Kwh. However the effective power you get to do stuff such as running machines and electronics is IVCosø and under normal circumstances Cosø is 0.8 then the effective power to your machines and devices is 3.12 x 0.8 = 2.49 KWh for one hour, you will however still pay Kenya Power for 3.12Kwh. In short, you pay for the power factor inefficiency.
What Can Cause The Angle ø To Increase?
It is evident from above that the higher than angle of separation of Voltage and Current, the less effective power that reaches your equipment. In fact, if this angle is 90 degrees, then Cosø is equal to zero and there will be no power at all! There are several things that can make this angle larger such as presence of inductive machines such as electric motors on the premises. Motors are found in water pumps, elevators, vacuum cleaners, fans, in workshop machines (my friends workshop in this case) and many more. The more motors you have in a building, the bigger the angle ø tends to be. This is especially true if the motors were not properly designed or are of a poor quality such as those in counterfeit equipment. It was the inefficient and poorly designed motors in my friends ‘new’ equipment from China that was causing an increase in angle ø. For the equipment to produce the required output, it had to suck in more power from the mains supply than necessary. One unit in his workshop had an expected output of 5000 Watts. At 240 volts and a normal power factor of 0.8 then it would suck from the mains about 6250 Watts (5000/0.8). But because of the increased angle ø, the value for Cosø was about 0.61 and the machine was now sucking 8196 Watts. The extra 3196 Watts (8196-5000)watts is excess power that has to be paid for. Because voltage is constant at 240 Volts, the extra power is produced by the equipment drawing more current (I) from the system. More current leads to excessive heating of equipment. Excess heat leads to a shorter life span of both electrical and electronic equipment.
How Can This Be Corrected?
There are several ways to correct this situation where equipment inefficiency causes your bills to be high.
- By installing some capacitor banks. This is the cheapest but not the most efficient.
- Installing synchronous condensers and running them in over-excited mode. In simple terms, a synchronous condenser is a synchronous motor that runs with no load connected to its shaft and over-excitement means the current in its coils leads the voltage unlike the diagram in figure 1.0 where the voltage leads the current in the clockwise direction.
Considering it is not in every persons reach to install power factor correcting equipment in their businesses and homes, the easiest way to ensure that you pay lower power bills it to purchase original equipment from reputable brands. A cheap piece of equipment might save you the initial capital expenditure but highly inflate your monthly expenditure on power bills (as was the experience with my friend), repairs and parts replacement, labor and costs associated with downtime. At the end of the day, what you thought was a bargain from a cheaper supplier ends up making your total cost of ownership (TCO) higher. Cheap is always expensive.
Frequently asked questions
After seeing many complaints and questions on social media on several areas of technology that we use in our daily life, I have come up with a Q and A list below to try answer some of these nagging queries that people have. I have tried to explain this in simple layman language.
Why does my Satellite TV (DStv) go out when it rains?
Satellite TV signals are transmitted from a Satellite that is 42,164KM away from the earth, The frequency used for this transmission is anything between 11,000 to 14,000 MHz, There are very high frequencies making these signals microwave signals. To put them into perspective, your normal TV signals are at around 700Mhz while your mobile phone signals are at around 900 or 1800 Mhz. A characteristic of microwave signals is their interaction with water. Your domestic microwave oven is able to heat the food only and not the plate because unlike your plate, the food contains water molecules which absorb the microwaves converting them into heat. The same thing happens when microwave signals from a satellite travels to your DStv dish encounter water in the atmosphere in form of clouds or precipitation (rain). The water absorbs a huge portion of these signals. If the absorbed signal is not too much, then some portions of the picture are lost leading to choppy pictures and sound, if however most of the signal is absorbed, then your decoder loses connection to the satellite. The easiest way to ensure that you do not lose the signal even when its raining lightly is to make sure the dish is installed by a professional who will optimize the signal or use of a bigger dish. The dishes we see around are mostly 60cm in diameter, a person using a 60cm dish will lose signal earlier and for a longer period than another using say a 98cm dish.
Why does electric power in Kenya go out when it rains?
A three phase recloser system on a power pole.
Electric power lines are some of the highest structures in most open spaces, this makes them more vulnerable to lightning strikes. When lightning strikes the power lines, a surge of electricity several thousands of volts rushes through the system towards your home, if this high voltage power were to enter your house, it would destroy if not set on fire your electronics and electrical devices. Power companies therefore install items called reclosers on the power system. These detect the high voltage and disconnect the consumers from the power supply and hence saving them from the malevolent power surge that would have hit them. What is supposed to happen is that the recloser momentarily disconnects and reconnects the consumers once it drains the excess voltage into the ground, users should therefore experience just flickers during thunder storms on a system with working reclosers. The unfortunate thing is that in Kenya, due to poor maintenance, most reclosers are very good at disconnecting but poor in reconnecting back users. a technician has to physically travel to the recloser and restore power. Even without calling Kenya power to tell them your area has no power, they should able to identify where the fault is by use of time domain reflectometry (TDR) which tells them how far in kilometers from the substation the fault is. Again, due to lack of TDR equipment, when a recloser fails, they have to be called by affected consumers for them to act.
What are all those things hanging on Mobile phone towers?
The technical name for what we commonly refer to as a mobile tower/mast is Base Transceiver Station and consists of many other things with the most visible being the tower. The actual BTS equipment is usually in a housing on the ground (mostly the base of the tower) and the antennae is then mounted on the tower that we mostly see. The towers are used mainly to clear physical obstructions. The labeled items in the picture on the side are:
A- Lightning arrests: These are copper rods with sharp ends that are used to arrest any lightning that might strike the tower. Because copper is a better conductor than steel, it will offer the path of least resistance to any electric current that is discharged by lightning. The copper arrests will transmit this current to the ground and save the equipment from being fried by the high voltage and current from a lightning strike. At the top of the tower is also a strobe light that warns pilots that there is a structure at the location that might not be clearly visible at night.
B and C- Sectoral GSM Antenna: In this picture, these are 120 degree sectoral antenna meaning to cover 360 degrees (all round the tower) three are needed (each for 120 degrees). For this particular picture, this is a shared tower and hence B belongs to one mobile operator and C belongs to another. The reason why in this case there are two antennas per sector is because of something called spatial diversity. In short, if this cell tower is transmitting in densely constructed area such as a city or an ares with many water bodies such as lakes, then two antennas are used in diversity mode to improve signal reception. This is because signals bounce off walls, water bodies and two signals from the same phone can reach the tower, the tower pics the best signal from either of the antennas.
D-Cable guide and ladder: The cables that connect the antenna to the equipment on the ground. If many, the run in the center of the tower because of weight, if few, they can run along one side of the tower. The ladder is enclosed for safety reasons and is used by personnel to access the antenna.
E- Microwave radio Antennae: These are the high-capacity links between one tower to another, the towers are usually interconnected with each tower passing its voice and data traffic to the next until they reach the Mobile switching office. These antennas size depends on how far they are transmitting to with bigger ones transmitting to far off towers and smaller ones to nearby towers. If you see two similar antennas one on top of another facing the same direction, the two work together as diversity antennas. These days however, fiber optic cables are replacing the microwave radios especially in urban centers and these towers now have less or no microwave radios at all.
Why don’t microwaves from an oven pass through the door and harm people?
Microwave ovens produce radio signals that operate at 2,400Mhz. This means that the signal changes direction 2400 times a second, that is very fast!. On the front of your microwave door, in addition to the clear glass, there is an iron plate with very many tiny holes on it. At visible light frequency which is between 668,000,000 and 484,000,000 MHz, These holes allow light through for you to see the food you are warming. However at microwave frequencies which are much lower to the light frequencies, the holes are too small to pass the microwaves out and the perforated iron acts like a solid iron plate hence blocking the waves from reaching you, Microwaves do not pass through iron. This is the same explanation as to why your home TV antenna is a wire mesh, a wire mesh at the TV signal frequencies will behave like a solid plate, so making antennas using iron wire mesh is cheaper (less iron used) but achieves the same objective and results as if a solid iron plate was used.
Why do cell phones consume more battery power when using data?
This is because other than just sending or receiving your voice or data, a cell phone also sends and received other information in what is known as signalling. This information includes your location, IMSI, timing, signal levels and other channel keeping information. When on data mode, the rate at which this information is sent by your phone is much higher meaning that the phone is busy throughout irrespective of if you are using the data connection or not. It’s therefore recommended to disable data so as to save battery life if you do not intend to use data or are far away from a charger and your battery is running out.
Why do car interior get very hot when parked in the sun?
This is due to a property of glass known as the green house effect. Heat generated by the sun has a smaller wave length than heat generated by other objects. When the sun’s heat reaches the car windshield, because its smaller infra rays, it passes through the glass, once inside, it heats the car’s interior and the interior produces heat of a higher infra wave length, these higher infra waves cannot pass through the glass to the outside and the car’s interior keeps on getting hotter. This is the same principle by which green houses work.
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How drones might revolutionize ad-hoc telecoms
US Air Force handout image of a Predator drone
The mention of the word drone conjures images of missile-carrying unmanned aircraft on a mission to bomb the lights out of a terrorist cave in Pakistan or Afghanistan. Unfortunately this is how most of us came to know about them; as weapons. However, these unmanned remote-controlled aircraft are now finding application in many areas such civilian and wildlife surveillance, agriculture and aerial cartography.
Other than long-term communication networks, there exists many short-term and ad-hoc networks that are created and destroyed on a as-when-needed basis, a good example is the outside broadcasting of live events such as sports, national parades, concerts and disasters (you can add election tallying and supreme court sessions if yo are from Kenya to this list). The list of ad-hoc telecoms networks is endless.
Satellite capacity
Satellite news gathering and Outside Broadcast (OB) vans at an event
At the moment, nearly all news collecting organizations have signed contracts with satellite operators to lease either BSS or FSS satellite capacity for their live video links from remote locations. With normal SD video requiring about 9 MHz and HD requiring about 18 MHz of non-inclined orbit satellite capacity, the cost of one SD feed is about 2 Million shillings a month, considering that the link is not in use all the time, the per-use costs associated with provision of multiple satellite based video links can be huge for a large news gathering organization. Whereas this cost might be insignificant to the likes of Fox and CNN, it cannot be absorbed easily by smaller news gathering organizations like those found in Kenya. The fact that Satellite capacity lease contracts are usually long-term (3 years and above), such an undertaking can easily spell doom for a corporation that is not careful when signing the dotted line.
The other alternative is the use of UHF line of sight point to point links. these are however limited by the following facts:
- They suffer heavy attenuation over long distances making them useful for short hops (say from Nyayo stadium to CBD).
- Even with the use of high-powered UHF transmitters to enable the transmission of the signal over longer distances, the earths curvature means that if you transmit from the top of an outside broadcasting van parallel to the ground in the vicinity, the signal will end up in the sky after a long distance, a tall mast or several repeater stations are therefore required to target the signal downwards. The many radio repeater stations along the Mombasa-Nairobi highway that were used before fiber optics were there more because of the earths curvature than to amplify the signal.
Drawing A showing how a signal originally transmitted tangentially to the earths surface ends up in the sky because of the earths curvature. Drawing B shows how the use of repeater tower stations along the way can help ‘bend’ the signal.
Because of the random locations from which news happens, a fixed network cannot be economically used for the transmission of live news and events. The news and events happen anywhere any day any time. a versatile network is therefore needed and at the moment only Satellite can offer this versatility. Fixed networks also become unavailable in case of disasters such as floods and earth quakes and wars.
Enter the Drones
The fact that a drone is steerable within the atmosphere means that it can be flown to any location and with the aid of gyro-stabilizers, park them in air and be used as telecommunication facilities to receive regenerate, amplify and transmit onward a signal from users. compared to satellites, drones can offer the following advantages:
- They can be steered to any location to offer a line of sight to any user/OB van or if they are equipped with high zoom cameras, they can be used to gather news without the need of a human camera operator on the ground, this can be useful especially in disasters, war zones and in daily events like road traffic monitoring.
- The drones, by virtue of them being easy to deploy, can be effective in providing communication in areas that have been cut-off from telecom networks such as earth quake and flood areas, a drone can provide GSM and Wi-Fi connectivity to a large area without the need of setting up terrestrial networks.
- The fact that a drone can land back to earth unlike a satellite spacecraft, drones can be re-fueled and repaired and used countless number of times unlike satellites. They can be easily reconfigured for different tasks, the same drone unit might gather news, offer Wi-Fi to a disaster zone, relay signals and do aerial cartography by simply re-configuring it for each task.
- The ad-hoc nature and speed in which the drones can set up and tear down networks will considerably lower the cost of using drones for telecommunication purposes as a drone can be re-deployed many times for different missions. A While back Safaricom had to tow along a mini BTS and satellite dish to provide GSM coverage for the Lewa marathon, all they will need is to deploy one drone on the event day and provide GSM coverage for the even.
- Their proximity to the earth means that they can use unlicensed spectrum making it cheaper to communicate.
- They do not need long-term commitment to start using them, getting satellite capacity from an operator can take upwards of 3 months and the shorter the contract period the more expensive the capacity.
Regulatory framework
There will however be the need for a stringent regulatory framework on:
- Who can be a licensed drone owner/operator.
- For what purposes will the drones be used? Situations of drones infringing on privacy can be common if not checked. Imagine a drone trailing and photographing a cheating spouse in his/her escapades.
- Airspace control and navigation guidelines to avoid drones colliding with buildings, airplanes or other drones.
- Designated no fly zones for camera equipped drones such as residential areas, military barracks etc.
I believe, if well implemented, the use of drones can revolutionize telecommunications especially the creation and tearing down of ad-hoc networks.
Pitfalls the fifth mobile operator should avoid to thrive in Kenya
Mid last year, local newspapers carried a story about the possible entry into the country of a fifth mobile operator in to the Kenya market. A Vietnamese state-owned operator Viettel had expressed interest in entering the Kenyan market after ‘successfully’ setting up shop in Mozambique.
The fact that a state-owned firm from a little known country wanted to enter the Kenyan market raised eye brows because the Kenyan market is not as easy to operate in, perhaps due to a mix of several factors that include the famous ‘peculiar habits’ of Kenyan mobile users. Sunil Mitall’s Bharti Airtel and Shashi Ruia’s Essar have found the going tough in Kenya after setting up mobile firms that have failed to capture the peculiar Kenyans imagination.
I will try and discuss what i think is the reason behind Bharti Airtel and Essar telecoms dismal performance in Kenya even with such high mobile penetration rates.
Where Bharti Airtel and Essar went wrong
After changing hands severally, Kenyans first mobile operator known as Kencell ended up in Sunil’s hands and changed names to Bharti Airtel. With high hopes of making it big in the Kenyan market, Bharti Airtel embarked on a marketing campaign to endear itself to Kenyans. However, several strategic miscalculations saw them fail to do this. These also apply to Essar telecoms and they are:
- An Out of touch marketing campaign: Many of Airtel’s advertisements featured non-locals (most had South African and West African looks), unfamiliar slogans that were all in English. Poor product naming and more so failure to use Swahili or sheng in their product naming and advertizing. This left them out of touch with the ordinary users who spent over 95% of their time communicating in Swahili. While Safaricom called it M-Pesa, Airtel called it Airtel-Money, While Safaricom called it Sambaza, Airtel called it Me2U. It is just recently their Airtel realized this and changed their marketing to include the use of Swahili words and product names, they now have “piga stori na bob”, “feelanga free”, “Kopa kredo”, “Lipa Karo” etc etc. This approach has started to work for them.
- Out of touch management: By shipping middle and senior management from their India operations to Kenya, Bharti miscalculated the need for local knowledge. One of the reasons why its competitor Safaricom is doing well is because of the local knowledge possessed by most of its management team. The other problem was the frequency at which the mid and top management changed, I once did a 5-month project for Airtel and within those five months, the CTO office bearer changed thrice and the CEO twice.
- Poor technology road map: The adoption of technology such as 3G has taken time to the point of it nearly being overtaken by events. Essar still runs a 2G network when its competitors are testing 4G-LTE. When it comes to VAS, the failure to accurately predict user requirements has seen Airtel and Essar roll-out irrelevant products to the market or even when relevant, they have failed to effectively market them, for example, Airtel rolled out the phone contacts backup service before Safaricom, but no one seems aware of the existence of this service at all. Other than lack of a clear technology and marketing road map. there is also lack of clear vendor selection and qualification with the effect that one segment of a network is handled by more than one vendor leading to confusion and eventual poor service. A good example is when the project I was working on required the system to interface to a competitors system for Sigtran signaling. The competitor, by the fact that he had not won the bid to supply what I was supplying, was reluctant to assist me complete my work by modifying his systems to interface with mine. This ended up causing delays and not meeting marketing deadlines until a work around was used to resolve the issue. An operator who structures his network segments in such a way that interfacing is standardized and minimal will have with him a scalable and robust network that will grow with the business. The current situation where all major and minor telecom equipment brands can be found in a single mobile switching office courts nothing but trouble for operators.
- Lack of strong channel partners: With a poor channel partner network, Bharti and Essar have failed to effectively demonstrate how they can serve the customers they are trying to attract. This is especially true when it comes to mobile money services and airtime card distribution. This is one area that Essar is trying to improve on though with mixed results. This is a chicken and egg situation, do they look for customers first then build a wide channel network or do they first build the channel then look for customers, I am of the opinion that they first need to set up a channel then look for customers.
- Price wars: The penny profit mentality of Indian businesses did not work very well in Kenya when Bharti Airtel and Essar started a price war by lowering their calling rates to unsustainable levels. The lesson all operators got from this is that contrary to folklore, users are not just after keeping their MSISDN numbers for identity purposes, they are after quality service and value added services (VAS), whoever manages to win the VAS battle wins the market.
Viettel is a state-run operator, the fact that Vietnam is a communist country might cause unease at CCK to grant them a license after all despite the millions they intend to pay as license fees. If granted, the Vietnamese operator with no experience in doing business in Kenya better learn from mistakes of its predecessors and ensure that they get it right from the word go. They can only do this if they do the following:
- Believe in local talent
- Do not engage in price wars to win market share
- Establish a wide-reaching distribution channel. I should be able to withdraw money from my phone in my village as is the current situation with Safaricom.
- VAS, VAS, VAS
How Kenya can enjoy lower electricity tariffs
This week, Kenya Power company announced a plan to increase the electricity tariffs and connection fees by about 45% from the current prices. They have also proposed a reduction in off-peak tariffs by about 20% to encourage heavy power users to utilize off-peak periods for their consumption. Off-peak in Kenya is from 11PM to 5AM where power consumption is about half the peak consumption.
The move to lower the off-peak power tariff is something I have been advocating for because doing so will lead to the following:
- If heavy users shift their consumption of power from peak time to off-peak time, then the spike in demand will reduce. Power for peak load conditions is mostly generated from sources that can come into and out of the grid at short notice, these are mostly fossil fueled plants. Lowering the % of power generated from fossil fuels can considerably lower the overall electricity costs. Take a look at the fuel adjustment figure on your electricity bill to understand what impact lowering this figure can have on your overall bill. If electric power utilization in Kenya were nearly a straight line, there would be no need for introduction of expensive peak load power plants into the grid as base and intermediate load plants can serve customers at a lower cost.
- The utilization of off-peak period by heavy users such as factories can lower their cost of production because energy is a huge component of manufacturing costs in Kenya. Kenyan manufacturers pay 21 US cents per KWh compared to Egypt and South Africa which pay 3.1 and 4 cents per KWh of electricity respectively. Power costs are the main reason behind many manufactures shifting base to outside Kenya.
History of Electric power Monopoly in Kenya
In 1908, Harrali Esmailjee Jeevanjee (Jevanjee Garden in Nairobi is named after him), a wealthy merchant in Mombasa bought a second-hand generator from Seyyied Bargash who was the sultan of Zanzibar. The Sultan had purchased this generator from spice money in 1875 to light up his palace and nearby streets in Zanzibar.
At around the same time an engineer, Mr Clement Hertzel, was granted the exclusive right to supply electricity to the then district and town of Nairobi. This leads to the formation of the Nairobi Power and Lighting Syndicate. in 1922 the Mombasa and Nairobi generators are merged under a new company incorporated as the East African Power and Lighting Company (EAP&L). Between 1922 and 1983, EAP&L expands into East Africa and builds power networks and sales the distribution rights to the respective governments. By 1982, EAP&L was only present in Kenya and it changed names to Kenya Power and Lighting company (KP&LC).
Breaking the Monopoly
Since 1908, electricity distribution model has been an expansion of the original one consisting of a centralized source of power shared by many. The acquisition of exclusive rights from day one by Clement meant that no one had the permission to generate and distribute electricity. A Monopoly was therefore born. Kenya can considerably lower its power distribution and generation costs by opening the market to several players. I have discussed in detail in a previous blog post how this can be done here
Improve generation and distribution efficiency to lower costs
A huge chunk of the electricity costs go towards three things.
- Paying for the capital expenditure in the generation and distribution network equipment: Most of the CapEx comes in form of loans from ‘development’ banks and western foreign governments. We can considerably lower the cost of these loans by borrowing in the currency in which we will buy the equipment in or better borrow from the Chinese who are giving the lowest long-term development loan interests.
- Costs introduced by inefficient systems: The Kenyan power grid is inefficient. We lose about 7% of the generated power due to poor electric lines and about 10% due to use of old inefficient generating systems and transformers. My former Electric transmission lecturer who was also the then director at KIRDI reckons that improving the electricity grid efficiency in Kenya by 1% can save the economy about 7 Billion shillings annually.
- Idle capacity costs introduced by a short peak time demand period: During off-peak, the idle capacity becomes a cost, See how idle capacity can become a cost here. By spreading the load over a 24 hour period through encouraging heavy users to use off-peak power, the component of idle capacity costs in the operating costs of the national power system can be drastically reduced leading to lower electricity bills to consumers.
If the above costs are reduced as outlined, the Kenyan consumer can continue to enjoy lower power tariffs for a long time to come. The reason why other countries can afford to offer power at five times below what Kenya is offering is because they adopted these measures to lower the cost of electricity.
Kenyan ISP’s must up their game
US Robotics 9.6Kbps Dial-Up Modem
Not a day passes on my twitter timeline without seeing several complaints by frustrated people about the quality of Internet connectivity they are getting from their current ISP’s. Many of these complaints stem from the fact the ISP did not deliver on its promise to avail bandwidth to the customer at the subscribed speeds. Other than this, the second most complaint is the lack of proper customer support from the ISP as it becomes evasive in resolving customer issues or explaining what is happening to the customers link.
When Internet service provision in Kenya started in the late 90’s, there was no data last mile network to speak of, existing voice circuits were conditioned to deliver data to customers via dial up or leased lines. Dial up lines delivered 9.6Kbps on 64Kbps channels to users because the analog modem circuitry of the day had not been designed with the Shannon-Hartley theory in mind. Digital leased line could however deliver 64Kbps and above link speeds. The reason why the circuits were 64Kbps is because the Nyquist theorem states that the sampling rate for a voice signal to not suffer distortion should be at least double the highest frequency component of the signal, for voice most the power is concentrated at frequency components below 4kHz, so the sampling frequency is 8KHz, in Pulse Code Modulation, each sample is represented by 8bits/sample, so the bit rate=8000 sample/sec x 8bit/sample=64 Kbps. This 64Kbps is what was available on a single leased line copper pair for data use.
Due to the poor maintenance of the copper telephony infrastructure and a monopoly market for the Internet backbone by KP&TC, Internet services were erratic and rudimentary to say the least. Bad Internet was the norm and good internet was unheard of in Kenya.
With the liberalization of the last mile and Internet backbone provision, many players came into the market to offer the services, service levels did improve but only for some time and users were back to the dark days of slow internet in no time.
Where did ISPs go wrong?
Whereas voice providers offered a 64Kbps circuit for voice communication, they billed by the minute. The longer you make a call, the more you paid, if you are not making a call, the 64Kbps was still dedicated to you and you paid a monthly flat fee for that. ISP’s on the other hand, delivered the 64Kbps and decided to charge a flat monthly bill irrespective of the amount of data transferred. In short, ISPs were offering unlimited data from the onset. Due to the poor management of the incumbent operator Kenya Posts and Telecommunications Corporation (KP&TC), ISPs easily transferred this element of resource over utilization to the incumbent as they made profits using a flawed billing method. When the market was liberalized, the ISP now owned the end to end infrastructure (last mile, core and backbone) and any inefficiency in resource utilization could not be absorbed by anyone else other than them. The rain stated beating ISPs immediately after the liberalization of the internet industry in Kenya as their books now started reflecting these inefficiencies as losses and high operating costs. Many were in the loss making regions, many fell by the way, many merged.
The perpetuation of the unlimited internet promise to customers is the reason why cost cutting, overselling and poor customer support ails the ISP business today. Without a differentiated level of service and billing by the quantity of data transferred, ISPs continue to bleed as a small percentage of customers take advantage of this and over use the service greatly affecting the quality of service the rest receive. When Safaricom abandoned the unlimited data plans early last year, they said that about 1% of the users consumed over 70% of the network resources causing the remaining 99% to experience poor service. Safaricom understood this flawed model of doing business and they no longer offer unlimited data plans on their mobile platform, I also see them doing the same for their fiber and wireless customers in the near future.
Cheap is expensive
At the moment, international capacity if wholesaling at a retail price of 200 USD per Mbps. Any ISP selling dedicated service priced below this is cheating its customers. I see adverts of ISPs selling 1Mbps for as low as 10 USD. This capacity must be shared between several clients to retail at that price. Depending on how many the other users are and how heavy their downloads are, customers will generally never hit even a quarter of the subscribed bandwidth on a good day. The end result is frustration and anger as customers accuse the ISP of treachery and poor service.
The fact is that anyone who needs dedicated Internet will have to pay not less than 500 USD for unlimited 1Mbps in Kenya today, should users wish to pay less for this speed, then it must be capped by amount of downloaded volume as it is not possible to get both dedicated Internet speed and unlimited content download service otherwise ISPs will make a loss. Don’t be fooled by marketing gimmicks and jargon used by ISPs. Nothing good comes cheap. End users who have come to this understanding are reaping the fruits of the choices they made to pay hefty pricing for Internet that works.
Sacrificed at the alter of cheap service is customer service, an ISP cannot charge 10 USD for a 1Mbps link and afford to hire sufficient support staff and cover its overheads to offer any semblance of customer support. The lack of responses from many ISPs in Kenya today to customer support queries is deliberate and not as a result of poor planning or failure to cope with the number of incoming calls. Trust me, customers who pay a premium for Internet have their calls answered and issues resolved faster than their 10 USD counterparts.
What needs to be done?
Lower prices cannot be sustainable in the long run, offering cheap but poor service is also not a good business strategy. There is enough proof in the market to support this. Safaricom did not join the voice and data price cutting bandwagon started by its rivals, they were the most expensive in the market (they still are) yet they continue to turn a profit year after year. Why is this possible? Because it is not true that users are after cheap service, they are after good acceptable service and are willing to pay a premium for it.
ISPs need to offer good service and to do this, they will need to increase their pricing from the current ridiculously low figures to levels that will offer the end user acceptable service levels and make them a profit. The current service by most ISPs is so poor that upgrading from one plan to the other has no noticeable effect on service levels. This has to stop. It can only stop if ISPs increase their pricing.
I know I am not going to be popular for saying this but it’s the truth and unless ISPs bite the bullet, they will continue to offer mediocre services to their customers.
The big Telco help-desk outsourcing myth
Many an MBA will whip up a power point presentation with his eyes closed on the advantages that outsourcing can have to any organization. To the uninitiated, outsourcing seems to be the in thing especially in the telecoms and IT sector. It is the ‘panacea’ to the many ills afflicting many a telecoms and IT firm today.
How did they get here?
Many CEO’s will be inundated by explanations from direct reports as to why the firms failure to outsource is the reason why they are losing market share and is also the underlying cause of their inability to tame runaway costs. To bring credence to these allegations, external business consultants are brought in to ‘analyze’ and ‘make recommendations’ to the board on why failure to outsource will be the end of the firm. A good example is when the Customer Services Manager (i hear they are now known as Chief Happiness Officers or CHO’s) says that the call center can no longer handle the ever increasing volume of calls from customers to the company, he goes ahead and says that it will be unsustainable to hire more staff to the help desk as the call volume increase shows no sign of abating. “Outsourcing to a call center operations company would be the best solution” he would add. First things first, why are customers calling the call center? the most obvious reasons are:
- The service or product utility they are deriving from the company is poor or complex to utilize and they need help
- There lacks self explanatory manuals, materials or a self-help IVR system that would eliminate the need to speak to a ‘live’ person for help.
Most of the times, poor service or low product utility is the cause of help desk calls. If the company focused on improving this, then customers would have no reason to call the help desk.
In the years I used to work in customer services, I found out that the Pareto principle held true even at the help desk, 80% of the calls came from 20% of the customers, incidentally, this 20% customer base belonged to the 80% base that gave 20% of the revenues and there was very little up-selling to this lot. This made the help desk an outright cost center. Reducing cost incurred was therefore more of a concern to senior management than improving service.
What type of cost is the help desk?
In the short and medium term, the costs associated with the help desk are fixed costs in that the total cost does not increase with every sale made. This is contrast to a variable cost that increases with every sale. Proponents of outsourcing argue that outsourcing has the desirable (magical is more like it) effect of turning a fixed cost into a variable cost. Management accountants will tell you that the higher the ratio of variable to fixed costs, the healthier, the more nimble the firm is perceived to be. A company in the doldrums can in one wave of the outsourcing wand move from being a weakling into a healthy company. This is the hidden reason behind the outsourcing fad. This is because, by the time a company is unable to handle its customer calls volume, its already too late and the company product is performing poorly. The magic of outsourcing comes in handy, not because customer service will improve or the actual help desk related spend decrease, but because the books will look better. Truth be told, telcos with outsourced help desks give poorer service than those with in-house help desks. How else would you explain loss making telcos still in the game? They have outsourced nearly everything other than the CEO position.
The Core Competency theory
The core competency theory was put forward in a paper titled “The core competencies of the corporation” by the late Professor CK Prahalad and Prof Gary Hamel, the two are credited with coining of the phrase “core competence”. In this paper, they define core competency as specific factor that a business sees as being central to the way it, or its employees, works. A core competency can take various forms, including technical/subject matter know-how, a reliable process and/or close relationships with customers and suppliers.It may also include product development or culture, such as employee dedication, best Human Resource Management (HRM), good market coverage etc. A core competency IS NOT the main line of business contrary to what many CEO’s think today. The core competency of a telco might be innovation or their customer support, not selling call minutes or data bundles. Prahalad and Hamel say that core competencies must fulfill three key criteria (courtesy Wikipedia)
- It is not easy for competitors to imitate.
- It can be re-used widely for many products and markets.
- It must contribute to the end consumer’s experienced benefits. The importance of the product/service to its customers.
Many telco firms outsource what they consider as non-core competencies to third parties while in actual sense they are outsourcing non line of business activities. In this confusion, they end up outsourcing what would have been core competencies to them. The result is that the telco loses its edge and appeal in the market even though they have managed to reduce operating costs or alter the variable to fixed cost ratio for malevolent reasons.
What to do?
Irrespective of the cost benefits, outsourcing to a third party has the following inherent dangers:
- The third party staff do not posses the same culture and beliefs as your internal staff. They lack a ‘big picture’ view and line of sight of where the firm is heading. They treat symptoms and not the real disease. (If the third party staff treated the disease, they would lose business volume). They are paid per call handled.
- No one understands the firms products and services uniqueness better than insiders. Third parties cannot articulate this uniqueness well.
Customer support is a key differentiator in today’s market place, the consumer is armed with social media tools to make his pain known by others in a flash. Telcos need to stop burying their heads in sand by outsourcing the help desk due to increasing calls from customers, they need to identify the cause of this pain and eliminate it. From experience, this pain is usually from a poor customer experience of the product or service. Telcos should focus on building services that are reliable and intuitive to use and the call volume will be manageable. Call center statistics and feedback should be used in product development and marketing as they will help in easily identifying the pain areas of customers. This closed loop feedback system has the effect of decreasing customer dissatisfaction in the long run.
The Bane of “Consultants” on African Telcos fortunes
The global management consulting company AT Kearney, has just released a report titled “Africa telecoms at a crossroads” in which they say that the future of telecom operators in Africa is bleak if they do not adapt to the changing landscape by changing their operating processes and find out what value proposition their existing and potential customers requires. The report alludes to the fact that the days of unbridled growth are over and the rate of new subscriber acquisition has fallen and hyper competition is driving a free-fall in prices, placing pressure on margins and profits. I disagree with many parts of this report because it simply replaced the word “global” with “African” and it was then presented to Africans in Africa. The exact report was presented to European operators too. The entire report is available on their website. I will however try to discuss some of the reasons why I think that African telecom operators are where they are today and what they can do about it to survive or thrive.
The “Single African market” myth
One of the biggest mistakes investors make is to assume there exists an economic entity called the “African market” and then proceed to formulate a single strategy for “Africa”. This is the biggest myth there is. The fragmented nature of the African continent as far as Geo-political boundaries, economic zoning, widely varying tax policies and regulatory environments make it difficult to classify any two countries in Africa as offering similar operating environments. Africa is not a country. In a recent world bank report on the ease of doing business in Africa, only three countries were ‘homogeneous’ enough to be classified as a single market, they were South Africa, Botswana and Namibia.
I believe the spectacular failure of Bharti Airtel’s and Orange strategies when they ventured into Africa was because they failed to realize that what worked in India or France might not necessarily work in Africa. Each country needed a different approach to return on the investment they had made. I also attribute Telkom South Africa’s failure to successfully expand into the rest of Africa to the same reasons. Those who understand that this market only exists on paper and not in real life have made significant returns on their investments e.g MTN and Vodafone
Lack of Product Innovation
According to a white paper released by Delta Partners titled “The Future of Telecoms: New models for a new industry”, the telecoms industry largest revenue contributor, voice services, is set to decline from a share of 50% to only 30% by 2020. At the same time, data growth will continue to explode in the next 10 years through rapidly growing Internet and smart device penetration. This results in two fundamental industry shifts:
- Shift in revenue mix and growth: The global telecom industry is set to grow from $2 trillion to $3 trillion by 2020 but with data-centric services like broadband, M2M and ICT/Cloud to drive 90% of the growth.
- Shift from higher to lower margins: These new data-centric services have generally lower margins than voice and SMS at below 30% and as the revenue mix shifts, this is likely to result in margin dilution
This means that operators will need to adapt by expanding their service offering beyond traditional voice and by lowering their operation costs. But let these figures not fool you, I think the biggest issue here is that this is a global report and not an Africa specific one. Sad thing is many African telcos read such reports and take strategic steps based on the reports recommendations. These recommendations will be true for mature mobile markets such as European or American but not African. Again, just as the AT Kearney report, its misleading.
The problem that African operators face today is because they are caught in a catch 22 situation (perhaps from implementing a past ‘report’ recommendation) because:
- They have just finished or are just about to finish setting up of 3G networks which were originally aimed at offering high-speed data. However, the utilization of these networks is below expectations and some are not even breaking even. In Kenya, Safaricom has rolled out a 3G network that covers 58% of their base stations yet about 10% of their customers have a 3G enabled phone/device. They are in a catch 22 because on one side they need to return their investment on this expensive-to-run network while on the other side, they need to lower their operating costs by running more efficient and cost-effective networks such as 4G-LTE and outsourcing non-core operations. Many operators in Africa are planning to roll-out 4G-LTE, not because they see any commercial sense in doing so, but because it’s the ‘in thing’ to do.
- Despite all the good news coming out of African countries on mobile telephony uptake and growth, the markets are loss making. Very few operators are making a profit, the question is why? An obvious answer would seem to be the recent price drops that have been witnessed (from US$c 20/min to US$c 6/min in Nigeria for instance). However, the real problem lies in the lack of value addition in the services being offered. operators continue to roll out dumb pipe services as third parties such as Google and Apple eat their lunch. With the launch of iTunes stores in several African countries, Apple will make more $ per MB transported on an African telco network than the owner of that network, this has reduced them to mere utilities. Operators need to look beyond the success of mobile money transfer and m-banking .
Flawed business strategies
We have all see those impressive figures about mobile penetration in African countries and how mobile is about to change the continent, sadly these figures are doled out by consulting firms and NGO-types and government bodies with vested interests and not by industry players, the sad thing is that industry players sing along in agreement of the high penetration of mobile for marketing and to attract investors. Recently the GSMA released actual penetration figures that showed that the figure we all know of penetration are actually exaggerated by about 30-50%. This means that for a country like Kenya where we have been told mobile penetration is at 75.4%, the actual figures are about 37%. In the same report, the penetration of India was reduced from 76% to 26% while for South Africa from 138% to 66%. See a snippet of the report here.
The problem is that most operators have based their cash flow projections and investment plans on these figures as opposed to basing their growth prospects/potential on them instead. The GSMA report shows that there is real opportunity for growth of new subscribers because penetration is still low. The problem with a penetration figure of 75% is that an operator will think he has reached peak growth rate and would then strategize to satisfying existing customers with new value add services and faster data networks such as 4G. There are far more unconnected users out there who can turn the fortunes of most operators faster than existing ones. The new revised figures by GSMA mean that operators have a real opportunity to grow their businesses if they focus on understanding what these unconnected users want. It is highly unlikely that they will follow the same utility curve their predecessors followed of voice followed by SMS then some 2.xG data then a bit of 3G and a dash of value added services here and there. This new user will be demanding VAS from the word go, but what kind of VAS they will need is the question, As Prof. Clayton M. Christensen once said in his book ‘The innovators dilemma‘: Markets that do not exist cannot be analyzed. Operators are therefore left to trust their gut feeling. Those who have done so like Safaricom, have succeeded, those who have relied on reports from consulting firms and analysts who have never even been to Africa have themselves to blame.
Follow @tommakauHow do countries block access to the Internet?
In the recent past, there has been news of certain countries blocking certain websites or the entire Internet from being accessed by the citizens. We have seen stories of countries in the middle east blocking YouTube, Google and social media websites such as Facebook and twitter during the Arab spring and the recent release of a movie that touched on the Muslim religion. We have also seen countries such as China block access to Facebook for political reasons. Just last week, Syria blocked Internet and mobile access by its citizens as the civil war ragged on.
The distributed nature of the Internet ecosystem means that there is more than one path to and from an Internet resource such as a server hosting a website. distributed content delivery and hosting also means there exists more than one copy of the same website or content on several servers that are located in geographically distinct regions. For example, if you tried to access a YouTube video from an Internet connection in Kenya, the video could be hosted at the Google cache servers on Mombasa road. A person accessing the same video in the UK can get the same video from a content server in London for example. This poses a challenge to people who might want to block access to the Video.
How the Internet works in ‘layman’ terms
The Internet utilizes a special routing protocol called Border Gateway Protocol (BGP). In BGP, each Internet service provider has IP addresses that they give users who want to connect to the Internet. All of an ISPs IP addresses then belong to what is called an Autonomous System (AS) number which belongs to the ISP. What happens then is that all ISPs in the world announce their IP addresses under their AS numbers. To find your ISP’s AS number click here.
As an example, assume ISP 1 has the IP addresses from 197.236.64.0 to 197.236.127.255 (total of 16382 addresses) and has them under AS 1, ISP 2 had the IP range from 41.255.32.0 all the way to 41.255.63.255 (16382 addresses also) under AS 2 and so on and so forth up to say ISP100 with IP range x.x.x.x to y.y.y.y on AS 100. So if say for example YouTube is hosted under the IPs that belong to ISP 40 with AS number 40, then if there is a customer on ISP1 that wants to access YouTube, then the routers on each AS will have what is called a routing table that tells them to which AS to send traffic for a particular IP address. A BGP routing table is something like this:
- To reach the IP range from 197.236.64.0 to 197.236.127.255 on AS 1, send this traffic to the BGP router advertizing AS1
- To reach the IP range from 41.255.32.0 to 41.255.63.255 on AS 2, send this traffic to the BGP router advertizing AS2
- …
- To reach IP addresses on AS n, send this traffic to the router advertizing AS n
- To reach all other IP addresses that I do not know how to reach, I should ask some few knowledgeable routers at some big ISPs who because of their size might know.
This means very many IP addresses can be addressed by the common AS Number they share. One ISP can have only 1 AS number to address all its customers. The YouTube IP belonging to AS 40 can therefore be reached by the customer on AS 1 if the AS 1 router knows the route to AS 40 from its routing table.
The above is a simplified explanation of how an Internet routing table looks like. From this we see there are three critical conditions that need to be fulfilled for an ISP user such as you and me to reach or be reached from the Internet. These are:
- A user must have an IP address
- This IP address must belong to an AS
- This AS must be announced by BGP to other BGP speaking routers on the Internet.
How then can Internet access be blocked?
The above means that a user without an IP address cannot access the Internet, but it would be nearly impossible to remove all IP addresses from devices in a country if the powers that be do not want them to connect to the Internet.
The easiest way to make these users not reach the Internet or be reachable is to stop announcing their IP addresses and AS number via BGP. This means that if an ISP is asked by the government to stop announcing its AS, then users on that ISP cannot access the Internet. All a government needs to do is threaten the withdrawal of ISP operating license for non compliance and boom, the entire country is without Internet access!
The diagram below shows how about 57 Syrian AS’s containing thousands of IP addresses stopped being reachable on 29th November 2012 after the government ‘asked’ ISP’s to stop announcing them on the net. The few remaining AS’s were most probably government-run networks.
On the other hand, a government might want to block access to a particular website. This they can do in several ways.
- By asking ISPs to install filters that can detect and filter traffic to and from particular IP addresses that host the website. This is usually a long drawn process and can take months to implement. Iran, China have such systems in place. Nokia Siemens was in the news facing criticism from EU in 2010 for supplying Iran with such equipment.
- If a government wants to block with immediate effect without involving the ISP, they can do this by use of illegal means of advertising a more specific route to the website and discarding the traffic upon receipt. In this method, a government announces an AS with a smaller IP block similar to what belongs to the website. Lets say for example there is an AS number 78 advertising the block 195.210.0.0 to 195.210.31.255 (8190 IP addresses), If a government comes up with an AS number 94 with a similar IP address block but more specific say 195.210.0.0 to 195.210.15.255 (4094 IP addresses). Then lets say the website address is 195.210.0.44 which is part of this IP block, then there will be two AS Numbers 78 and 94 announcing that they know how to reach the website IP on the Internet, so which AS is chosen? The AS chosen is the one with a more specific route (less IP addresses on it) in this case the malicious government AS number 94. So user traffic from this country to that website can be picked by the government router and discarded. Pakistan Telecom (The govt controlled incumbent) inadvertently announced routes to YouTube on the Internet in 2008. They however did not apply this to Pakistan ISPs only but this specific route leaked to the Internet causing a worldwide YouTube outage as all YouTube traffic was now being routed to a BGP speaking router in Pakistan. See how it happened here.
- Countries or organizations that control the root name servers for top-level domains (TLD) such as .com and .net can also block access to websites using the TLD by not answering domain name queries to the root servers for particular domain names. The root server method is what the hacktivist group anonymous wanted to use to bring down the Internet, if they attacked all the existing 13 root servers and bring them down long enough, then the DNS resolution system would collapse leading to a world-wide Internet blackout. This method of blacking out Internet access to certain websites can only be done by countries or organizations controlling these root servers such as the USA.
There are many other numerous ways to block Internet access or access to certain websites by a country, some legitimate and some illegitimate like example 2 above. All in all, it is very easy to block entire countries from the Internet should the need arise.
Is Internet Connection a Public Utility?
If you had just enough electricity to either heat your house during winter or power your PC and give you an Internet connection, what would you chose?
In a recent survey, a group of Americans were asked this question and 63% of them chose the Internet connection over staying warm. In another case, a man dug up his neighbor’s lawn to pass a fiber cable to his house and when the neighbor sued him for damaging his well-manicured lawn, the defendant said that Internet was a utility service and therefore had right of way, the courts however thought otherwise and asked the defendant to pay for the damage done. Some ISPs in Kenya have faced difficulties when laying fiber to the building as landlords demand monthly fees for hosting the ISPs cables in the buildings, ISPs have been adamant in paying this monthly ‘rent’ because they argue that companies like Kenya power or the water distributors do not pay a similar consideration to the landlords to deliver their services to the tenants. The ISPs want the landlords to treat their Internet cables as utility cables and not charge for their routing in the buildings.
The question that arises is if Internet connectivity can be considered a public utility like water and electricity. A public utility can be defined as “a business that furnishes an everyday necessity to the public at large.” electricity and water are all considered public utilities. In strictly legal terms, there is also a regulatory component in the public utility definition, but here I am concerned with the “everyday necessity” portion. In a utility service like electricity, I want to flip a switch and expect electricity and consume it in quantities that will satisfy my need but at the same time leave enough available to satisfy other people’s (the public) needs too.
I believe the answer to the question on if the Internet is a public utility depends on many factors. The first is geography. In as much as Africa has made great strides in as far as Internet penetration is concerned, we are still very far compared to our European or Japanese counterparts when it comes to not just availability of the Internet but its use also, its one thing to have internet available and another to use it. Statistics show that Africa contributes just about 2% of total Internet traffic and less than 0.1% of the content. Africa is still fighting hunger and disease and lack of clean water, to try classify the Internet as a utility might seem insensitive and counter productive. or is it?
In the rest of the developed world, penetration in some countries is close to 100% (with Norway at 97% and Monaco at 100.6%) compared to Africa’s Highest penetration rate of 51% in Morocco and lowest in South Sudan at 0%. It might seem counter intuitive to classify Internet as a utility in South Sudan for example. However, if this is done, it might actually spur its penetration levels.
The reasons for declaring it as a utility are different for developed and developing countries. Whereas the developed country population is already hooked to the Internet and use it for their daily lives, In developing countries it’s still a luxury and not many can afford it. However, more and more people from developing countries are spending a bigger chunk of their incomes to gain connectivity.
Declaring The Internet as a utility in a developed country will be mostly to spur usage while in a developing country doing so will only spur penetration. The problem however that will arise in both developed and developing countries is that all public utilities must be closely regulated. When the FCC in the US attempted to declare the Internet as a public utility in 2010, it faced a lot of opposition because of the raft of regulatory measures it had put in place. At stake is how far the FCC could go in dictating the way Internet providers manage traffic on their multibillion-dollar networks. The FCC said that its intentions were misunderstood and all it wanted was to guarantee net neutrality. The issue of net neutrality arises from the fact that some ISPs were giving higher preference to traffic from their own services or friendly partners and less priority to traffic from rival networks, eg Comcast was giving video traffic from its sister companies higher priority than traffic of a similar nature from say Netflix or YouTube. Again, the issue of if Comcast is justified in doing this is a discussion for another day.
So the answer to if the internet can be classified as a public utility depends on so many factors. My opinion is this: for the sake of increasing penetration levels, it should be classified as a utility but should be devoid of the close regulation imposed on other utilities such as water and electricity. This is because unlike water and electricity which lack distinct differentiators from one supplier to another (clean water is clean water, 240 volts AC is 240 volts AC), the Internet has unlimited ways in which value addition and differentiation can be done. a regulatory framework to manage this value addition can be cumbersome and self-defeating and market forces should be let to determine which ISP wins the market.
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