Facebook, Google, Amazon and Microsoft Are About to Eat Telco’s Lunch

There have been recent developments in the Internet backbone and last mile space that should get every Telco CEO worried. These developments are about to throw into disarray well thought out and tested business models on the bandwidth provision front.

In the last few years, there has been increased activity by Facebook, Microsoft, Amazon and Google on the telco infrastructure front.

According to TeleGeography, the international capacity deployed by these companies rose 14-fold between 2012 to 2016 and continues to grow. For example:

  • A coalition of investors led by Google is funding the new Monet cable linking Florida and Brazil, and in February 2018 announced it was backing three projects set to come online in 2019.
  • In April 2019 Google completed the “Curie” project, its first private intercontinental cable, connecting Chile to Los Angeles. It also announced last year the Dunant transatlantic submarine cable project connecting Europe and the US to be lit in 2021.
  • Facebook and Microsoft both funded construction of the Marea cable connecting Virginia and Spain, which was completed in September 2018.
  • Amazon is one of the key investors in the Hawaiki Submarine Cable, which will connect Australia to the U.S. West Coast via New Zealand and Hawaii.

Closer home, Google recently announced its building a cable from Europe to Capetown in South Africa that will land in several West African countries. Named after the Nigerian slavery abolitionist and author Olaudah Equiano, who was kidnapped as an 11-year-old and sold into slavery in the 1750s, the cable will have 20 times the current capacity provided by all existing cables on the same route. Facebook too, in partnership with some local operators is finalizing plans to lay its cable (aptly named Simba) which is expected to land in most African countries in the East and West coast of Africa.
Other than undersea cable investments, these players who were traditionally in the OTT or cloud services space, are also laying or testing last mile infrastructure. Google is operating a fiber optic metro network in Uganda and is in advanced stages of testing their high altitude baloon- based (Google loon) wireless transmitters that will beam LTE signals over large areas of the continent. Unlike ground based wireless transmitters on masts that cover a small area, a single loon can cover the area the size of Nairobi county. Once tests are complete, end users can access the service using a Google issued SIM card or a cheap roof top receiver. Hot on the heels of this is Elon Musk’s Starlink Low Earth Orbit satellites that will offer high speed broadband at 25ms latency to the entire earths surface and oceans. As of November 2019, SpaceX has deployed 122 Starlink satellites. They plan to deploy 60 more per launch, at a rate of one launch every two weeks beginning in November 2019. In total, nearly 12,000 satellites will be deployed by the mid-2020s, with a possible later extension to 42,000. Facebook is also trialing free access in a different way; by partnering with mobile service providers to offer free Facebook or discounted WhatsApp data bundles access on their networks, Its free because Facebook has paid fees for the access to the mobile operator.

What is happening here is that slowly, OTT and cloud services providers are getting vertically integrated, owning the data center, undersea cable and last mile to the end user. Soon, if all goes to plan, Google will be able to serve you a video on YouTube from a data center it owns, via undersea cables it also owns through their LTE SIM card in your Android phone. This cuts off all traditional players in the Internet broadband space. With eSIM cards soon becoming the norm, traditional mobile operators will find it hard to compete. Googles own Pixel2 supports eSIM. A Phone will by default have an internet connection free for life.

This vertical integration has been taken a step further by Facebook where not only are they about to own the entire distribution chain for internet access, they are also manufacturing their own network hardware and servers. Facebook wrote faster switching software algorithms and made them open source while at it. Its now possible to build network switches that are way faster than what you can get off the shelf. Some are commercializing this already. On another front, Google announced that they are getting into banking services to offer bank accounts and credit cards.

Other than connectivity, these players are also investing in data centers and POPs in Africa and many other parts of the world, Amazon today announced that it will have presence in Kenya early next year. These will be inter-connected via these providers owned networks, cutting off many existing commercial undersea cable operators. Until Trumps recent trade War with China, Facebook in conjunction with Huawei were planning on building a massive data center in Kenya with other inland countries to follow. These operators will start by leasing data center space from existing data centers but will with time build their own spaces because they will need to even manage the data center operations end-to-end to be more efficient in their every expanding operations. This is a massive opportunity for Konza Technopolis or even Naivasha county offering Data centers land acreage near the geothermal power plants.

What is about to happen is these players, will now offer free internet access and voice calls directly to end users in addition to financial services. Most of the world outside china is already using WhatsApp (which is owned by Facebook) to send messages and call. Many don’t use the call or video feature because it costs data to use them. Users will now be able to access services such as YouTube, Facebook, WhatsApp video and voice calls, Twitter, Microsoft Skype/Teams and Amazon Web Services for free, to many that constitutes the entire Internet. Broadband pricing and poor speeds have been one of the biggest impediments to the likes of Google, Facebook, Netflix and Amazon. If they offer this free and cut off players who charge a fee, they will increase the number of customers drastically. Investing in these projects is deliberate and is expected to yield profits for these players. This is what Elon Musk’s SpaceX and Starlink project is all about, making re-usable rockets that can launch as many satellites to orbit as possible and at low cost. He can lease his network to the likes of Amazon or Netflix or even Google to deliver content directly to end users. Currently, I am paying $9.9 for Netflix and paying a Telco about $40 for Internet access. Netflix can charge me $11 and give me ‘free’ Internet access to Netflix. In this arrangement, Telcos are impeding content providers access to markets and the faster they are eliminated by the content providers, the better their fortunes will be.

The ease with which these operators are doing this is worrying and connectivity providers need to reinvent themselves because they will soon be cut off from the internet content distribution chain. Another worry is the locking out of content providers who cannot match the investment the likes of Google are making in connectivity services. The issue of Net Neutrality crops up. For example, will Google lease their network to competing service providers? If yes, will their traffic be treated equal to Googles in google-owned cables? How will smaller players and innovators compete in a space where the big players control/own even the operating system that your device runs on?

What Needs to be Done to Stem the Frequent Fiber Optic Cable Cuts in Kenya?

Kenya’s broadband penetration and growth has been nothing but spectacular and has been fueled by capital intensive investment in mobile and fixed infrastructure by private sector players. The local regulatory environment has also in many ways aided this. According to the regulator Communication Authority of Kenya, as at 30th June 2019, the number of broadband subscriptions stood at 49.9 million with 99.9 percent being on mobile data. This was an increase of 21.4 percent since 30th June 2018. During the fourth quarter of the 2018/19 Financial Year, the number of broadband subscriptions stood at 22.2 million up from 21.9 million subscriptions reported during the third quarter. Broadband subscriptions accounted for 44.5 percent of the total data/Internet subscriptions.

This growth indicates that broadband connectivity is fast becoming a must have for many individuals and businesses to access digital services such as e-commerce, cloud services, social media, infotainment and conduct business communications. Reliability of the broadband connectivity therefore becomes important because any downtime has a direct impact on peoples livelihoods and their economic and personal well being. At the heart of broadband connectivity are fiber optic cables that are buried underground that aggregate and transport data being consumed by end users on both mobile and fixed connections. these cables are often found buried close or next to other underground infrastructure such as piped water, sewerage and underground power lines.

In countries where physical planning is taken seriously, underground infrastructure planning is centralized and owned by the local governments. These governments, incorporate into their physical planning, underground paths and conduits to carry power, fiber optic, gas and water pipes. They also maintain an up to date map of the paths taken by these conduits and which service provider is leasing which segment. This information is often publicly available or accessible to registered providers. The authorities also manage and supervise any works done by a provider in the conduits. For example when a provider is conducting repairs or extending their services. This supervision is necessary to ensure that a provider does not deliberately or inadvertently interfere with other providers infrastructure and services.

Here in Kenya, the story is different. Local authorities such as county governments and government bodies such as Kenya National Highways Authority (KeNHA) or the Kenya Urban Roads Authority (KURA) issue way leaves to underground infrastructure owners to allow them lay their infrastructure mostly on road sides and under pedestrian pavements. Each service provider then has to excavate, lay their own conduits and pipes, and backfill. There is no sharing of centrally managed conduits that should ideally be owned and managed by the authorities and leased to the providers as a small fee.
This approach would work very well if the way leave issuers managed the access of this infrastructure by the providers for the purposes of repair and service extension. As you would imagine, there is very little management and enforcement of access guidelines and every provider seems to work independently and can access their underground infrastructure at will as long as they have a way leave issued after paying the required fees. The result is the providers take little caution when excavating to extend or repair their infrastructure leading to interference of other providers plant. The providers also end up not doing a good job or restoring places they have dug up back to their previous condition as stipulated because of little or no supervision or consequences for non conformity.

According to statistics by fiber optic cable providers, second to power outages, cable cuts due to negligence and poor planning accounts for 26% of all downtime experienced in the country with power issues contributing a massive 38% of all downtime. These are grim statistics in a country that boasts faster average internet speed than the USA.
There have been efforts by the regulator and other sector bodies and lobby groups to reduce this through a ‘dig once’ policy or infrastructure sharing. It was believed that by making providers share infrastructure such as underground cables, they would pay more attention to any works being done to avoid damage to competitors cable because it also carries their traffic. This hasn’t worked well because there has been little uptake of this by the providers. Even if they had complied to this directive and share infrastructure, majority of the cuts are not by the fiber optic providers or their contractors but by other entities such as water and sewerage companies, road contractors and private developers. There is not a single day that passes in Nairobi and other major towns without a fiber cable cut that is caused by the water companies, road builders or developers doing works near roadside way leaves such as putting up a new petrol station.

What can be done to end this?
With the current way leave owners simply collecting revenues by charging each provider separate way leave fees and not putting in place measures to ensure the safely of the fiber plants, providers and contractors are on their own. They simply obtain the way leave and start work without caution or informing other underground tenants at the work area of the impending works. The result is damage to communication cables and other services leading to downtime in some cases, depending on the location of the cut. A recent example is when on 27th Sept 2019, The Nairobi Water and Sewerage company (NWSC) dug up a sewerage line on Mombasa road near the East Africa Data Center (EADC) and in the process ended up cutting over 200 fiber optic cores belonging to Telkom Kenya, Airtel, Safaricom, Liquid Telecom and others that carry traffic to the data center and towards Mombasa and to the Internet. This led to slow Internet experience for users of services such as Facebook, YouTube, Netflix and other services because the EADC hosts the Content Delivery network servers for local caching. The EADC also hosts many other services for organizations that were also impacted by this. There are several redundant paths to the EADC and this particular cut being close to the premises meant that the route diversity was reduced. Being carrier neutral, almost all internet providers connect to the EADC via multiple paths and reducing the number of available paths due to such a cut leads to slow services or total downtime for providers who were only dependent on the Mombasa road route. This borders economic sabotage and hefty fines should be applied to punish such negligence.

About 3 months ago, the ICT Authority of Kenya issued a notice to all fiber optic infrastructure providers to share with them an updated map of their existing and planned fiber optic cable routes in Kenya. The Authority also said that upon submission of the maps, any provider wishing to extend their networks needed their prior approval to do that. This has not been well received by the operators because:

  • There is no existing legal framework that mandates the ICT authority to ask for this information from providers and to ask them to seek their approval for network extension.
  • The authority’s requirement to seek their approval is also not well defined in the law and there is fear that this exercise is just a revenue collection avenue for the body.
  • The Authority owns the National Optical Fiber Backbone (NOFB) and leases capacity to customers in a commercial arrangement. This effectively makes the Authority a direct competitor to the private sector operators which it wants to now manage with this new directive.
  • Providers already pay way leaves to local governments and bodies such as KeNHA and KURA. It also takes an average of 35 days to get way leave approval from them. The authority should instead be working with way leave permit issuers on how to lower this from 35 days to less than a week, as opposed to making the process more difficult than it currently is. Some counties have even refused operators way leaves on frivolous grounds such as saying they recently paved the town with red cabro as if the providers have refused to re-pave the sections they work on at their cost.

The authority’s intentions were to centralize the management of fiber optic routes and offer a one stop map portal and resources. These are good intentions and are welcome, but they are not well anchored in law and many believe this mandate falls under the regulator; Communication authority of Kenya and not the ICT authority. There is also a feel that, considering that already the providers are already paying levies to other bodies, the addition of another approval and levy step will only go to make broadband access more expensive and slow down the rapid growth being witnessed.

There is need for the formation of a multi-stakeholder body that is in charge of issuing way leaves, maintaining an interactive map of cable routes with indications of ongoing or planned works and a process behind it to ensure cooperation in their activities. This body can be funded from the universal service fund (USF) so as to not turn it into a revenue generator with no substantial benefit to the stake holders as is the case now. The benefits of broadband access to the government and citizens far outweigh the measly fees being levied by these bodies and i believe its time the law is amended to outlaw them. Counties stand to benefit more if they provided a conducive environment for operators to extend their networks. They can find other ways of benefiting from this through beneficial partnerships with providers as opposed to levies and taxes. A good example is Nakuru county that has partnered with Liquid telecom to roll our public Wi-Fi hot spots for the county residents. A bad example is a county I won’t name that even asks branded provider vehicles to pay a branding license/permit for driving around their county in branded vehicles yet they were going there to conduct activities that benefit the county residents. County governments need to look at the bigger picture and create a suitable environment and not just be blinded by revenue prospects through levies and fees charged.