04 July 2007

Incremental infrastructure for Africa

Extending the discussions at TEDGLOBAL2007 in Tanzania and the conversation that's currently taking place online, Ethan Zuckerman has a must-read post on the economic growth of Africa as exemplified by the very fast growth of mobile telephony across the continent -- there are currently nearly 120 million subscribers to cell phones. That growth has been breathtaking, and is central to many discussions about the future of Africa. However, Ethan wonders, it’s hard to know whether it is replicable in other sectors:

There’s a couple of circumstances that I think are critical to understand in the rise of mobile networks on the continent:

• You can build a mobile phone network one piece at a time. With a GSM license and a single tower, a company can begin earning revenue and start using this revenue to finance future expansion. An investment in the single-digit millions can turn into a multi-billion dollar business through reinvestment of revenues. That just isn’t true for creating container ports, major roads or large power generating facilities (...)
• Users financed a great deal of the infrastructure behind the mobile phone boom - specifically, they purchased the handsets (...)
• Sheer government incompetence helped the mobile industry by ensuring that most phone buyers weren’t replacing land lines with mobiles, but purchasing their first phones. It’s easier to sell someone a new, useful service rather than an improvement on an existing service (...)

I’m trying to figure out whether these criteria lead to an infrastructure investment strategy for Africa based on incremental infrastructure development. (...) African mobile phone companies are being forced to become power companies. In urban areas, phone companies have to equip every tower with diesel generators because of frequent power cuts. In more rural areas, where companies can’t rely on grid power, providers need to put in two generators - one to power the station, the second as backup. The cost of delivering diesel fuel to these locations is substantial - Russell Southwood calculates that a grid and road-connected base station costs $2,500 a month to maintain, while a very rural station might cost $20,000. (...) If mobile phone companies - or a similarly entrepreneurial entity - could begin building larger, more efficient power generating facilities, they could service local communities with power as well as with telephony. If there were sufficient success for this model, it might start to resemble the “electranet” that some have suggested might alleviate African power problems.

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