The government of Kenya has invited the private sector to partner in Long Term Evolution deployment, a move that is likely to benefit smaller ISPs (Internet service providers) and further reduce connectivity costs.
The decision by the Ministry of Information and Communication comes after complaints that the 3G license fees were priced too high, at US$15 million. They were later reduced to $10 million, after critics said high capital expenditures stifled infrastructure growth in rural areas.
The partnership initiative calls for LTE deployment via an open-access model, where small and big operators will be able to use infrastructure without worrying about spectrum fees and high capital expenditures during rollout.
"This is the only way to salvage ISPs owned by small businesses to be able to compete and offer innovative solutions to consumers," said Bitange Ndemo, permanent secretary in the Ministry of Information and Communication.
In a newspaper ad, the government called on companies that have tier-one network operator status, are 20 percent Kenyan owned and are capable of rolling out a countrywide network within a year. The requirements were seen as a radical departure from the spectrum regulations that had previously emphasized the ability to pay, which led to some companies hoarding spectrum.
"Our understanding is that the government is seeking equitable access to spectrum irrespective of size of operator; Safaricom has always advocated for the principle of 'use it or lose it,' and open-access network is in line with this principle," said Bob Collymore, Safaricom CEO.
Safaricom was the first company to pay $15 million for a 3G license three years ago. Last year the fee was reduced to $10 million after complaints from Telkom Kenya (Orange) and Airtel. Currently Safaricom has the most extensive 3G coverage, with 1,500 base stations on 3G out of 2,500 base stations countrywide.
The open-access model was embraced by the ICT industry in the country even though the requirement that a company must be a tier-one operator was seen as a way to lock out other infrastructure providers who are not within the bracket.
"We need a tier-one operator in order to leverage on existing towers in which case we shall only spend about $100 million instead of $4 billion, which of course will be passed to the consumer; it does not matter which consortia wins since the outcome will have to be open access," added Ndemo.
Collymore said the requirement of 20 percent local ownership was a good idea given the critical importance of the spectrum to the future of ICT growth. The winning partner will have three years to comply with the local shareholding requirement.
The public-private partnership is likely to address the thorny issue of spectrum. LTE is optimized for 2.6GHz but that spectrum is currently being used by the military.
Safaricom is testing 3G and has been forced to use the GSM (Global System for Mobile Communications) band with the Communications Commission of Kenya arguing that there was still a way Safaricom could optimize on the allocated spectrum.
"The 2.6Ghz will mostly be utilized in urban areas; it will be more economical to deploy 700MHz in rural areas just like what Europe has done; we shall do what it takes to deploy the appropriate spectrum," said Ndemo.
The 700MHz spectrum is expected to be available after the country migrates to digital broadcasting even though there is no indication whether the spectrum released by TV stations will be auctioned or allocated to community broadband projects in rural areas.
There are questions whether the new partnership concept will divide available spectrum according to operators in the network, or whether spectrum will be divided according to need and load within the network.
"To date the practice has been to divide the available spectrum into 'reasonable' chunks, normally 15MHz to 20MHz blocks; whilst this creates more infrastructure-based competition between 'owners' of spectrum and is sufficient for run-of-the-mill broadband applications, it does not provide sufficient spectrum to use LTE to its full potential like 100Mbps download speeds and backhaul purposes -- for that one would need more like 40MHz to 50MHz," said Dobek Pater, senior telecoms analyst at Africa Analysis, an ICT consultancy firm with operations in sub-Saharan Africa.
While the availability of spectrum and infrastructure is going to encourage more competition between players, Pater said, success is based on how the partnership will be run and whether operators will be allowed to choose where to go.