Fibre to the home: lessons from Kenya

With i3 Africa’s announcement earlier this month that fibre to the home was finally going to be a reality for South Africans, I thought it high time we checked in with the FTTH pioneers in sub-Saharan Africa, the Wananchi Group, to see how its Zuku service has been received in East Africa.

You may remember the Zuku triple-play service (voice, data and TV) was announced mid-2010 to much gnashing of teeth and shaking of heads in South Africa, especially when Wananchi chief executive, Richard Bell, said the company would be in South Africa in a heartbeat, if only it could get a licence to build a cable network here.

The Wananchi Group, backed by East Africa Capital Partners and Cisco Capital, earmarked US$200 million to deploy high-speed FTTH services in Kenya and Tanzania last year. I recently had an email chat with Richard Bell to see how things were progressing.

Bell was loathe to share customer numbers at this stage, but did say that the biggest lesson they have learnt is not to under-estimate demand, once roll out starts, thanks to word-of-mouth publicity from early customers.

When and where was the service launched?
Bell: We started selling cable services on the new network at the tail end of last year and only really started early this year.

What are the speeds and prices you currently offer?
Bell: 1, 4 and 8 Mbps.

What has worked well in the roll-out? What would you improve in future?
Bell: Once the service is available in an area the word spreads and customer expectations and frustrations mount rapidly if they are in an area that is not yet “ready for service”. In future we will place more emphasis on (1) accelerating network construction, and (2) managing consumer expectations.

How is the TV side going?
Bell: Anecdotally people love the Zuku content and the feedback is that the market is very ready for a value-based pay-TV offering. The imminent launch of our DTH [direct to home] service will make the pay-TV Zuku service available to a very large market instantaneously. This will really show how huge the latent demand is – watch that space, we believe the market will be shocked at the strength of the product uptake.

Is the Zuku deployment true FTTH or is it FTTN [fibre to the neighbourhood]/hybrid fibre coax? If the latter, what speeds are customers getting, and when will true FTTH be deployed?
Bell: We plan to deploy a combination of FTTH and FTTN. In high-density areas FTTN is still the preferred option. Our network is DocSys 3.0, which means we can deliver up to 120 Mbps per subscriber if we chose to.

To what extent are you filling in the gaps with WiMax?
Bell: WiMax is no longer a core strategy to the group.

What are your plans for 2011?
Bell: To ramp up network construction.

Last year Wananchi said it would love to provide the same services in SA, but that the regulatory environment prevented this. Can you clarify – is this a technology regulation or foreign investment issue? Also, has anything changed, any chance of announcements in this space in the near future?
Bell: Both. The South Africans have a very restrictive environment both with regards to the media industry and the telecoms industry both from protecting their incumbents and from foreign investments. I think it unlikely there will be any breakthroughs soon. The loss is all theirs, as we say…

According to the Zuku website, www.zuku.co.ke, the top-end package bundles unlimited broadband at up to 1 Mbps with 91 TV channels for Ks 4,499 a month – or just less than R450 per month according to the exchange rate at time of writing.
No doubt second-to-market competitor, incumbent Telkom Kenya, will shake things up even further with its recently announced FTTH services. Currently trialling a combined voice/data service in Nairobi, the company told Kenya’s The Standard that it would launch triple-play services by the end of the year.

It will be interesting to see if the South African market follows the same trajectory as Kenya, both in terms of speed and prices, and whether Telkom, or another competitor, follows hot on the heels of the first local service.