Is Google’s Project Link the first nail in the African telcos’ coffin?

Google recently announced its first infrastructural project in Africa, called Project Link. This initiative, through the building of a fibre-optic network in Kampala (Uganda), enables internet service providers (ISPs) and mobile operators to provide faster connections to their users than ever before. This announcement, which has not really been picked up by the African tech media so far, can be a real game changer for the African digital space.

Why Kampala?
According to the official website of Project Link, there are three key reasons why Google chose Kampala:

• It is a modern city that is ready to connect on a bigger level
• The current network infrastructure of Kampala is unable to keep up with the city’s demands
• By building a better foundation for internet access, Google can help improve speed and quality across all devices and platforms

These three points are actually true for most African capitals, so why should we believe that this is only true for Uganda? Although, the aforementioned rationale for such an investment could be almost seen as a philanthropic act from Google, in which they are making efforts to unlock opportunities for the people of Kampala, but the real picture seems a lot more complex than that.

Kampala is nothing but a test market
There is no single reason why Kampala would be the best African candidate for this project, unless this initiative is simply considered as a test market by Google.

The country has one of the lowest GDP per capita in Africa (around US$1 300), Kampala has a relatively small population (around 3-million people) and a moderate GDP growth (5.2% per year, there are more than 15 countries with higher GDP growth in Africa currently).

In order to maximise the return on investment (ROI), Google could have pursued areas with a much higher GDP per capita or a much larger population, but it did not. Why? Because this investment was not about maximising ROI, it was purely about testing a business concept and measuring how an infrastructural boost could impact a developing market like Uganda and more importantly how Google can play in the African telecom space.

Google is moving towards the telecoms space
When on 30 March 2011 Google announced its first fiber-to-the-premises service in Kansas City many people were wondering whether it is a one-time initiative or it is a first step towards Google’s ambition to become a network provider.

In the last two years, we saw how the company expanded its fibre services to Austin, Texas and Provo, Utah. This summer Google also launched a non-traditional experiment, labelled Project Loon where Google’s signal was carried by high-altitude balloons transmitting to hundreds of square kilometres. In the future, this technology may enable Google to connect people in rural and remote areas, filling coverage gaps where the traditional infrastructural solutions cannot be applied. A technology like this would be extremely valuable in a market like Africa.

Future implications
At the moment, the main question about this African entry is whether Google’s real objective is to:

• Increase Google revenues in Kampala (this is their stated objective)
• Test whether it can operate as a wholesale (or even as a retail) network provider
• Measure what kind of competitive response a fibre entry can invoke
• Gather additional, telco-specific data about its customers
• Or all of the above

We don’t know the answer yet. However, one thing seems pretty clear, this move was not a one-time initiative and it was not a philanthropic project either. Project Link is about to test the African market and measure how Google can be part of the African telecom ecosystem.

The African telecom operators will probably wait and see what happens next. However, they need to be aware that Google’s entry to the continent’s telco space can largely impact their lucrative business models.

While for the leading mobile operators this business is about managing their infrastructure and selling mobile voice and data, Google’s real motive is to foster internet usage and to ensure that they are well positioned for an African digital boom. A proof of this is the pricing of its current entry fibre package in Kansas: US$0 a month for unlimited 5Mbs internet access.

If Google is serious about its African presence, the currently dominant mobile operators might start worrying because they may easily become nothing but a dumb pipes in the next five to 10 years…

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This article by Daniel Petz originally appeared on Dpetz and is republished with permission.