Solving the last mile problem – the path to universal connectivity & its role in global development

Key highlights

  • Sub-Saharan Africa will increase 4x its mobile data usage in the next 5 years and while the mobile industry will contribute $184bn to GDP by 2024 across Africa, India, and Southeast Asia.

  • Unlike developed markets, data growth is skewed towards mobile data where technology advancements and MNO investment are required to deliver service to rural populations.

  • The Economic and Social benefits of closing the connectivity divide are substantial.

  • Half of Africa remains unconnected.

The internet fosters productivity and innovation across all areas of the economy and has already changed many aspects of our lives in the developed world. However, only 2.7bn of 7bn people have access to the internet today. Systematically unconnected societies typically live in developing or rural regions. On a positive note, Sub-Saharan Africa has repeatedly topped the chart of record internet access growth rates globally.

Percentage of individuals using the internet by region (2019)

The above chart from the ITU indicates most growth potential for the continent of Africa. With only 28.2% enjoying access to internet services, the need for corporate and private investments is ever present.

As global demand for data consumption steadily increases alongside the percentage of internet users, socio economic development will contribute to GDP growth and promote employment & education, especially in the region of Sub-Saharan Africa.

Economic Impact

Increased productivity - In developing economies, high speed internet connectivity offers extraordinary opportunities for economic development and fosters productivity and innovation across all areas of the economy. The increase in data availability and transferability allows markets to function with more efficiency while also accelerating the rate of innovation and technology adoption. A key example stems from applications in frontier markets where cellular connectivity allows famers to access pricing information, weather forecasts, disease control and livestock tracking.

Supporting enterprise and innovation – SME’s in developing countries are among the largest winners from improved internet access. The benefit of reduced transaction costs and distance constraints lowers barriers to entry to global markets while attracting talent and investment.

Reduction of extreme poverty – Internet access can lead to fundamental advancements in the structure of economies where the sharing of information allows both increased specialisation and higher paying jobs, but also increased yields from agriculture driven economies that have access to weather information and tutorials on procedures and crop development.

  • Long run productivity could be enhanced by 25%.

  • The resulting economic activity could generate $2.2t in additional GDP and create 140m new job opportunities.

Social Impact

In addition to the far-reaching economic benefits of increased connectivity social impacts are equally significant. Access to basic health information will reduce the number of deaths and severe illness from avoidable and easily treatable disease – Evidence suggests that the link between literacy and mortality rates shows that internet access alone could save up to 2.5m lives across India, Africa and Southeast Asia if internet penetration was that of developed nations. In addition, access to basic levels of healthcare information in remote locations will reduce cost pressures on diagnosis and treatment as well as reducing child mortality in new-borns and the spread of sexually transmitted infections.

Often underestimated benefits are to be found in the improvement of education and personal relationship development. PEW research centre has published a study that analyses a survey which was cried out in SSA. 79% of local agree that education will improve, due to the mobilization of global resources, the ability to participate in globalization and widespread inclusion in the online learning environment. 62% of participants agreed that internet access will enable them to enjoy a higher quality of life when it comes to personal relationships. Be that through text messages or skype calls with loved ones that are elsewhere or simply to take care of personal affairs, the majority agrees on the collective benefit. Whilst education directly links to future economic growth potential, personal relationships are very important too, as they create collective happiness which indirectly reflects in work morale and entrepreneurship, hence also contributing to GDP growth.

Job Creation

The Job opportunity is large, with both direct and indirect jobs being created.

  • Direct jobs in the construction and installation of mobile tower and broadband networks.

  • Incremental employment from businesses selling goods and services to those directly involved in network construction.

  • Growth in offshore services from accounting, software development, back office, and call centre activities.

Barriers to growth in Rural Sub-Saharan Africa and reducing the cost of connectivity.

Connectivity in Sub-Saharan Africa continues to increase; however, data costs remain prohibitively high in many regions demonstrated on the map below.

High speed internet has been available in the developed world since the early 2000’s with the introduction of ADSL based broadband (and later cable broadband) as a replacement for dialup internet. With this came WIFI, online streaming services, Netflix, mobile banking, online education and everything else required by modern society.

The rollout of broadband in the developed world was initially started by using existing copper phone lines delivering speeds in the region of 1-2 Mbps. With growing data demands, dedicated fibre backbone networks began to gain popularity, followed by Fibre to the Home and Fibre to the Cabinet services that are now commonplace across most of Europe. The UK has a target of 85% of all UK premises to have access to gigabit broadband by 2025, most of which will be delivered by open-reach’s FTTC program across rural England and dedicated urban FTTH operators such as Hyperopic and Community Fibre.

Developing markets, primarily Sub-Saharan Africa have a dire need for internet connectivity but aren’t able to progress in the same manner that Europe has taken. Phone line infrastructure is not as advanced, nor can it support today’s high data traffic demands.

With a large portion of connectivity taking place over mobile connections the demand for the majority of SSA’s populous is for high-speed mobile data – not so much fixed line internet.

Key global themes are centred towards the rollout of 5g service in major cities – this is coming sooner than expected in SSA with both Vodacom and MTN launching the first 5G fixed wireless access services in several locations in South Africa. Operators in the region will invest over $52bn in the next 5 years in digital infrastructure growth.

Although MNO investment is fantastic in the journey towards connecting Africa, only 50% of the population of SSA is actively subscribed to a mobile data plan thus there is a clear, dire need for investment in rural connectivity. Locations with no fibre or phone line service are plagued by this systematic lack of access to education, financial and basic medical services.

These communities’ distance from existing infrastructure, combined with very low incomes makes for a difficult investment decision for MNO’s when provisioning service thus they will need to look towards new technologies and businesses to close the connectivity divide.

New technologies are making it cheaper and faster to deploy networks to rural areas through two primary routes.

  • Terrestrial microwaves backhaul and free space optical technology advances have made it possible to connect regions that are semi-rural or within 50 miles of a large population centre with 3g and 4g GSM services.

  • Satellite backhaul is an option for very rural communities and businesses however has historically been plagued by latency issues and high transmission costs – in recent years the shift from C band to Ka and Ku band capable VSAT equipment has made it possible to deliver 3g services anywhere in the world for a modest cost.

Future technologies are being tested such as Google’s project Loon (without success). The future of connectivity, particularly for mobile backhaul will probably lean towards Low-Earth-Orbit solutions such as SpaceX’s Starlink – currently delivering low latency service across Europe and USA and speeds of 300mpbs+. Compared with existing Geostationary satellite solutions that are slower, with round trip latencies in the 600ms range.

LEO systems are not without their issues, mainly high setup costs and complex equipment (electronically steered arrays to track LEO satellites across the sky) but existing VSAT solutions present the only viable way for MNOs to access rural populations.

Nearly half a billion people will be using mobile internet in Sub-Saharan Africa by 2025, a third of which will come from Nigeria and Ethiopia, while mobile data consumption will grow more than 400% towards 2025 its clear that digital infrastructure demands are ever increasing. A distinct focus will be needed in rural areas as economics continue to improve.

References and Sources:

1. GSMA Mobile Economy 2020

2. Deloitte – Various

3. International Telecommunications Union, 2019

4. PEW research centre, 2017