What is Halotel Trying to Achieve with its Fibre Cable Strategy?

Once again I have come across the 18,000 km of fiber cable figure that has been or is to be laid by Halotel in Tanzania and I ask myself: what are they trying to achieve?

Firstly, to put the question in context, in my estimates (and I can be wrong), the figure of 18,000 km may as well be greater than the sum of all fibre cables already laid in Tanzania. While the use of fibre cables in Telecom should no longer surprise us in Tanzania but when a new entrant chooses to lay fibre to that extent, people need to ask 'why'. Besides, there are political and commercial implications: the government has decided to accommodate Halotel by more or less shelving its previous policy of not issuing licenses to operators to lay fibre cables across regions. Again, after holding the other operators back for years, why change the policy now while the National ICT backbone network is still alive, kicking and remains highly underutilised?

Second, investment-wise, the idea is baffling. While it is possible that by their analysis Halotel has determined that it is more beneficial to deploy its own network rather than use the already existing NICTBB network, whose pricing and service models I have questioned in the past as being too restrictive- especially to an operator whose interest is to add and drop links ubiquitously across the nation- but Halotel does not have the numbers yet, and given the market conditions it is unlikely that they will have a significant market share to justify that investment for several years to come. Why not start small by leasing capacity and expand their network gradually? It should be said that this is what Halotel has done in other aspects, e.g. by leasing tower space from Helios Towers rather than building its own towers everywhere. 

So, we go back to that question: what are they trying to achieve?
A technical question is this: if fibre cable is the transport solution, what are the services? We have already pointed out that the projected mobile data and voice services can hardly justify that strategic move, not for the next few years at least. Besides, that approach will limit Halotel's price competitiveness and its ability to acquire new subscribers due to maintenance costs and like. The following statement by the Minister for Communication, Science and Technology may hold a clue: “Viettel has commitments with the government to provide fibre connectivity to more than 850 public institutions”.

This indicates a more advanced fibre cable strategy than what has been adopted by all the other Telecom operators in Tanzania. Yes, all the operators have clients connected with fibre cables here and there but none of them have pursued such a comprehensive data connectivity approach. Mobile data strategy with all its conveniences does not yet eliminate the need for super fast data connectivity and reliability that fibre cables can provide.

It should be said that this is what I was seeing when I 'advised' TTCL to adopt a broadband-driven strategy exactly five years ago this month. This is what I wrote: "it will be foolhardy (for any business strategist) to overlook TTCL’s special positioning as a multi-play services broadband operator in Tanzania." I know that that Daily News article was read by some top executives within TTCL but I wonder whether they listened. As a government owned operator, unlike Halotel, TTCL does not need any special arrangement to connect any public institution. However, the fact that in this day the government still feels that there are reasons for a new operator to be given a special arrangement to connect its institutions then either TTCL has not fulfilled its duties or Halotel has some undue influence in the government. I think 'both' will be a safer bet. Given NICTBB network what was expected of the government was to interconnect all major public and private institutions with fiber cables, put an end to all the other many redundant interconnection projects which cost the government millions of dollars (and provide opportunities for significant corruption to occur), integrate its servers and data access procedures, and set the nation on the path of acquiring true eGovernance benefits.

But, going back to Halotel, even the combined traffic from all the 850 public institutions and many private ones is not enough to justify potentially thousands of gigabits of network infrastructure investment. Yes, the improvements to e-governance will be massive, especially if the data from all those locations will be managed centrally, but still, what does Halotel see?

Logically, the answer lies in one word: video. Only video and TV transmissions carry enough traffic to justify such a massive investment in fiber. And, if this is true, it is possible that Halotel may be onto something interesting here. While Tanzania has witnessed a significant expansion in satellite and terrestrial TV subscriptions in recent years, no operator has attempted to bundle the data/internet, video/TV and voice services (triple play) successfully yet. I think there are opportunities for a smart operator to capitalise in this area. When Airtel entered the Tanzanian market we speculated that it will revolutionalise the market with some of the strategies it has used so successfully in India and elsewhere. After all, what is the point of entering another low ARPU market if one is not going to capitalise on the competitive advantages one has gained through similar experience elsewhere? Unfortunately it has chosen to be tame and disappointing strategy wise, content to be a market follower rather than a leader that Zain before it wanted to become. 

Will Halotel choose to be different? Time will tell.