No Riches For ISPs At Africa's Edge

Let's say you wanted to become an Internet service provider in Tanzania. You wouldn't want to, as will become apparent, but for the sake of argument imagine that you did.
Written by Todd Spangler, Contributor on

Let's say you wanted to become an Internet service provider in Tanzania. You wouldn't want to, as will become apparent, but for the sake of argument imagine that you did.

Running an Internet service provider anywhere is challenging, of course. But in Africa, operating an ISP is fraught with unusual obstacles at every turn.

"We're always dealing with some kind of problem," says Hussein Dharsee, owner of Raha.com, which claims to be the largest ISP in Tanzania. "Even when the problem isn't our fault, our customers yell at us."

Perhaps the biggest headache for African ISPs is dealing with the local governments. The most extreme cases are countries such as Ethiopia and Libya where independent ISPs are illegal. In places where ISPs are tolerated by the government, there are numerous regulatory hoops to jump through, with varying degrees of difficulty.

But the ISPs face a bubbling stew of other tribulations. The country's telephone network is a nightmare. The ISPs waste a lot of bandwidth sending traffic to and from each other; because there is no local exchange point, the traffic must bounce off to Norway or the U.S. before returning to Tanzania. It's difficult just to keep the lights on, because the power grid is unreliable. Tanzanian banks don't issue credit cards, so e-commerce is basically nonexistent. Hiring Unix geeks is close to impossible in a mostly agricultural nation.

The biggest drag on the bottom line for ISPs, however, is the exceedingly high cost of Internet bandwidth. If you're an ISP in Tanzania, the government requires you to purchase Internet bandwidth from one of its approved providers, and it will cost roughly $20,000 per month for a 512-kilobit-per-second connection. There are three wide area network providers licensed to provide bandwidth commercially: Datel Tanzania, Sita and Wilken Afsat.

On the surface, it looks like a fairly good situation compared with African nations where the state-owned telecommunications company is the sole provider of overseas connectivity and can charge ISPs whatever it pleases. Nitel, the national telecommunications operator in Nigeria, charges $130,000 per year for a 9.6-Kbps leased-line circuit.

But the Tanzanian ISPs say there's not really much of a choice. Sita, the international network carrier that provides service to the airline industry, purchases Internet connectivity from Datel. Wilken Afsat, meanwhile, sells its own dial-up Net service directly to consumers and is therefore a rival.

By default, Datel is seen as the only feasible option, and it charges extremely high rates; Raha.com pays $28,000 monthly for 2 megabits per second of bandwidth. That's roughly triple what Internet bandwidth from Tanzania would cost on the open market, the ISPs say.

"The ISPs hate Datel. Datel has poor customer service and poor technology," says Adam Messer, one of the co-founders of CyberTwiga, Tanzania's first ISP. "And they could have been less avaricious with the pricing." CyberTwiga does not use Datel anymore, relying primarily on Wilken Afsat for its bandwidth.

Defending their prices, Datel executives say they themselves are charged high rates by Telenor, the Norwegian telecommunications company that provides Datel's satellite feed. "We have squeezed our margins to bare bones," says Said Abdallah, Datel's deputy general manager. But in the very next breath, he concedes that if the ISPs were to buy bandwidth directly from a U.S. carrier instead of Datel, they might be able to get it for 20 percent to 30 percent less.

Now that you're paying through the nose for connectivity, you have to deal with the local phone company in order to get incoming lines for dial-up access. The phone companies in Africa are usually state-run - read: inefficient and unresponsive. Tanzania Telecommunications Co. Ltd. (TTCL) is a "parastatal" entity, a former government corporation that is in transition to private ownership, and it gets very low marks from the ISPs for its service and technology.

From an ISP's perspective, the TTCL public switched telephone network is an erratic minefield. Lines are very noisy with electrical interference, able to only occasionally sustain at best a 33.6-Kbps connection. The phone lines also frequently go dead, switches get congested and power surges on the lines regularly burn out the modems of both ISPs and their customers. Another of TTCL's shortcomings is that it offers only analog connections to its phone switches, although it has promised primary-rate interface Integrated Services Digital Network hookups - which would provide a 2-Mbps connection directly from the phone company to an ISP's site - at some point in the future.

TTCL's service is anything but prompt. You can wait days for the phone company to remedy technical problems on lines, and months for new lines to be installed. TTCL, according to one ISP executive, "is full of lazy buggers."

Small and mean

The craziest aspect of operating an ISP in Tanzania is that it is a hypercompetitive market. Incredibly, there are roughly a dozen ISPs selling Internet access in Tanzania in spite of the enormous hassle of getting online. Each is ferociously vying for the business of 5,000 subscribers. A couple of ISPs have already come and gone, including Global Access, started by a long-haired Dutch hacker whose name nobody can remember.

All but three of the existing ISPs are based in Dar es Salaam, the sprawling capital city - with a population of 1.36 million - that faces the Indian Ocean. The ISPs are concentrated in Dar es Salaam's 4-kilometer-by-3-kilometer Ilala business district, so they are all basically within spitting distance of each other.

The four largest ISPs - the leader is Raha.com, followed by Cats-net Interactive, CyberTwiga and Internet Africa - probably account for more than 80 percent of the market.

For individual users, Internet access is clearly a buyer's market. The competition has driven monthly unlimited access prices down from $150 three years ago to roughly $50 now. But in a land where that is one-fourth the typical average income, demand is scant. Usage grows slowly, and so ISPs are resorting to poaching each other's users.

"Too many people thought this was going to be a great business," says Gulam Chagani, the manager of Cats-net. "Currently, the strategy is to try to win customers from other ISPs instead of looking for new customers."

Tanzania's online users know they hold the cards, so they demand - and receive - extraordinary technical support. The task is further complicated by the fact that much of the software that finds its way into Africa is pirated, and therefore can't be upgraded or fixed easily.

"We have to make house calls when someone has a problem," says Bill Sangiwa, co-founder and managing director of CyberTwiga. "We have to, because they threaten to switch providers. Our tech support people are out all day some days."

Adds CyberTwiga's Messer almost indignantly: "Do you think AOL [America Online] has to go out and make house calls?"

ISPs don't exchange traffic locally with each other. This means, bizarrely, that if you access a Tanzanian Web site hosted on another service, that traffic has to travel thousands of miles - looping through Norway or the U.S. before boomeranging back to Tanzania.

It's an avoidable waste of bandwidth. Sangiwa says there have been discussions among Cats-net, CyberTwiga and the University of Dar es Salaam about establishing an Internet exchange point. Datel even offered to provide space to host it, but nothing has materialized yet. "You need to build trust," Sangiwa says. "It's a very difficult thing to build up a relationship of trust here."

Sites unseen

Most of the ISPs also host Web sites, but this is a very small part of the business. There are 158 domain names registered in the ".tz" country code, and all told there are probably just a few hundred sites based in the country.

E-commerce is, for all practical purposes, nonexistent. Besides the low number of Internet users to begin with, the other huge problem is that none of the Tanzanian banks issue credit cards, so almost nobody has one. Also, there are no credit-card clearinghouses in Tanzania; all receipts must be processed through neighboring countries, such as Kenya, or elsewhere.

In fact, what little Tanzanian e-commerce activity there is comes from Web sites hosted outside the country - mainly safari tour operators such as London-based Ranger Safaris - catering to customers in the U.K. or U.S. The official Tanzania Tourist Board site is hosted in London, too.

There are many other things to worry about that you would take for granted in the U.S. - such as expecting customers to pay their bills each month. The ISP owners say there is a tendency among Tanzanians to take a casual attitude toward paying debts, and since very few Tanzanians have credit cards, all ISPs require that their subscribers prepay their accounts a month in advance. Another thing to worry about is reliable electricity. All of the ISPs in Tanzania have diesel-powered backup generators, as do many of the office buildings, to protect against the one-hour to two-hour outages that occur roughly once a week.

To keep your ISP running, you also need to find and hire a systems administrator who knows how to maintain Unix servers, and technical support personnel familiar with configuring Windows dial-up networking. Remember, this is in Tanzania, where 90 percent of the people are farmers. The country's top information technology talent is wooed by rich mining companies and banks, and these are employers that can outbid the ISPs on salaries.

Furthermore, it's difficult and expensive to get equipment. Tanzania's government levies a 5 percent duty on all computer equipment and software, in addition to the 20 percent value-added tax charged on all goods and services. ISPs in Tanzania typically order their equipment over the Internet from U.S.-based distributors such as CDW Computer Centers, Ingram Micro o

Editorial standards