September 25, 2015
Analysts have indicated that Internet service providers in Africa will have to expand their horizons if they want to see continued growth. While Africa is seeing fast Internet uptake levels, poor telecoms infrastructure is hindering penetration rates even as the restrictive regulatory frameworks contain market growth.
The main factors dampening uptake is the widespread poverty that makes Internet services unaffordable, the low literacy levels that are limiting demand, and the high operating costs that continue to keep Internet service prices high.
ISPs are being called on to consolidate their efforts and create strategic relationships with cellular operators. The further development and increasing penetration of cellular networks would allow ISPs to offer mobile Internet access and boost penetration of their services, thus reducing the high initial investment costs involved.
Mobile handset operators will, at the same time, have to partner with ISPs to provide affordable tools for mobile Internet access. In order to develop a sound market share in the limited market base characteristic of Africa, there is a need for product differentiation to increase consumers’ switching costs.
In addition, ISPs need to target markets outside the major urban areas, since these areas are currently saturated in terms of operators. Accordingly, partnerships with cellular operators would go a long way to address this challenge. Besides, low-cost and high-speed access will also be crucial to ensuring market growth.
International growth consulting agency Frost & Sullivan has reported that the growth rate of Internet usage in Africa is in double figures. However, such growth has been predicated on a narrow base, with the overall number of Internet users remaining limited. Low penetration rates indicate a huge potential market available for Internet services.