Every other week it seems like data prices are just going up. Sure, we can blame that on our depreciating currency, but even in the USD era, data wasn’t what the typical Zimbo would call affordable. For example, in 2016 Zimbabwe had the 3rd most expensive internet in Africa with 1 GB of NetOne data goes for US$30.
It’s wild, I know. But before we answer the question of why internet is so expensive in Zimbabwe, we just need a basic understanding of how internet works. How does the internet get to Zimbabwe? You can watch the video here.
How the internet works
The internet is in fact a connection of many computers. Now when you search the Internet for an image of a Samsung, you only use whatever network you have to connect to a computer somewhere in the world where that Samsung image is stored. So basically the internet is one big network of all devices that can connect to the internet.
That said, how do I get an email from someone in China in Zimbabwe or watch a live football match in Spain in bed on my tablet with DStv Now? Well, that actually happens thanks to 2 things. Satellites and submarine cables. These 2 technologies are essentially the backbone of the Internet as they connect continents.
But even on land, there are still huge cable networks, mostly fiber optic cables, taking over from where satellites and submarine cables end to bring the connection to the world closer to your door.
So between the cameraman in Spain filming the football match and your tablet with DStv Now that this match is being streamed live, many different companies are involved. And this will be a very big simplification of it, but it should be enough to paint a picture.
From the camera filming the match, the feed goes to a computer connected to a local internet service provider (ISP) such as Utande or a mobile network operator (MNO) such as Econet. MNOs or ISPs then go through Internet Access Providers (IAPs) such as TelOne or Liquid Intelligent Technologies, who then choose to use a submarine cable or satellite to send this feed to the rest of the world.
This means they go through other companies such as Eutelsat for satellite or Seacom for submarine cables. From here, the reverse happens until the feed reaches its intended destination. Liquid takes over from Seacom, Econet takes over from Liquid and your tablet is playing live football. As you can see there are quite a few intermediaries involved and they all have to be paid. With real money. So let’s talk about money.
Telecom Operating Expenses
A telecom operator pays a lot of money for a lot of stuff. So much so that we actually have to break it down into a number of categories.
This is approximately the data speed of your internet connection. When the Internet is priced for ISPs and IAPs, it is in traffic volume and not actual data usage. We can get into this later, but faster transfer rates cost more because bandwidth is a limited resource.
Some of you in the Techzim community used to complain that 4G speeds in Zimbabwe are generally good 3G speeds. This could be for a variety of reasons including the base station you are connected to and being overwhelmed by the traffic it faces but the cost of bandwidth is something ISPs take into account before deciding on how much internet speed they can give without it. to make it too expensive.
Zimbabwe is a landlocked country and so IAPs need to build infrastructure to connect to the world by either setting up a satellite like the Mazowe Earth Station using TelOne or a fiber optic network that Liquid Intelligent Solutions is located throughout Africa.
These are additional costs that ISPs factor into the pricing of their data, and this is just to get the connections for access, which is quite expensive, as hinted by Director, CSI JAKOVLJEVIC, Dejan:
…the affordability of the internet and the return on investment (ROI) in landlocked countries is low. This is mainly due to the geographical remoteness and their further distance from the nearest submarine cable node, which entails the cost of laying a transport cable to the landlocked ones.
Director, CSI JAKOVLJEVIC, Dejan – ITU
Equipment and software licenses
Telecommunications involves a lot of technology, with most equipment being purchased to order and from the manufacturer. How well this equipment performs depends on the quality of the hardware, but more importantly, how robust the software on this hardware is.
This makes the equipment VERY advanced to a point where support comes from the guys who make the equipment. And most of them are based in Europe and Asia, which means that if there is a critical system update or new technology to be installed, they should send in these experts. In addition, the software used to manage these systems is licensed software that is paid on a subscription basis. Money is again being spent to keep everything running smoothly.
Like any registered business, you must be licensed to operate. And it’s not very cheap. Fixed telecom operators like TelOne and Liquid Home are looking at $100 million for a 20-year license, and for MNOs like Econet, NetOne and Telecel, that’s a cool $137 million for the same 20-year license. Certainly not cheap.
And it’s a very significant portion of their earnings. We can see Econet as a case study as they are the largest MNO in Zimbabwe and have their data online. In 2021, their total sales amounted to Z$35 billion, which is in line with the RBZ interbank rate of Z$108 to US$1 meant Econet’s revenue was approximately US$325 million. This is before we remove overheads such as licenses we mentioned earlier, wages, utilities, legal fees, etc. Every year Econet has to pay US$6.85 million on top of all these mentioned overheads.
In comparison, we can take our neighbor Zambia where a operator license is US$1 million valid for 10 years, which is still US$100,000 per year versus US$6.85 million per year in Zim. An operating license in Zimbabwe is 68.5 times more expensive than Zambia, which is also a landlocked country.
In 2014 there was a 5% excise tax applicable on all Airtime purchases† Another 5% tax was suggested in 2017 this time labeled as a health levy. Then, in February 2022, a 10% tax was levied on all Internet and VOIP services in Zimbabwe.
All these costs are not absorbed by the telcos, but are pushed to the public through the higher costs of Internet and voice services. And these just come in whatever way, shape and form that continues to drive up the prices of data.
Overheads unique to Zim
Every business around the world has to deal with overhead costs such as utilities, security, and general service and maintenance. But this is Zimbabwe and as such some of these overheads are much higher than outside Zimbabwe.
The biggest of recent times is the availability of power. The electricity supply in the country was hopeless for the past few years. It is so bad that standby generators on telecom infrastructure have to run continuously for 12 hours in several cases.
This is an expensive source of energy, compounded by the fact that fuel is sold in US$, while telecom operators sell their Internet and voice services in Z$. And if you follow, the Z$ . has lost 3.5x its value over the past 6 months according to RBZ’s auction rates, while telecom operator rates have been unable to keep up with the loss in value of the Z$.
Some MNOs are now spending money to get more affordable energy sources, in this case solar energy. Econet has actually installed around 520 Tesla powerwalls in 260 of their base stations so that they can run on cheaper solar energy.
Econet has installed 520 Powerwall batteries, two of which go into each base station, which is reportedly the largest telecommunications project Tesla has participated in to date.
The power problem is a Zimbabwean problem and even we citizens are following the solar route, meaning the demand for solar systems is unprecedented. So has telecom site vandalism by individuals desperate to make ends meet by stealing solar panels and lithium batteries. This is another problem that drives up operating costs for MNOs as it adds downtime to their operations and forces them to spend Capex on replacing hardware prematurely.
Fixed telecom operators are also not spared, especially TelOne with the largest ADSL network in the country. This ADSL network uses copper cables as the transmission medium to get internet to your home. Because of the price copper fetches as scrap, it is another target for vandals who steal it to sell and make a quick buck. It’s so bad that there’s a 10 years in Zimbabwe for anyone caught stealing these copper cables.
Now it becomes a bigger problem when you see that all the fees I have outlined here are paid in forex. And we buy all our airtime and data in Z$, which means these telecom operators have to convert this Z$ to forex at the RBZ. But we have a huge forex deficit in Zimbabwe to the point that the RBZ developed a forex auction system where those who need forex can bid on it and keep their fingers crossed that they win the bid. Even then, the available forex is not enough to fully meet the demand.
We are not much in Zimbabwe. Our population totals 14.8 million and less than half of this population lives in urban areas and uses the internet. To make reasonable margins, telecom operators need to have many active subscribers and the more active subscribers they have, the more the costs they incur can be spread over a larger subscription base, reducing the cost of Internet and voice services.
I get it. But are telcos real?
Telcos are businesses after all. They have to make money and fend off competition. So it won’t do them any good if they make their services so expensive that no one can afford them. They lose customers to the competition and eventually go bankrupt.
It’s also a problem to make their services dirt cheap because they have all those costs that we talked about that they have to cover in order to keep running, otherwise the quality of the service will take a nosedive and customers will again come to the move competition.
I believe telcos in Zim are as reasonable as possible given the business environment, and some have not even seen a profit in decades. Anyway, I want you to let me know what you think. Are the costs of data in Zimbabwe justified?