Facebook runs the Free Basics which is an initiative through which it offers free Internet services to some selected websites including most Facebook products. In other words, when you visit the websites, your meter will not be running on your mobile devices. According to the company, it is a way to make Internet affordable. In Nigeria, that initiative partners with Airtel, a major telecommunication operator.

It is very hard to ascertain how that service has worked in Nigeria. By that I mean if people are making decisions to buy Airtel SIM cards for the ultimate access to the Free Basics. In Lagos and across Nigeria, I did not have that feeling. MTN has remained the largest network, with Glo coming far behind. Airtel is #3 and remains so even after striking the partnership with Facebook on Free Basics.

Besides Airtel, other telcos across Africa now support Free Basics. Facebook pays the mobile operators since the customers do not have to pay for the data. That means that Facebook is the paying customer. Facebook through its balloons and other tools provide the broadband services which the telcos “retail” free for the end-consumers to use to access the chosen websites. If Facebook does not pay the small fee for the operations, the telcos ideally will not bother.

Also, there is the possibility that some telcos can use that as a consumer acquisition strategy, getting customers to use their SIM cards, knowing well they will stick with them when they need to enter the open Internet, which has to be paid for.

The Problem with Airtel and Facebook Partnership

A major problem with Free Basics is that the chosen websites are largely not for productivity. While Wikipedia is a good website, the fact remains that if you are restricted on the site, even the site you have access is diminished. There is always a feeling that the other site is better.

Imagine a scenario where a student is chatting with a friend on Facebook via Free Basics, and the friend tells him that the professor has posted a homework available in the university portal. The student wants to access the school portal but Free Basics does not support that site. The option for the student is to buy credit to have access to the real open Internet. When that is done, the student can see the assignment. This experience will surely diminish the Free Basics before the student.

The implication is that the best way to run Free Basics is to partner with companies that understand how to offer Internet free, even if it means watching adverts, to do so. People watch the adverts to have access to the web. So, when they are on Free Basics, they access the available sites, but when they want to access the open web, they watch adverts to do so. The Facebook-Tizeti partnership should be anchored on that framework. But that is not what we are getting.

The Facebook-Tizeti partnership

Tizeti, which manages Wifi.com.ng and Flobyt, a free WI-FI  service, would have been a natural partner. It can offer end-to-end experience on totally free service for Free Basics website and the open Internet for users. That means, what Facebook supports get delivered and the other websites can be accessed by watching adverts. That was possible in the old Tizeti; not anymore.

Tizeti Network Limited is a fast growing Wireless Internet service provider in Lagos, Nigeria, delivering high-speed unlimited wi-fi Internet access to residential and business customers. Founded in 2012, the Company has established wi-fi networks all over Lagos. The Company was the first ISP to deliver unlimited internet using wide area wi-fi in Nigeria and is now offering its services all over Lagos and the South.

Yes, after Tizeti raised money from global investors, it pivoted from its old business model of offering free WI-FI services. Now, you need to pay to have access to its WI-FI services. Nonetheless, on this Express WI-FI, you can still access the Free Basics part free on its network. From Facebook and Tizeti press release:

Tizeti … announced a partnership to expand Express Wi-Fi by Facebook in Nigeria, …, this initiative supports Facebook’s and Tizeti’s shared goal of connecting more people to the internet in a cost-efficient way.

A fast and affordable public wi-fi hotspot service, Express Wi-Fi in Nigeria is focused in areas where people gather and work, including markets, cafes and public outdoor spaces. Using affordable internet through Tizeti’s wi-fi technology, anyone with a wi-fi capable device and the ability to receive a one-time SMS will be able to use Express Wi-Fi without switching SIM cards or having a data plan. People can connect through Express Wi-Fi on most Android and iOS phones, tablets, and laptops.

{…}

Our Express Wi-fi plans are affordable and range from N50 for 100MB to N2,000 for 10GB.

In addition, anyone connected to an Express Wi-Fi hotspot can access Facebook Flex and Free Basics, which offers people access to impactful local services, including health resources, education and business tools and more.

From the press release, you can get the Facebook Free Basics via this partnership. But if you need the open web, you have to pay. The cost of 10GB of data is N2,000 which is really cheap; 9Mobile would reduce your pocket by N7,000. Yet, it did not solve the pain point even though it has lowered the cost of broadband. A free win would have been if Facebook has pushed Tizeti to adopt its original free WI-FI service, supporting it with funding to make up any revenue from advertisements. That is when we will know great things will happen.

All Together

Free Internet has emerged as a stunt which entrepreneurs use to get free media. Once they start operations, they begin to charge customers. Most of them that promised free Internet are now charging customers. Of course, it is not an easy business model to run free WI-FI because it costs money to build the infrastructure. The Free Basics remains limited, because offering one part of Internet free and other parts paid will always create poor experiences for most people.

A company that can use advertising to support the cost of the open web will be a natural partner to this initiative. They can cap the maximum data usage for the open web while Free Basics remains unlimited to the chosen websites. That way, people will know that even though I do not have money, I can be in Free Basics contents, and if something triggers me to go to the open web, I can watch ads and access the contents while making sure that I do not exceed my available data allocation. Not doing that weakens Facebook vision and India was right to have banned it outright: it is a distortion of the mind.

That inability to find a way to get people to the open web remains the weakest link of this initiative. I will never encourage a family member to use such a service because it rewires the brain on the possibilities of the web. Facebook can fix this with its money. Yet, I respect that the firm has to execute its business model on its own terms.

A professor from Nigerian Electricity Regulatory Commission (NERC) gave a speech in Owerri last week. In that talk, he broke down all the problems with the Nigerian electricity sector. He explained the near-impossible seamless interface between the distribution companies (Discos) and the generating companies (Gencos) despite the presence of the NBET (Nigerian Bulk Electricity Trading Plc) and the Transmission Company of Nigeria (TCN).

The Discos are not motivated to carry all the available electricity sent to them because the tariff to sell them to the consumers is below market price. According to the professor, the Discos devised a way to manage that problem by stalling the implementation of the smart meter, giving them the opening to do estimated billing. Through that, Discos could rip-off customers, making money, even when not delivering any electricity. The Discos are not fully privatized: government retains about 49% in each of the Discos.

The Gencos are not happy because since electricity through the Nigerian grid cannot be stored, and Discos cannot accept all that Gencos are capable of generating, Gencos are not energized to operate at their maximum capacities. So, Gencos cut capacity, idling plants and losing on economies of scale. Most of the assets by Gencos are fully privatized.

The TCN, wholly owned by the Nigerian government but on contracted management, has its own problem. Its transmission system cannot carry more than 8,000 MW of electricity which means that even if Gencos generate above that amount, Discos will never get them.

NBET was designed to help to smooth these relationships, removing the friction which may exist between Gencos and Discos so that even if Discos cannot accept the electricity, Gencos will not lose money badly. Most times, it is irrelevant if the end customers have electricity. NBET is in intermediary role to make sure that an equilibrium point is maintained and the markets function well.

As the don spoke, I saw a clear ceiling in the whole problem: Nigerian problem is centralization  of our energy policy. This is what I think we can do:

• Dismantle the whole nexus of national grid. Nigeria will never have enough money to beef up TCN to provide the transmission capacity we need to have 50,000 MW we need in this country. With that knowledge and TCN capacity stunted below 8,000 MW, a simple decision can be made. Do away with national grid and allow private sector to come in and run this business.
• More capacity from Gencos is not the answer: Our problem is not more capacity. Even if Gencos produce 50,000MW, only 8,000 MW can reach the Discos through TCN pipelines. My suggestion will be for the Gencos to have the capacity to sell their power directly to customers, without going through Discos. They can find a way to do that through their partners and investors
• Discos should lose exclusivity on meters: Government should make it possible for any company that can generate at least 50MW to have the capacity to sell meters and install same for customers under defined supervision for quality and fairness. Our fuel stations use meters and government regulates them, making sure they are fair as they dispense the petrol; we can do same on smart meters for electricity.
• Absolute and total decentralization: From generation to distribution through transmission, allow competition. Simply, decentralize the whole aspects but with requirement that no LGA can have more than two Gencos (above 50MW capacity) and two Discos and where those institutions operate they must share meters and transmission lines. If we do that, we will solve the problem of the national grid. That will also take out the problems the Gencos are experiencing of not operating on full capacity. This will also push Discos to innovate and function better through competition.
• Government should allow reflective tariff: As naira loses value, it makes sense to allow electricity to be optimally priced. Nigerian government should allow that to happen.

I understand that the Gencos who are used to producing massive power to transmit regionally  and nationally will not be happy with decentralization. The fact remains that they can fund such infrastructures to reach new markets, if they decide.

Generally, if we decentralize and deal with the issues of national grid and meter, we will get closer to having constant power. The structure we have today will not work, because even in ten years, I don’t see where Nigerian government will find money to improve the capacity of the transmission lines. In a system, a weak link renders everything useless: the transmission system is the permanent weakest link here. Because TCN is still Nigeria’s issue, Gencos and Discos cannot reach real equilibrium based on market forces. We need a real market dynamics to have electricity in Nigeria: decentralization will get us closer to that.

We are fixated on the Over-the-Top (OTT) solution providers like WhatsApp, Skype and WeChat which allow people to consume audio, video and other media services directly, via the Internet, as standalone products bypassing telecommunications service providers that typically function as the gatekeepers of such contents. The implication is that OTT deprives companies like MTN, Glo, Airtel and 9Mobile extra revenues besides what customers have paid them to have access to the Internet.

In most strategy conversations, people are focusing on these OTT companies. Interestingly, there is a huge disruption that is coming which may even deprive the telcos the mere opportunity to even earn at least the fees customers pay them to have access to the web to do the WhatsApp and Skype in Africa. KonnectAfrica is leading that charge and it is ferocious. From a newsletter:

Konnect Africa, the Eutelsat-owned satellite broadband service provider, has unveiled SmartWIFI, a new hotspot service, as part of its ongoing commitment to bring digital opportunities to Africans.

This new service leverages Konnect Africa’s powerful, reliable satellite broadband network to enable sales outlets (retailers, hospitalities, gas stations, etc.) as well as healthcare centres or schools to become a connectivity point and digital gateway to opportunity for the surrounding population. Users will be able to access the internet from a distance of several hundred metres around the hotspot. Access can be extended to several kilometres through off-the-shelf Wi-Fi repeaters.

Users can access the SmartWIFI service through vouchers or mobile payment schemes. In addition, SmartWIFI comes with a unique local data storage system, enabling users in remote areas to access smart digital content free of data charges, including online courses and education programmes, sports and entertainment. Mobile and computer applications will also be available to help support daily business activities.

If this company succeeds, we will see a new basis of competition in the telecommunication sector. While many may argue that satellite broadband may not be as fast as terrestrial broadband, the fact remains that the satellite technology has improved over the years for broadband services. What KonnectAfrica is offering is a threat to the present telcos business models. Satellite broadband cost model is better since it is using satellites, meaning that its products will be cheaper.

Elon Musk is coming with satellite broadband in 2019 and Africa is one of the main focus areas. Who wants to compete with Musk? He is the most brilliant innovator in our time, and I do think he wants to do good in Africa with these satellites. That means, the price will be low. Innovators offer better services at usually lower costs.

Elon Musk’s SpaceX plans to start launching satellites into orbit in 2019 to provide high-speed internet to Earth. In November, the company outlined plans to put 4,425 satellites into space in a Federal Communications Commission (FCC) filing. But the document gave little detail on the timeline

The SpaceX is expected to cut the cost of broadband in Africa by least a factor of 2. It is going to be a brutal moment in the industry because other players will join the competition. Just as KonnectAfrica is doing, most of these players will bypass the telcos working with schools, churches, mosques, and health centers as business partners to reach their customers. Just like that, terrestrial telcos will be cut-off. The threat is many orders of magnitude to what OTT is giving them today. OTT gives them options to earn internet connectivity revenue; satellite broadband provides a new basis that does not follow their paths.

Meanwhile, many global players have seen that Africa is the growth market for telecommunication services. Nokia and Vodacom have signed partnership to trial “Nokia 5G technology to accelerate the launch of the new technology and enable Vodacom to drive digitalization for the benefit of businesses and individuals in South Africa”. As Vodacom is working with Nokia, MTN and Ericsson have also sealed a deal on 5G trial.

Ericsson and MTN have announced the first 5G trial in South Africa to start in the first quarter of 2018. The two companies signed a memorandum of understanding (MoU) at AfricaCom 2017 to collaborate on the rollout of 5G technologies in South Africa, one of the first in Africa. 

All these developments are expected. In my projection, I expect 2022 to be the year Africa will have immersive connectivity. That is turning out to be so, in the making. My models are coming out fine.

In today’s videocast, I make a case that Africa will enter the era of affordable broadband internet in 2022. That will be the year we will begin a new dawn of immersive connectivity where you can eat and surf all you can. Industry players will take off the Internet meter and then focus on service, experience and quality. From satellite broadband vendors to the MNCs with balloons and drones, the sector will become very competitive and service will drive growth. This has happened in the past – every decade, Africa experiences a major industrial transformation. We saw that in banking and voice telephony. 2020s, starting at 2022, will be the decade of immersive connectivity.

All Together

As you build web products and services, have in mind that by 2022, most African cities will be at parity on broadband with most areas of EU and United States. My model and capacity to track technology penetration have given me confidence that our business model can shift to an era of affordable Internet, starting 2022. It will change many things including more global competitors and access to new markets. Even the products we make today which are designed for metered Internet may evolve because Internet will be more affordable: from Facebook to Microsoft, from KonnectAfrica to the telcos, we will see huge price collapse. That will be the beginning of the new era of web business in the continent.

Last week in Lagos, I ran a Board Meeting strategy for a major client. The business had many products and was looking at how to coordinate capital investment to ensure optimal asset allocation and utilization. Our job was to drive the visioning process to make sure investments are synergistic across the product lines. During my work, I introduced my clients to One Oasis Strategy (my phrase) which I have used with major clients in U.S.  You will read an extended piece if you subscribe to Harvard Business Review print.

Before explaining the One Oasis, let us refresh what oasis means:

In geography, an oasis is an isolated area in a desert, typically surrounding a spring or similar water source, such as a pond or small lake. Oases also provide habitat for animals and even humans if the area is big enough. The location of oases has been of critical importance for trade and transportation routes in desert areas; caravans must travel via oases so that supplies of water and food can be replenished. Thus, political or military control of an oasis has in many cases meant control of trade on a particular route.

Indeed, oasis is very critical and every company has oasis. Your best product is the oasis in your business. Every other product feeds on that best product. If you build your investment around that main product, you will find success, because those investments will have a clear “customer”, and that reduces market risks. In other words, if your new business investments are geared to support the best product, and the best product is doing well, it means the risks on the new investments will be easily managed. Provided the best product continues to do well, demand on the new investment is assured. That is the One Oasis Strategy.

Every product is like the animal that returns to the oasis for water. Every product is like the humans that depend on the oasis for habitat. Provided that the oasis is there, and doing well, their survivals are guaranteed. Yet, as those new products do well, they could find new customers, beyond the first customer (that best product). That means, you can introduce them to the markets for other customers to buy, even when they are supporting the best product, which is the most important reason the original investments were made.

For my client, we spent time and agreed upon the best product in the business, using many indicators including brand, financials and market positioning like market share, etc. We then worked on how investments could support that best product while also having the capacity to serve the broad market in future. We want the best product to be the category-king and purely peerless in the industry. The massive accumulation of capabilities in the company to deepen its position was designed to make that happen. We structured some business lines and reshaped how some products were made. Simply, we engineered a One Oasis Strategy. I have so much confidence that my client has paid for elite insights.

Cases of One Oasis Strategy

In this section, I will explain two companies which have used the One Oasis Strategy.

Amazon: Amazon is an ecommerce company with massive user base. It supports billions of transactions in a year and needs computing resources to keep its portal functioning well. Amazon could have called IBM to rent a cloud infrastructure for its ecommerce. Rather, Amazon decided to build one in-house knowing that the future of its ecommerce will be driven by the capacity to offer great experiences to clients. The cloud infrastructure investment is necessary as growth in the ecommerce keeps going up. It does not make sense to be sending that money away. So, Amazon went and invested in cloud. The ecommerce is the oasis and the cloud is like the animal that finds habitation from the oasis. Provided the ecommerce is doing well, the investment in cloud has minimal risk. The first customer to the cloud business was ecommerce and that means Amazon does not have to worry if there is any external customer for the cloud services. Amazon does not need to check market dynamics to invest in cloud provided its ecommerce business is doing well.

But interestingly, after time, Amazon did find opportunities in the external market to sell its cloud services. Those services are now called Amazon Web Services (AWS). Tekedia is hosted on AWS, just as many websites which include brands like Dropbox and Instagram, present or in the past. The oasis (the ecommerce) has been served by the new product (cloud) and now that new product is making profit for Amazon.

Samsung: In the global semiconductor business, Samsung is one of the most prominent companies. Others are Chartered, Intel, TSMC and GlobalFoundries (old IBM). While Intel makes chips it sells to customers to be bundled in products, it does not have any direct customer-end products of itself. Others are largely pure foundries. But Samsung is different: it makes all these chips, fabricates them, and it has products in the markets that use them. The Samsung Galaxy series is the best Samsung product, an oasis, which the semiconductor is serving.

This is what makes Samsung competition with Apple very interesting. It can afford to invest in new memory chips and OLED display irrespective of what the market trajectories are. Why? The first customer to Samsung semiconductor business is Samsung mobile devices unit. That means Samsung semiconductor has an incentive to innovate because it wants to make the best mobile devices in the world. No other company in the world has those capabilities, at scale, as Samsung.

Between Apple and Samsung, Samsung is a better business in terms of re-positioning, but Apple is a fashionista brand which makes customers great fans. Samsung has better engineering, but Apple builds better customer perceptions on products. But when you look deeper, you will notice that without Samsung, there will not be any Apple iPhone in this world, at least at its quality level. Samsung will make about $110 from each iPhone X sold.

Simply, with this capacity to feed the oasis, knowing that Samsung semiconductor has no risk in the business, it makes it harder for competitors who are in OLED display and memory chips. Those competitors have to find customers, and then get their assurances they will stay with them for long. But Samsung semiconductor has the customer in-house and can wager without any risk since its best customer is a unit in the group business. That explains why Apple has been unable to find an alternative to Samsung in supplying these critical components used in iPhone: no one can take the risk required for innovation unless Apple can lock in for years. But Apple will not do that. So, at the end, only Samsung has the best product. That is the reason why Apple has to use Samsung, its arch-rival.

Apple along with some investors bought Toshiba memory business. Sure, this new business can see Apple as its first customer, based on the One Oasis Strategy, to invest. But with private equity (PE) firms involved, they will not be in a hurry to invest billions required to match Samsung scale. Apple will not just have to guarantee taking those supplies; Apple has to be ready to pay at the rates that PE will like to see. It is not likely that is possible because Apple is a minority investor which will likely look for the best deal in the market. Samsung has the best price along with the best product. Toshiba has to win on both ends.

All Together

The One Oasis Strategy is about finding how to create solutions which can find their first customers within the business. Amazon Cloud has the ecommerce operation as its first customer thereby removing any market risk. Samsung Semiconductors has the Samsung mobile devices business as the first customer. With those assured internal customers, these firms deploy resources, irrespective of the market dynamics, because they have found the first customers already, in-house. But over time, the products are now made available to the general public. You need to identify your best product (the oasis) and get others to find how to build habitations around it.