logo

Tag: Subsea

Blog Details

Long way to 5G in Indonesia

Posted on | by Matt Walker

Indonesia, the world’s fourth most populous country, is expected to face an uphill battle to enable 5G. Reasons include its complex geography, unavailability of core 5G frequency band (i.e. C-band 3.3 to 4.2 GHz), and dwindling operator revenues. The goal of this post is to briefly address these challenges and make suggestions for how to improve 5G’s outlook in the country.

Recommendations

There are several steps that would improve the outlook for 5G in Indonesia. The Ministry of Communication and Informatics (MCI) may:

• take steps to make the 3.3-3.4 GHz band available for International Mobile Telecommunication (IMT);
• recommend a footnote for the future use of 3.4-4.2 GHz for IMT at the World Radiocommunication Conference 2019;
• conduct effective spectrum auctions for suitable millimeter wave band(s), perhaps starting with 28 GHz; and,
• remove roadblocks to ease the process of cellular market consolidation.

Meanwhile Indonesia’s operators should utilize the connectivity provided by the recently completed Palapa Ring project to expand their business in remote areas, and work with MCI for an effective market consolidation.


Indonesia overview

Indonesia, home to over 271 million people, is an island country in Southeast Asia comprised of more than 17,000 islands. It is the world’s 4th most populated country with the world’s 16th largest economy in terms of nominal GDP (gross domestic product).

Indonesia shares land borders with Papua New Guinea, Timor Leste, and the eastern part of Malaysia. Australia, India, Palau, Philippines, Singapore, Thailand, and Vietnam are its maritime neighbors (Figure 1).

Figure 1: Indonesia Map

Source: https://www.nationsonline.org/oneworld/map/indonesia_map2.htm

Telecom market overview

Government

Indonesia’s Ministry of Communication and Informatics is responsible for organizing government policy in the field of Information and Communications Technology. In 2003, the Ministry established the Indonesian Telecommunications Regulatory Body (BRTI) to which it delegates authority to regulate, supervise and control telecommunications networks and services. BRTI is also responsible for executing frequency spectrum auctions.

Mobile operators

Indonesia is the fourth largest cellular market in the world with more than 330 million subscribers. The market is dominated by five cellular players, including state-owned Telkomsel and privately held Indosat Ooredoo, Hutchison 3 Indonesia, XL Axiata, and Smartfren. (Figure 2) SingTel has a 35% stake in Telkomsel, with the remainder held by incumbent Telkom Indonesia.

2G (GSM/GPRS) is still the dominant technology with close to 45% of subscriptions. Mobile broadband comprised of 3G and 4G networks has made substantial progress since inception. Operators continue to expand 4G network coverage to remote areas. For example, Telkomsel deployed 22,000 4G LTE base stations in its network between January and September of 2019, stretching deeper into rural regions.

Figure 2: Mobile subscriber totals for Indonesian telcos, June 2019 (millions)

Source: Company earnings announcements

Although 5G is making headlines globally, Indonesia’s operators are not in a rush to deploy as they continue to expand 4G penetration and await a settlement between the US government and Chinese vendors, and perhaps for market consolidation.

The Ministry is in favor of consolidation due to declining financial health of the operators. As in most countries, telcos in Indonesia are not finding topline growth easy to achieve. Market leader Telkom Indonesia, for instance, has faced negative revenue growth rates over the last few quarters, in USD terms (Figure 3).

Figure 3: Annualized revenue growth rate for Telkom Indonesia (YoY % change), USD-basis

Source: MTN Consulting

If measured in local currency, Telkom’s revenue growth rates are slightly better than the above figure. A weakening currency has worsened the comparisons. Currency issues have also made imported network equipment more expensive recently, a big issue in Indonesia where capex to revenue ratios are often well above 20%.

Independent tower operators

To help cope with high network costs, operators in Indonesia have transferred the bulk of their radio tower business to third parties (tower companies). Indonesia’s five big tower companies ended June 2019 with control of 45.3K towers, up from 42.5K in June 2018. Tower spinoffs continue. For example, Indosat Ooredoo recently agreed to sell as many as 3,100 telecommunication towers to local tower providers. PT Daya partner Telekomunikasi (Mitratel) will buy 2,100 of Indosat’s towers while PT Professional Telekomunikasi Indonesia (Protelindo) will acquire 1,000 with a total transaction value of about US$456 million.

This asset restructuring has helped Indonesian telcos lower their cost base and accelerate service coverage. It has also created a viable new industry of asset specialists, classified by MTN Consulting in its global research as “carrier-neutral network operators” (CNNOs). The largest of the group, Sarana Menara Nusantara, had total 2018 revenues of $412M, about 4% of the $9.2B booked by the largest local telco, Telkom Indonesia.

Spectrum

In 2015, the Ministry allocated an additional 246 MHz of radio frequency spectrum for mobile broadband purposes. The target allocation is 350 MHz according to the Ministry’s 2015-2019 Strategic Plan. These spectrum assignments have been made through various methods including auction, refarming, reallocation, etc. Indonesia’s mobile service providers are operating in various bands now, including 450, 800, 900, 1800, 2100 and 2300 MHz (Table 1).

Table 1: Operating frequency and bandwidth allotted (MHz)

Company 450 800 900 1800 2100 2300 Total
H3I       20 30   50
Indosat     25 40 30   95
STI 15           15
Smartfren   22         22
Smarttel           30 30
Telkomsel     30 45 30 30 135
XL Axiata     15 45 30   90
Total bandwidth 15 22 70 150 120 60 437

Source: “Analysis of 5G Band Candidates for Initial Deployment in Indonesia,” 2018, by Septi Andi Ekawibowo, Muhammad Putra Pamungkas, and Rifqy Hakimi of the Bandung Institute of Technology (page 3)
Note: PT Sampoerna Telekomunikasi Indonesia (STI, or “Net1”) is a regional operator which started operations in 2018. It utilizes the 450 MHz frequency band to offer 4G LTE. 

While the Ministry hasn’t explicitly addressed spectrum allocations suitable for 5G, it is trying to free up spectrum. For instance: digitalization of television broadcasting: The ministry is taking steps to free up spectrum by switching off analog broadcasting in consultation with other stakeholders.

Fixed line

The fixed-line segment is quite small as compared to wireless telephony market due to complex national geography, high up-front cost and operational expenses. The state-owned Telekom has the monopoly in this segment, while Indosat is the second major player, both providing services mainly in the urban areas. There are a number of alternative broadband providers and ISPs which also invest in network infrastructure locally.

Vendors

Chinese suppliers are stronger than usual in Indonesia, but Huawei, ZTE, Ericsson and Nokia all have significant shares of the local network infrastructure market. That includes 4G, and will likely extend to 5G. Just recently, ZTE signed a Memorandum of Understanding (MoU) with Telkom to deploy 5G, while Nokia executed the first 5G millimeter wave network trial with Hutchison 3 Indonesia.

Geographic challenges

Development of infrastructure to provide ICT (Information and Communications Technology) services including broadband is a unique challenge due to Indonesia’s complex geography consisting of many remote islands and rural regions. Land-based connectivity is cumbersome due to oceanic separation between islands and between smaller islands to major cities, which are in some cases 1,000s of miles away. For example, the distance between Jakarta (capital of Indonesia) and Kupang (capital and major port of Indonesian province of East Nusa Tenggara), is 1,023 nautical miles. Thus, in many cases the preferred methods to provide connectivity include satellites, microwave radios and submarine fiber optic cable.

Due in part to its geography and disperse population, operators require higher capital investments than many other markets. For example, the capital spending of Telkom Indonesia has been higher than the Asia average consistently since 2011 (Figure 4).

Figure 4: Telkom Indonesia capex/revenues vs. Asia average, 2011-18

Source: MTN Consulting

Satellite-based Communications: Indonesia launched its own domestic satellite system in mid-1970s. The largest segment of the satellite telecom market is the backhaul connectivity followed by Internet communications for the consumers. However, only a small portion of total traffic is carried over the satellites.

Submarine Cable based Communications: Indonesia is lagging behind to some extent when it comes to providing international connectivity through submarine cables. Recent investments in new cables will help. For example, the SEA-ME-WE 3 (South East Asia – Middle East – Western Europe 3) lands in the Indonesian cities of Jakarta and Medan. Connectivity has been further improved with SEA-ME-WE 5, which was inaugurated in 2017. The SEA-ME-WE 5 cable lands in the Indonesian cities of Medan and Dumai. A number of other smaller cables connect the Indonesian market to Australia, Malaysia, Singapore and Thailand. New projects like INDIGO and the Australia-Singapore cable will help Indonesia as well.


Palapa Ring Project

The Ministry has taken multiple large-scale infrastructure development projects to overcome the digital divide. One key project is the Palapa Ring network, a new national backbone network utilizing a mix of submarine and terrestrial routes. Completed in October 2019, this project took several years and $1.3B to complete. This new fiber optic backbone can be used by operators to provide broadband services. Figure 5 illustrates the Palapa project, using blue lines for fiber and blue dots for optical nodes.

Figure 5: Scope of Palapa Ring Project

Source: https://web.kominfo.go.id/sites/default/files/KOMINFO_Laptah%202017_Final_English.pdf

Recommendations

Indonesia was ranked 111th out of 176 countries in the ITU’s 2017 ICT Development Index. This index measures the levels of economics, prosperity, literacy and other skills that enable citizens to take full advantage of ICTs. Much can be done to improve the ICT status of Indonesia, and telecommunications has a role to play.

5G could be one of the key enablers to improve the ICT standing of the country. To enable 5G, though, Indonesia at least needs a long-term roadmap, a solid fiber optic cable network, effective frequency spectrum auction(s) and a strategy for market consolidation.

The development of some of the pieces of this puzzle are still in the rudimentary stage and more concrete steps are needed. Our recommendations for further progress are as follows:

Long-term policy roadmap: Indonesia’s telecom Ministry (MCI) may need a long term roadmap for development of the sector, with three prongs. One to solve the technicalities (e.g. spectrum allocation); another to ensure an opportunity for effective return on investment; and thirdly and most importantly its benefits and implications for the people of Indonesia. With strong policy coordination, the government can use 5G as an enabler to reduce the broadband connectivity gap between its rich and poorest regions, create jobs and strengthen its ICT standing in the world.

Market Consolidation: Many successful markets have 3 to 4 cellular providers; Indonesia has five operators. Consolidation should help strengthen the dwindling financial strength of these companies. Out of the five operators, only Telkomsel has an EBITDA of 50 percent whereas Indosat, XL Axiata and Smartfren all suffered losses in 2018.

Frequency Spectrum: in Indonesia, the 5G core spectrum band of 3.5 GHz (i.e. 3.3 – 3.8 GHz) and frequencies up to 4.2 GHz are currently used for fixed satellite service (FSS) applications. FSS applications include tv broadcasting, banking communications, and Internet connectivity. In more granular terms, the range from 3.3 to 3.4 GHz is used for fixed wireless broadband and rest for FSS. FSS is extensively used in this particular band and thus to use this band for 5G will be a daunting task. Indonesia may reflect its intention for the future use of this band for mobile and more specifically for IMT (International Mobile Telecommunication) in the footnotes in the coming WRC-19.

As the availability of the core band is next to impossible in the near future, it is important to pay more attention to millimeter wave band frequencies. The recent completion of the live 5G trial in 28 GHz using Nokia’s equipment on Hutchison 3 Indonesia network is a good step. Along similar lines, ZTE and Smartfren have also conducted an indoor 5G trial on 28 GHz.

Spectrum Auctions: Spectrum auctions for 5G particularly for the core band need to be executed by keeping a strong balance between the wish-list of the government and desires of the operators. There is no magic figure for the base price of a particular frequency band, which depends on a number of variables. However, it should be lower for millimeter wave bands as compared to the core band due to much higher implementation costs of the former.

Connectivity: A solid transport network including backhaul is a must for the success of broadband and 5G. The Palapa Ring project and ongoing investments by local CNNOs and telcos will both boost the development and implementation of 5G.

–

*Saad Asif is a Contributing Analyst for MTN Consulting and a recognized industry expert in wireless communications. He has worked in the field of telecommunication for over 21 years, and has authored three books and multiple peer-reviewed technical papers. Saad has been granted multiple patents and is a senior member of the IEEE.

–

Photo by Ikhsan Assidiqie on Unsplash

Blog Details

Improving Africa’s connectivity: more subsea cables are a good start

Posted on | by Narola

Over the last two decades, submarine cables have become a key growth enabler for trade and communication between Africa and the rest of the world. Subsea cables play this role elsewhere, but the effect is newer in Africa.

With recent investments, Africa’s position has improved: stark declines in the price of international capacity have supported a surge in the volume of data consumed, generated, transmitted, cloud-hosted and processed real-time over Africa’s communication networks.

But does Africa have enough capacity?

Traffic and subscriptions have exploded; for instance, mobile broadband users in Africa reached 253 million in 2017, from 22M in 2011.  Keeping up with this growth momentum requires continual investments in international connectivity. This article explores recent submarine developments in Africa, identifies bottlenecks, and discusses how they can be addressed.

54 countries and not enough fiber to go around…yet 

With 54 countries recognized by United Nations, Africa has 38 countries with a coastline and 16 that are land-locked. The pace of regulatory liberalization, sophistication of telecom infrastructure, and geopolitical stability is quite uneven across the continent. Much of the African growth journey is confined to 10-15 countries. However, this is set to change. Africa’s boom in the construction of new submarine cables is serving as a growth catalyst for regional terrestrial fiber networks connecting multiple countries, fully or partly funded by institutions like African Development Bank (ADB) and other investors.

These investors hope improved international connectivity can create a better business climate for development, reducing prices. As an example of Africa’s challenges, consider the price of a 100G IP port. In London, it available for a monthly recurring charge of $15,000-20,000. Even in South Africa – the most affordable African destination – a 100G port costs 5X higher. This stifles business viability and compels ISPs, MNOs and MSPs to deploy Nx10G incrementally, forfeiting economies of scale.

30 operational cables serve Africa, across 4 corridors

Africa’s cables cover four connectivity corridors – Africa-Europe, Africa-Latam-US, Africa-Asia and Africa-in-region.

Out of Africa’s 38 countries with seashore, 37 countries have at least one submarine cable landing, including 30 operational, and 7 under construction. The best connected country is Egypt, which lands 15 submarine cables. It’s far more common to have just one cable landing, though. Nine African countries face this dilemma, including the Republic of Congo, Togo, Liberia, Sierra Leone, Guinea, Guinea-Bissau, Gambia, Mauritania, and Sao Tome & Principle. Figure 1 illustrates the distribution of subsea cable landing stations in Africa.

Figure 1


Source: MTN Consulting, LLC

The Djibouti hub needs improved terrestrial connectivity

While the count of 30 submarine cables is an impressive figure, most of the upstream IP connectivity is served by 9 submarine cables. One reason for this is, 13 of the 30 cables are basically passing through Africa to Europe via Djibouti and Egypt, as depicted in Figure 2 below.

Figure 2

Source: Submarine Cable Map 2017 

Most of these cables play little role in the African economy. Djibouti, despite being close to Kenya and landing 11 submarine cables, remains isolated from rest of Africa. One reason for this is lack of fiber infrastructure connecting Djibouti and Egypt to other African countries. Ethio Telecom, the incumbent in neighbouring Ethiopia, has made things worse by showing little apparent interest in expanding connectivity.

July 2018 brought good news, though: Liquid Telecom announced that it would expand its growing pan-Africa network north into Egypt, signing an MoU with Telecom Egypt to link its network from Sudan north into Telecom Egypt’s network via a new cross border interconnection. That will create a 60,000km km fiber network from Cape Town to Cairo, sometimes called the “One Africa” broadband network (see figure, below).

Figure 3

Source: Liquid Telecom

Multiple weaknesses exist in Africa’s international connectivity 

“One Africa” will improve things around Djibouti, but that’s just one of many issues. Africa’s international connectivity needs a number of other improvements:

  • more submarine cables with open access cable landing stations,
  • multi-provider terrestrial backhaul options,
  • fair-play interconnect with other submarine cable systems,
  • carrier neutral datacenters and Internet exchanges for traffic localization,
  • deployment of network automation with software controls

To sustain the continent’s growth momentum, Africa’s network operators need to address these issues over the next 3-5 years. Fortunately, they are making progress.

Africa’s cable boom is driving higher end user bandwidth requirements

Africa’s new cables are beginning to change the definition of a “high” and “low” capacity customer.

Globally, 1G is becoming the new STM1 and increasingly deployed for enterprise connectivity. 10G is the new STM4, and select markets are ready for the 100G leap (“replacing”) STM16 in 2019-20. While Africa is a year or two behind, outside South Africa, the pace of transformation is set to accelerate in 2019-20. That is evident from recently 100G network upgrades undertaken by Liquid Telecom, SEACOM, EASSy and MainOne. Also, AAE1 announced it would upgrade to 200G last month. This comes just 18 months after the cable was ready for service (RFS), and 2 years ahead of schedule. (Figure 4)

Figure 4

Source: AAE1

Webscale network operators are now big in submarine; is South Africa the next stop?

The global submarine cable market is transforming rapidly due to participation from Google, Facebook, Amazon and Microsoft. Put together this group has already invested in 21 submarine cables globally, the majority in 2015-20 period. The only regions where they are yet to invest in submarine cables is the Asia-Europe corridor, Middle East and Africa. These companies are laying the groundwork, though:

  • Microsoft and Amazon have edge network nodes in South Africa and work is underway for cloud datacenters with Teraco to be operational by mid-2019.
  • Google and Microsoft have conducted multiple pilot projects across Africa in the last 3 years to bring affordable Internet to underserved regions.
  • Facebook and Amazon are reportedly scouting for partners for submarine cable builds and announcements are expected in early 2019.

Given their long term plans, it’s likely that the deep pocketed webscale players will soon start to expand their massive hyperscale networks (including new submarine cables) in South Africa in 2019-20. These new cables will have a far-reaching impact on the continent, especially when combined with the terrestrial reach of the One Africa network.

One challenge is that, even if a new cable project is announced and funded in 2019, it would not likely be operational before 2022. The webscale operators are likely to engage in a number of partnerships to meet their capacity needs in the interim. For instance, they may consider linkups with Liquid, MTN, and Orange for west Africa, and SEACOM or EASSy for east Africa.

Complimenting submarine cables with terrestrial networks and datacenters

Submarine cables alone cannot alleviate Africa’s connectivity challenges. They have to be complimented with multi-provider terrestrial fiber networks with cross-border alliances to make regional connectivity “affordable” – where a reasonable target is 1G links priced below $5000 per month, and declining by 15% per year.

Along the western coast of southern Africa, Angola, Nigeria, Ghana, Ivory Coast and Morocco have multiple providers developing terrestrial fiber networks, but cautiously with limited reach. Pricing remains high, inhibiting deployment of 1G and 10G links.

The situation is better on the eastern side of southern Africa, including South Africa, Mozambique, Tanzania, Kenya, Uganda, Zimbabwe and Zambia: multiple regional providers are developing fiber footprints with increasing capillarity. Liquid Telecom, Simbanet, WIOCC and SEACOM lead the market. The capacity pricing is competitive, low enough to trigger widespread usage of 1G and 10G links for the largest mobile network operators. By 2022, the entry of cloud and content provider-sponsored cable projects will trigger steeper price declines and stimulate demand.

Africa also needs datacenters that are truly carrier-neutral, and not selective about their neutrality. Developments in this area include:

  • Teraco in South Africa has datacenters in Johannesburg, Cape Town and Durban, and is at the forefront of the carrier-neutral space. That makes it an attractive acquisition target for a company like Equinix to jumpstart its Africa presence.
  • First generation datacenters, supposedly carrier neutral, are also operational in Kenya and Nigeria, with Tanzania, Uganda, Ghana and Ivory Coast lined up for 2019.
  • A new breed of focused datacenter providers like Rack Center, Rack Africa and Djibouti Data Center (DDC) are gaining traction. Their facilities, though, may need to be retrofitted to support technical requirements of the big webscale players.

Kenya and Nigeria poised for big changes in 2019-20

For connected-Africa to be a reality, the playground of new submarine cables, terrestrial networks and datacenters must move beyond South Africa. The two countries set to gain prominence in 2019-20 are Kenya and Nigeria. Both countries land 6 submarine cables each, but differ significantly in terms of cross-border terrestrial fiber connectivity.

Figure 5

Source: https://ian.macky.net/pat/map/afri/afriblu2.gif

Kenya has a distinct lead with robust regional connectivity to Uganda, Tanzania and Rwanda through Liquid Telecom and Simbanet. That is being extended to Malawi, South Sudan, Ethiopia and Djibouti. WIOCC and SEACOM have also created terrestrial routes mirroring their subsea routes to provide connectivity to land locked countries. The provider oligopoly however keeps the market price of 1G and 10G links intimidatingly high.

Nigeria is lagging with respect to regional fiber connectivity. That’s despite the fact that Nigerian operators MainOne and Glo-1 own and operate private submarine cables from Nigeria to Portugal and the UK respectively. MainOne has pursued expansion through Camtel and Orange into Cameroon, Cote D’Ivoire and Senegal. Adding that to its existing links in to Nigeria and Ghana, along with cross-border fiber connectivity to 5 adjoining countries, gives MainOne a regional network spanning 10 countries. For its part, Glo1 operates only in Nigeria and Ghana; its recent focus was developing the Glo2 project, a domestic extension to address the Oil & Gas segment.

Webscale the big open question

Africa has made lots of strides in its international fiber connectivity over the last few years, but has far to go. Impending entry by the globe’s big webscale operators is likely to have a big impact on many markets by 2022, and the effect will filter across Africa in the years after. Between now and then, a lot will happen. One thing to watch is how webscale operators link up with regional telcos and carrier-neutral providers to accelerate their network expansion. Such partnerships happen in other regions too, but Africa will require more of them.

Cover image: Cape Town, South Africa (credit: Dan Grinwis)