Internet access is expensive in Zimbabwe, that fact cannot be stressed enough. The cost of establishing a consistent connection for individual, residential or commercial use is still beyond the economic reach of most citizens especially against the backdrop of our strained economy.
With over 98% of internet connections in Zimbabwe made via mobile devices, the cost of mobile broadband is the key determinant of how big an expense the internet really is.
Which is why these high broadband tariffs were a major pain point when the local telecoms regulator, POTRAZ, issued a directive for all operators to set floor prices of 2 cents per megabyte on data bundles.
The tariff increase was eventually reversed, but even after this Zimbabweans still pay an average of US$30 for 1 month’s access of 1 gigabyte (GB) of data. It’s the third highest in Africa. The local mobile broadband product lineup has also been stacked with packages like the daily bundles which offer subscribers 1 GB of data for $2, valid for 24 hours.
While there have been a lot of reasons thrown around for these high tariffs, we’ve listed our 5 which have also been cited by members of the telecoms industry, analysts as well as the government.
Far from the sea and submarines cables- the realities of being landlocked
Most of the bandwidth which translates to the internet connections which we enjoy is delivered via submarine cables which emerge at cable landing stations located at specific coastal points.
As a landlocked country, Zimbabwe is faced with the additional costs that come with obtaining access to the same submarine cables through the third party countries that have these cable landing stations.
This factor has been cited periodically as a major hurdle for landlocked emerging markets trying to increase internet access to their populations. In a 2016 World Bank Development Report on Digital Dividends, it was called “the last 1,000 miles”, referencing the additional distance data has to travel just to get to countries like Zimbabwe.
Our country’s internet providers factor in this cost into their pricing model, which inevitably makes the cost of access in Zimbabwe higher than coastal countries.
That’s not to say all landlocked countries are paying as much as Zimbabwe, though. Some pay less while others pay more, depending on other factors that determine the eventual cost of the internet.
Zimbabwe’s small population
As with all things related to mass adoption and use, the more people who are set to access the internet, the lower the potential cost. Zimbabwe’s population of 12 million people is small by any mass distribution standard.
Considering that this same population is further segmented by aspects like economic activity, age and literacy, the final number of potential users drops to less than 10 million. Just as an illustration, we currently have an internet penetration of 50.1% which is approximately 6 million active connections.
When purchasing bandwidth for distribution local internet access providers have to be cognisant of these limited numbers, which results in smaller quantities bought and lower discounts negotiated for. A larger population would mean greater volumes of bandwidth consumed, and greater discounts then passed on to consumers.
A larger pool of internet users also ensures that any cost incurred by the internet providers in delivering services is spread across a greater number of subscribers and not carried by only a limited set of users.
Private sector leads in the rollout of a public utility
Internet access is now accepted as a basic human right and while the internet is an everyday utility the State has to treat it differently. This is because it doesn’t have control of infrastructure. Any attempt to theoretically extend a massive subsidy to consumers or to “nationalise” the sector for public benefit will rightfully have serious pushback.
The largest investment in Zimbabwean telecoms has come from the private sector through the work done by companies like Econet Wireless and its affiliate, Liquid Telecom.
Their profits driven approach has ensured that the entire industry (mostly) adopts an aggressive stance towards aspects like service delivery as well as pricing. It would have likely been a less dynamic telecoms space had it been done in any other way.
The majority of telecoms investment have been made by these private entities with obligations that have to be taken into account before the cost of the internet is lowered overnight. Which explains the lengthy negotiations that take place between the regulator and these providers before such changes are put into place.
Late investment in infrastructure
Zimbabwe’s internet boom took place after 2009 when the country adopted a multi-currency regime which unlocked tangible financial returns for investments made on telecoms infrastructure.
A lot of the work that followed this was enabled through leverage finance – borrowed capital, which was secured from investors outside the country. Less than a decade later, there is still a significant amount of debt that service providers have to service, creating the perpetual cries for leniency from the regulator in determining prices for broadband.
To a greater extent POTRAZ has accommodated this, going so far as to give broadband providers the leeway to set prices according to market forces.
Until Zimbabwe gets to a stage in telecoms investment when infrastructure isn’t reliant on finance acquired under tough payment conditions and this same infrastructure has been extended to a greater part of the population then this factor will always be at play.
A “compromised” regulator
POTRAZ is mandated to protect consumers when it comes to products and services in telecoms. However, it has other obligations as the entity in charge of safeguarding the industry and protecting revenues for all operators and providers.
It falls under the government which, in as much as it might try to accommodate the concerns of falling revenues in telecoms, still anticipates taxes from the vibrant sector. This case is even more apparent in a tough economy with shrinking revenues.
POTRAZ might be the one entity that’s supposed to look out for the ordinary man, but its role in protecting its principal plus the service providers places the citizen at a disadvantage where other more pressing concerns such as money are put forward.
POTRAZ has to balance these two roles out, and as was the case in the recent tariff increases, sometimes the State’s revenue comes first. The result is that the cost of data isn’t reduced as much as we’d want with the other “technical reasons” cited as the primary motivation for holding out on any #DataMustFall outcome.
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21 comments
Methinks the #1 reason is purely greedy pricing – not just by the telcos but by nearly every economic player in the country. Everyone wants to get rich overnight from just a single sale. Its a pricing model that promotes laziness because you are trying to raise tons of money while doing as little as possible. When the telcos connect to the undersea cables, are the connections also metered per megabyte per day?
Well said! Other landlocked countries with smaller populations, and some on the brink of war, are cheaper than us in terms of Internet costs. How is that? It’s just greed from operators trying to re-coup their total infrastructure investment in the first year of rolling out packages/services.
When ZOL was marketing it’s packages whilst they were still digging fibre trenches their pricing was outrageous. Eventually they revised their pricing, which it still high but affordable. Generally, the Zimbabwean customer pays through the nose for data, yet upstream the service provider pays peanuts.
There is a huge disparity between Internet prices per MB/GB from various operators Africom, Telecel, ZOL, Econet, TelOne, NetOne, Utande, YoAfrica e.t.c, yet they use the same upstream providers. It just boils down to greed.
Further to this.. Bandwidth is an imported commodity of which costs real foreign currency. As everyone knows our government has now kindly replaced our local fca with a supposed 1 to 1 bond currency, which is a lie as anyone who is willing to trade USD for bond will add a minimum 15% surcharge. Simply put anything imported now comes with an increasing exchange rate. This is all mainly the result of our failed corrupt government, these stories of potraz are simply a diversion from the core issue in our country.
Don’t forget the HIGH costs of licensing from POTRAZ!!! Millions of dollars a year in licensing fees that ISPs/MNO’s etc have to recoup from consumers!!!
yor right ….. thus really true we cant blame telcoms all the time people
$137.5 million over 20years that is $6.875 million per year as license,
Liquid could easily recover cost by focusing on volumes instead of margins, as everyone else does…reiterating what Anonymous said.
But they are greedy leeches, despite their self-placed halos where they believe they are somehow holy and perfect.
They are the best and most illustrative example of corporate greed.
Your comment is obviously from an uninformed position.
Read up before you start accusing them of being greed leeches.
@Anonymous – The reason connectivity is not more expensive is because providers offer capped packages, thus allowing them an easily controlled service. “Uncapped” is very difficult to manage, without imposing some form of usage restriction. Cheap, unlimited internet will not be fast.. Period. There are so many costs involved with delivering connectivity to the end user, you should be a little bit more understanding.
1) Licensing. We All know this is expensive as hell. The money has to come from the subscriber eventually.
2) Infrastructure. The fiber cables, trenching and associated equipment to connect the undersea cables to landlocked zimbabwe.. And then the end users.. This is not free, nor is it cheap. A decent 10G capable network switch will be > $20k. SFP+ modules 2-3k each at a minimum.
3) To build, and maintain a quality network – requires skilled engineers. These aren’t cheap. Not cheap to train, not cheap to hire.
4) Transit connection costs. All providers have multiple uplinks, with associated bandwidth charges.
5) Software & Licensing costs – These also add up.
6) High costs of import- bringing equipment into Zimbabwe is not cheap. Freight, duty and taxes all add up. Not to mention the banking delays on international payments.
How can you push volumes with a population size of Zimbabwe? You can only go as far. Compare the numbers and do the math
Excuses excuses… Zims are the world leaders at that! Simple reason.. coz we are a poor country wanting to have what 1st world countries have of which you have to pay a high price for it. If it wasnt for politics we would be miles ahead with cheaper and wider broadband access. Before 2009 Zim was still living in the dark ages when it came to fixed line broadband. No investment why you all know WHY.
Am of the view that if we augment the infrastructure resources and allow sharing amongst the operators then we can curtail the costs on a number of facets:
i. By purchasing large volumes using a single account from upstream providers Zimbabwe can negotiate volume discounts from these providers like Seacom and WIOCC.
ii. Most of our internet traffic is via Mozambique and the Mutare route is served by about 4 operators replicating investment as these operators do not share even ducts. The civils costs are replicated and the same applies to the costs of both passive and active equipment. The combined maintenance costs are high since each operator maintains there own links.
iii. The establishment of an Internet Exchange Point (IXP) is an imperative as this will reduce the amount of bandwidth requirements on the expensive upstream. An IXP will keep local internet traffic exchanges local. We do exchange lots of mail and correspondence locally but this traverses abroad consuming upstream bandwidth.
iv. If we open our telecoms industry to international big brands like Airtel, Etisalat, Orange and Vodacom; this might enhance competition and contain bullies in the industry. The more we localize the more likely things will remain the same. But the prevailing trends show that the status quo will remain unchanged in the medium future.
We have an IXP. All operators are in it. Most of our traffic is not via Moz.
1,2,4 & 5 apply to Ruwanda yet they have the cheapest internet in Africa? So therefor the only issues appear to be greed, tax and POTRAZ
Every other comment is important but this one is the only one that matters.
Let’s not forget tax. 5% excise. 3.5% licence fees (on top of $137.5m up front), 15% VAT, 35% corporate tax (profits are taxed and then left over used to invest). Up to 20% withholding tax on foreign services. Plus up to a 20% premium to get your USD out of the country. It adds up hugely. Don’t forget another 20-50% ‘risk premium’ for doing business in Zimbabwe.
This is simply zanu pf”s fault
1. Greed : why set floor prices when an operator has payed full license
2. Control of media: this is the chief factor if not the only. Times and times again zanu pf has showed the world that they are very scared of any other source of media which Zimbabweans can acces
ZANU pf wants to control what you think and your subconscious, they don’t want you to read how other countries remove governments like theirs on the internet. They don’t want you to see the full functions of human rights on the internet
And most of all they don’t want you to see what services they are limiting to Zimbabwean citizens on the internet.
Look what they did to kwese TV. Why are we still writing columns about Dstv if kwese TV is owned by a Zimbabwean entity because they know the power of media
Am not sure i agree with the idea of opening to international operators and wether that will have a major influence on the price.The reality is doing business in Zimbabwe is expensive.The cost of labour,taxes etc.
What bothers me personally is i do not know of any research/blueprint done by potraz to determine the pricing models and their viability.They introduced floor prices based on what the mobile operators said i wish they had produced a blueprint/feasibility study showing whether or not mobile operator companies will be viable and at what prices do they break even.This research needs to include all factors such as labour costs,cost of loans that mobile operators use for network upgrade,declining numbers in voice calls,data usage from customers per second for each operator,R&D costs etc ,all these should be factored in.
It is difficult/unfair to argue that mobile operators are being greedy without all this information.
A lot of the MNOs are struggling thats a reality,one needs to argue why companies like Telecel are struggling to expand their networks.
Most are just generating enough revenue to pay salaries and for day to day running but cannot generate enough to expand their business or diversify.
How much where you paid to write this garb ?
Silly, if you know how much he was paid, so what…
Thats sad because Econet is posting high profits everyyear ….i do not knw what profit margin do they really want,this sucks
I’m very surprised that some peope here feel that Portraz shouldn’t be charging licence fees. What country doesn’t and how’s that working out for them?
On the contrary surely last week’s shenanigans by Econet show that the biggest problem affecting the cost of data is corporate greed. When they failed to raise money to fast track payment of loans that are not even due by last week’s move they pressed forward with this new move for a rights issue which had been an apparent plan B.
Reading some of the comments above I can concede that they are logical but someone needs to also tie in the fact that MNO’S such as Econet that essentially control the price are managing to fast track expansion project paybacks from 10 years to 3 years then pleading poverty.