Why is internet so expensive in Zimbabwe?

Every other week it seems like Data prices are just going up. Of course, we could blame that on our depreciating currency but even in the USD era, data was not what the typical Zimbo would term affordable. So for example in 2016 Zimbabwe had the 3rd most expensive internet in Africa with 1GB of NetOne data going for US$30.

It’s wild I know. But before we get to answering the question of why the internet is so expensive in Zimbabwe we need just a basic understanding of how the internet works. How does the internet get to Zimbabwe?

You can watch the video with the player below or alternatively you can head to YouTube with the link here.

Why the internet is expensive in Zimbabwe

How the internet works

The internet is basically a connection of a lot of computers. If you search for a picture of a Samsung right now on the internet, all you are doing is using whatever network you have to connect to a computer somewhere in the world where that Samsung picture is stored. So basically the internet is one big network of all devices that can connect to the internet.

That said, how does an email from someone in China get to me in Zimbabwe or how can I watch a live football match in Spain in bed on my tablet using DStv Now? Well, that happens thanks to 2 things really. Satellites and undersea cables. These 2 technologies are essentially the backbone of the internet as they connect continents to each other.

But then even on land, there are still massive cable networks, usually fiber optic cables, which take over from where satellites and undersea cables end to get the connection to the world closer to your doorstep. 

So between the cameraman in Spain filming the soccer match and your tablet with DStv Now streaming this match live, there are a lot of different companies 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) like Utande or a Mobile Network Operator (MNO) like Econet. MNOs or ISPs then go through Internet Access Providers (IAPs) like TelOne or Liquid Intelligent Technologies who then either choose to use an undersea cable or satellite to send this feed to the rest of the world.

This means they go through other companies like Eutelsat for satellite or Seacom for undersea cables. The reverse happens from here till the feed reaches its intended destination. Liquid takes over from Seacom, Econet takes over from Liquid and your tablet plays soccer live. As you can see there are quite a number of middlemen involved and they all need to get paid. In real money. So let’s talk about money.

Telecoms Operating Costs

A telecom operator pays a lot of money for a lot of stuff. So much so that we actually need to break it down into some categories.

Bandwidth

This is pretty much the data rate of your internet connection. When the internet is priced for ISPs and IAPs it’s in traffic volume and not really data consumption. We can go into the weeds on this later, but higher transfer rates cost more because bandwidth is a limited resource.

A number of you in the Techzim Community always complained that the 4G speeds in Zimbabwe are generally good 3G speeds. This can be because of several reasons, with one of them being the base station you are connected to getting overwhelmed by the traffic it’s facing, but the cost of bandwidth is something that internet providers then consider before they decide on the speed of internet they can give you without making it too expensive.

Geographic Location

Zimbabwe is a land-locked country and because of this, IAPs have to lay down infrastructure to connect to the world by either setting up a Satellite like the Mazowe Earth Station that TelOne uses or a fiber network that Liquid Intelligent Solutions has been laying all over Africa.

This is an added cost that internet providers factor into the pricing of their data, and this is just to get the connections done for access, which is quite expensive as alluded by Director, CSI JAKOVLJEVIC, Dejan:

…affordability of internet and the return on investment (ROI) in landlocked countries is low. This is mainly due to the geographic remoteness and their further distant to the nearest undersea cable node, implying a cost of laying a transporting cable to the landlocked.

Director, CSI JAKOVLJEVIC, Dejan – ITU

Equipment and Software licenses

A lot of technology is involved in telecommunications with most of the equipment being bought by order and from the manufacturer. How good this equipment performs depends on the quality of hardware but more crucially how sound the software running on this hardware is.

This makes the equipment VERY sophisticated to a point where support comes from the guys who make the equipment. And most of them are based in Europe and Asia meaning if a critical system update needs to be done or new technology has to be put up, they have to fly these experts in. Moreover, the software used to manage these systems is licensed software that is paid for on a subscription basis. Again money is being spent to just keep everything running smoothly.

Operating licenses

Just like any registered business you need to be licensed to operate. And it’s not very cheap. For fixed telecom operators like TelOne and Liquid Home, they are looking at US$100 million for a 20-year license, and for MNOs like Econet, NetOne, and Telecel that is a cool US$137 million for the same 20-year license. Definitely not cheap.

And it’s a very significant chunk of their revenue. We can look at Econet as a case study because, well, they are the biggest MNO in Zimbabwe and they have their data online. In 2021 their total revenue was Z$35 billion which at the RBZ interbank rate of Z$108 to US$1 meant that in US$ Econet’s revenue was around US$325 million. This is before we remove overheads like licenses we mentioned before, wages, utilities, legal fees, etc. Every year Econet will need to pay US$6.85m on top of all these said overheads.

Just for comparison, we can take our neighbor Zambia where an operator’s license is US$1 million valid for 10 years which is still US$100 000 per year vs US$6.85 million per year in Zim. An operator’s license in Zimbabwe is 68.5 times more expensive than in Zambia which is also a landlocked country. 

Taxes

In 2014 there was a 5% excise duty tax applied to all Airtime purchases. Another 5% tax was proposed in 2017 this time labeled as a health levy. Then in February 2022, a 10% tax was imposed on all internet and VOIP services in Zimbabwe.

All these costs are not absorbed by the telcos but rather are pushed to the public through the increased costs of internet and voice services. And these just come in whichever way, shape, and form which keeps driving prices of data up.

Overheads unique to Zim

Every business everywhere in the world has to deal with overheads like utilities, security, and general service and maintenance. But this is Zimbabwe and as such, some of these overheads are a much bigger cost than outside of Zimbabwe.

The biggest one lately has been the availability of power. The electricity supply in the country has been abysmal for the past couple of years. It’s been so bad that standby generators on telecoms infrastructure have been asked to run continuously for 12 hours in several instances.

This is an expensive source of power compounded by the fact that fuel is sold in US$ whilst telecom operators are selling their internet and voice services in Z$. And if you are following, the Z$ has lost 3.5x its value in the last 6 months according to the RBZ auction rates, whilst tariffs for telecom operators have not managed to keep up with the loss in value of the Z$.

Some MNOs are now spending money to get more affordable sources of power which in this case is solar. Econet has actually installed around 520 Tesla power walls in 260 of their base stations so they can run on the cheaper solar energy.

Econet has installed 520 Powerwall batteries, with two going into each base station, which is reportedly the largest telecommunications project in which Tesla has participated to date.

IT Web

The power issue is a Zimbabwean problem and even we citizens are going the solar route meaning the demand for solar systems is at an all-time high. So is the case of vandalism of telecom sites from individuals desperate to make ends meet by stealing solar panels and lithium batteries. This is again a problem inflating operating costs for MNOs as it adds downtime to their operations and forces them to spend Capex replacing hardware prematurely.

Fixed telecom operators are not spared either, especially TelOne which has the largest ADSL network in the country. This ADSL network uses copper cables as a transmission medium to get the internet to your home. Because of the price copper fetches as scrap metal it’s another target for vandals who steal it to sell and gain a quick buck. It’s so bad that there is a 10-year jail sentence in Zimbabwe for anyone caught stealing these copper cables.

Now it becomes a bigger problem when you see that all the expenses I have outlined here are paid for in forex. And we are buying all our airtime and data in Z$ meaning these telecom operators have to convert this Z$ to forex at the RBZ. But we have a massive forex shortage in Zimbabwe to the point that the RBZ developed a forex auction system where those that need forex can bid for it and keep their fingers crossed that they win the bid. Even then, the available forex isn’t enough to fully satisfy the demand.

Population

We are not a lot in Zimbabwe. Our population sits at 14.8 million in total with less than half of this population living in the urban areas and using the internet. For telecom operators to make reasonable margins they need to have a lot of active subscribers and the more active subscribers they have, the more the costs they incur can be spread over a greater subscription base, therefore, driving the cost of internet and voice services lower.

I get it. But are telcos being genuine?

At the end of the day, telcos are businesses. They need to make money and fend off competition. So it will not do them any good if they make their services so expensive that no one can afford them. They’ll lose customers to the competition and eventually go broke.

Making their services dirt cheap is also a problem because they have all those expenses we talked about that they need to cover for them to stay running otherwise the quality of service will take a nosedive and again customers will move to the competition.

I believe that telcos in Zim are being as reasonable as they possibly can, given the operating environment, with some not having even seen a profit in decades. Regardless I want you to let me know what you think. Are the costs of data in Zimbabwe justified?