Safaricom set to launch The Box on the 8th

Kenya is set to experience yet another first in the continent. Reports have surfaced online suggesting an imminent release from Safaricom, Kenya’s largest telecommunications company, of a set top box appropriately named “The box”. The box will be a service from Safaricom offering high-speed internet, TV services and possibly voice services too. It is rumored to cost 4500 Kenyan shillings and may either be a subscription service or a one time purchase or both. The box is already generating a lot of tech buzz in Kenya ahead of its release 2 days from today.

A statement from Safaricom indicates that the main purpose of the box will be to deliver internet services to every home with a television set. Other unsubstantiated reports claim that Safaricom will be in partnership with Radio Africa Group for FTA TV while it concentrates on data services. This is not a surprise move given Safaricom is trying to diverse its revenue sources. Could we be looking at the next MPESA? Only time will tell.

This comes after rumors suggesting Safaricom had applied for a digital broadcasting license and permission to import set top boxes. These proceedings seem to confirm the said rumors. Safaricom has so far been a little secretive about the service, but we expect to hear more during its full year result for 2014/15 announcement. I could find little to no press coverage on the same. So far, this seems to be the only official picture from Safaricom.

We still don’t know much about the capabilities of the set top box but earlier leaks suggest it will be running android and will have WIFI capabilities. The set top box will support 4G-LTE for fast internet. However, we all know 4G is still a new concept in the county. The only places with 4G coverage are countable. Most of us, assuming we buy the set top box, will have to content with 3G speeds, which are not half as bad. With the right people, the right marketing and pricing, this is set to be a great success for Safaricom.

To be successful, Safaricom will have to greatly lower the cost of internet bundles. The current subscription model is unsustainable for video streaming. To put things into perspective, let’s use some math. Assuming HD content, say a 720p video of average size 80MB and 1GB data bundle, streaming this will get you about (1024/80) 12.8 videos. Assuming every video is an average of 3.5 minutes (music videos), you get 44.8 minutes of video watching. Using the same analogy, full HD content with an average size of 120MB will get you about 30 minutes and for 4K content, average size 500MB, you will be lucky to hit 7 minutes.

For a long time Kenyans have been treated to the chorus “internet prices will go be going down soon.” With the laying of the undersea fiber optic cables, I was optimistic, however time has shown that my optimism was misplaced. To reach more people, and to grow in the data sector, Safaricom will have to take some drastic action regarding internet bundle pricing. If Safaricom is serious about offering video on demand to Kenyans with the set top box, we are likely to see reasonable monthly subscriptions for the same.

The major customers for this service, I suppose, will be houses that by now have yet to acquire set top boxes and those that would like to have a stable internet connection in their homes either for work or entertainment purposes. The Kenyan market is slowly catching up with the internet TV trend. Consumers want to control what, how and when they consume TV content. It may just be the right time for introducing the service in the country. Indicators are good with local music videos finally starting to hit the 1million mark.

The driving force behind the purchase of the boxes will be the youth, people who are actively looking for a means to survive during this hard economic times. Most of them fresh graduates actively job hunting with a great need for the internet. If the box will launch with the current data bundle pricing in the country, it will most likely fail or take time to catch on. My suggestion is for Safaricom to offer the service bundled with a fixed monthly charge and a maximum download cap on the monthly data bundle, say 50GB to tame the ever cunning consumer.

Nonetheless, what Safaricom is set to unveil is not a completely new concept in the country. Zuku, a competing internet service provider has a service called Zuku fiber which offers high speed internet, telephony and TV services. All the three services are bundled into packages priced differently based on bandwidth offered and number of paid for TV channels. The major disadvantage with the Zuku service is that it relies on a network of fiber optic cables that the company is still laying down. Most of the country is yet to benefit from the service and this will continue to be the case until enough cable is laid down. On the other hand, Safaricom has a large mobile network coverage that it can leverage to reach many more customers. This gives it a major advantage over any other competing company with similar interests.

The pricing will be a little tricky for Safaricom, but if it’s something similar to what Zuku is offering, I will definitely be among the first customers to line up for “the box”. Conversely, if for some reason the service is priced at an unreasonable price (I consider anything higher than 5000 per month unreasonable) it will be a hard sale for Safaricom.