In the End, it Becomes a Question of Economies of Scale

Exploring Africa further, we’ve made a trip to Lesotho, where our team met with Jim Lundberg. Jim is the Co-Founder and CEO of LEO, the first company to bring the Internet to Lesotho, all the way back in 1994. During the interview, he shared with us the history of the development of the Internet in the country, the challenges, opportunities, lessons, and failures. And during almost 30 years in the business, there were many of those! Let’s take a look.

LEO and Internet in Lesotho

LEO is one of the leading players in the Lesotho Internet market. In fact, the company was the very first Internet provider in the country, bringing connection to Lesotho in 1994. It was at first a dial-up network using the existing telephone infrastructure but since 2001, LEO also developed a wireless network that right now encompasses the whole of Maseru, the CBD, the residential area around the business district, and extending as far as the international airport. “We were the first Internet provider in the country, and at some point, we had 100% of the Internet business. Then, with the arrival of ADSL, and EcoNet services and then Vodacom, we gradually became smaller, but nonetheless, our business has grown significantly.”

Lesotho in Numbers

Lesotho is a small country with a population of two million, and an Internet penetration rate of 50%. In the words of Jim, people connect to the Internet mainly through the means of mobile devices. 90% of the country’s population lives in rural areas. Notwithstanding this, even if people live in villages, the Internet connection is good, and they can connect to the Internet even if living in clay huts.

When it comes to domains in the country, the number is quite small. Jim mentions that there never were more than 2200 to 2300 domains in the country, and it’s been like that for more than 20 years.

People are quite supportive of the local .co.ls domains. There are some businesses that want to go with the .com, but the main reason is that they want it to look as if they are based in the US.

Pricing and payments

Local hosting is about $5/month, which is a bit more expensive than the rest of the world. “We can say that the small scale of operations in the city affects the price, not only of the hosting, but the bandwidth, and other related services.”

The price for the domain name is affordable, standing at 230 Maloti, which equals around $15.

Hosting challenges in Lesotho

Maseru is quite small, and the business people of the country are mainly centered in the city center. “There was a time not recently but there was a time when I could visit all of my customers on foot, and that would be within 10 or 15 minutes walking distance. Now, it’s a little bit more spread out,” says Jim. While this accessibility has its benefits, it brings with it quite a few challenges too.

Currently, the majority of the websites in the country are hosted outside, South Africa primarily. It’s often a really big problem for small countries, where it’s very hard to have a professional local provider at affordable prices. “In the end, it becomes a question of economies of scale. In Lesotho, the bandwidth has always been expensive because we didn't buy very much. But then, we don't buy very much because it's expensive, so we're in this catch-22 situation which we think we have now finally resolved. We have managed to secure additional bandwidth that we're hoping will take us now out of this conundrum. This situation where, you know, you're small because you're small and you stay small.”

Final words

The conversation with Jim was very insightful, giving a glimpse into challenges faced by Internet businesses in smaller regions. However, it also showed what potential solutions there can be to help move such countries forward. We really enjoyed our conversation with Jim, and hope you did too!