[kictanet] [Fwd: [Fibre-for-africa] Ex-Africa One Honcho bringing Optical Fibre to East Africa in another project]

[alice]

from Brian Longwe: Fibre for Africa mailing list:

Interesting to note that the former top gun at Africa One - the  
failed "fibre necklace for Africa" - is spearheading this initiative.  
One more piece of evidence that Africa holds the key to the future of  
the global telecoms business.


OUTSIDER EAST COAST FIBRE PROJECT COMES IN FROM THE COLD – SEACOM  
GOES PUBLIC
(From Russell Southwood's Balancing Act)
There are four projects to build an international fibre cable to  
connect the east coast of Africa. There’s EASSy, the Kenyan  
Government’s TEAMS, Flag Telecom…and the fourth project? Sithe’s  
SEACOM has been working quietly on the fringes to put together a  
privately funded “carriers’ carrier” project. News has been filtering  
out about it but Sithe’s Brian Herlihy made his first public  
presentation of the project at a United Stated Trade Development  
Agency Africa conference ten days ago in San Francisco. Russell  
Southwood spoke to him about what SEACOM will be and how it will work.

The new cable follows the same route as the EASSy cable down the  
eastern seaboard but it will either connect internationally directly  
into Italy or India via VNSL. The latter is important because the  
total cost of international fibre transit will include any second leg  
beyond the point where the cable lands.

Brian Herlihy is a veteran of Africa One who has learned the lessons  
of that over-ambitious project. Sithe is owned by venture capital  
company Blackstone but is raising private equity to complete the  
cable which will be called SEACOM. It wants to become a carriers’  
carrier for what it sees as an “underserved” market.

Thus far, it has raised money from the following sources: American  
funding from an African infrastructure fund, an Africa and Middle  
East Fund based in Europe and two private equity groups in Africa. At  
the conference presentation, Herlihy told delegates that “50% of the  
shareholders are African.”

In order to act as a “carriers’ carrier”, it will outsource day-to- 
day operations and is currently in discussions with an  
internationally reputable carrier. It will either invest in  
terrestrial backhaul directly or buy it from others. It has excess  
funding targeted at inland backhaul.

It is talking to ISPs and carriers about Capacity Purchase  
Agreements. In effect, it is selling IRUs where the purchaser will  
put 5% of the price down by an agreed date and make the final 95%  
contribution at the start of operations.

One of the current obstacles the project has overcome is that the  
South African Government will not allow it to land the cable in that  
country itself. Therefore it will make a commercial agreement with an  
existing carrier (Neotel) and transfer the operation of the landing  
station to it. Under the ECA Act, it will make sure that the fibre  
offers open and fair access to all operators and allows co-location  
of other POPs.

By contrast, in Tanzania it will obtain its own licence and build its  
own landing station and a large co-location centre and put a large  
ICT park alongside if it proves to be feasible. It will follow the  
same licensing and operating route in Kenya and also build a co- 
location centre there. It is currently talking to the Kenyan utility  
companies about obtaining terrestrial backhaul.

A factor that will affect all four East African fibre projects is the  
tightening market for optic fibre cable and build capacity. Having  
been in the doldrums for a number of years, the two main  
international submarine cable-laying companies are believed to be  
both short of fibre optic cable and ships over the next three years.  
There are now a large number of new fibre projects, particularly in  
the Pacific. EASSy has chosen Alcatel Lucent as its contractor and we  
understand that it also bid for the TEAMS project. The Kenyan  
Government chose Tyco as its contractor. Neither Flag nor SEACOM has  
appointed contractors although Herlihy says it will do so this month  
(April 2007).

On pricing, Herlihy told delegates”We have lowered expected pricing  
twice to unlock pent-up demand.” He said that the company would act  
as a wholesaler and that it expected that a reseller market would  
develop for bandwidth in much the same way as already operated in the  
satellite market. On pricing, he was coy about starting prices but  
expected prices to drop to US$91 per mbps per month in ten years  
time. He noted that the price of bandwidth was “killing more business  
cases (in Africa) than other factor”. Asked whether his company would  
be interested in building a competitive alternative to SAT3, he  
replied that there was already interest in Guinea (where it was  
involved in an aluminium smelting project) and several groups had  
already approached it.

It is interesting to note that the countries with more competitive  
markets like Kenya and Tanzania are attracting new operator interest,  
whilst South Africa is not really open for business in quite the same  
way.

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