[Kictanet] Day 2 of 10: What are the existing Business Modelsfor Optical Fiber Provision?

Wed Jan 24 15:30:29 EAT 2007

Hello

John 

Maybe what we should be addressing here are the issues of Technology
to be deployed or Economic models

What lessons have we learnt from other similar projects that have
taken place on the continent such that we do not fall into the same
traps or problems experienced

What are the good practices to follow on this prject

Maybe this will start the roll of infor

Thanks

John

---- Original Message ----
From: jwalu at yahoo.com
To: jmunsaka at zamnet.zm
Subject: Re: [Kictanet] Day 2 of 10: What are the existing Business
Modelsfor Optical Fiber Provision?
Date: Wed, 24 Jan 2007 04:15:09 -0800 (PST)

>Aih! this Day 2 is too quiet. I have copied the the last
>paragraph hoping it will kickstart this thread...
>
>>>
>
>The Question.
>So back to the question:- What are the existing Models
>for provisioning OFC? Plse voice your support, objection,
>correction or comments on any of the Models below giving
>reasons why. In addition, feel free to suggest other
>existing models out there or still under construction. 
>We have only 2days on this theme so let the views start
>flowing...
>
>walu.
>
>>>
>--- John Walubengo <jwalu at yahoo.com> wrote:
>
>> I want to thank all those who contributed (in writing and
>> in silence) during yesterday’s 1st day of discussions. 
>> Becky will be giving us the summaries in due course.
>> Indeed
>> it was a warm-up to what I believe is going to be a lot
>> more of a complex issue and hence the following long and
>> necessary background information on the Business Models
>> for
>> Provisioning  submarine Optical Fiber Cables (OFCs – plse
>> not the abbreviation, we shall use it frequently).
>> 
>> I stand to be corrected but from what I gather, there
>> seems
>> to be two distinct Business Models for providing OFC,
>> namely, Purely Commercial and Partly Commercial. A third
>> approach, which is yet to be tried (implemented) but is
>> highly acclaimed in Donor and Academic communities, is
>> known as the Open Access approach.
>> 
>> Now, in a Purley Commercial Setup, Private Data
>> Communications Companies, usually the top level IBPs –
>> Internet Backbone Providers such as Cable&Wireless, BT,
>> France Telecom, MCI, would establish a business need to
>> build an OFC b/w continents in order to exchange traffic
>> between their (ISP) customers that exists on both ends of
>> the OFC.  Please note that IBPs are not ideally selling
>> bandwidth directly to the regular you and me, but rather
>> to
>> the ISPs – Internet Service Providers who will eventually
>> resale this Internet Access (bandwidth) to you and me.  
>> 
>> Option I: Purely commercial Model
>> Basically, the IBPs use their own money to put up (down?)
>> the cable and they independently decide who connects to
>> the
>> cable’s landing (exchange) points and at what rate per
>> month.  These private companies are run on a purely
>> commercial basis with the aim of maximising profit at the
>> shortest times possible. Indeed ISPs would not mind the
>> potentially high-prices arising from these model as long
>> as
>> you and me can meet this cost when it is eventually
>> slapped
>> on us.  This is the prevailing model for OFCs between
>> America/Europe as well as America/Asia-Pacific – but with
>> the advantage that the OFCs in these two realms are
>> abundant to point of having driven the costs extremely
>> down.
>> 
>> Option II: Partly Commercial Model.
>> This is what has occurred with the OFC running from
>> Portugal, across the Western Coast of Africa through to
>> S.Africa.  The so called SAT3 Cable has been provisioned
>> through a (currently) contentious model that has given
>> the
>> term ‘Consortium’ a suspicious connotation.  At its
>> simplest level, a group of mainly government owned
>> (Public)
>> Telco companies across the affected coast-line get
>> together
>> to form a consortium with a view to seek funds and build
>> the OFC.  Thereafter, they retain the privilege of
>> independently deciding who connects to the cable and at
>> what rate per month. From the SAT3 experience, the OFCs
>> monthly rates charged are nowhere near the ones enjoyed
>> currently being enjoyed in the developed economies for
>> various reasons.  
>> 
>> Their high costs of OFC bandwidth has attracted pressure
>> from Civil Society, Academia and other groups who argue
>> that since (largely) Public Funds were used to build the
>> cable, the Consortium Profit-motive should be moderated
>> (regulated?) to strike a balance with the Public interest
>> (read – very cheap rates).  The Consortium has ofcourse
>> resisted this thinking arguing that their bandwidth
>> charges
>> are dictated by market forces – specifically, Africa has
>> over the years generated little internet traffic volumes
>> that would have made it possible for them to drastically
>> drop down the charges. Circumstances have therefore
>> forced
>> them into a High-cost, Low Volume business model.
>> Furthermore, their Bandwidth charges are incidentally
>> 5-10
>> times lower than Satellite Bandwidth costs and that
>> should
>> be appreciated.
>> 
>> Option III: Open Access Model.
>> And so, in comes the proponents of Open Access Model. In
>> the simplest terms, they argue that Africa’s
>> socio-economic
>> renaissance hangs on the availability of cheap bandwidth
>> or
>> communication costs.  As such, the OFC presents a
>> historic
>> opportunity that should not be left to prevail under
>> short-term, commercial arrangements either within the
>> Private or Consortium models.  Open Access Models
>> proposes
>> radical changes at all levels (Political, Legal,
>> Regulatory, Economical, etc) in order to provision
>> international OFC with an alleged bias towards
>> socio-economic development.
>> 
>> In particular, they claim that the OFC should be co-owned
>> by both Government and Private sector but should NOT be
>> operated for profit; that is, it should be run at Cost by
>> a
>> body agreed upon.  Further, access or connection to the
>> cable should be Open to current and future stakeholders
>> wishing to connect to it – AT COST not profit. The
>> fundamental point is that money should NOT be made out of
>> the cable, money and lots of it, should be made out of
>> services (BPO, eCommerce, etc) that would arise from the
>> presence of the cable. Open Access model, foresees a
>> Low-Cost, High Volume Business Model for the Cable. Its
>> biggest limitation is the fact that it remains a fairly
>> academic topic that is yet to be tested – particularly in
>> an environment whose political, regulatory and legal
>> structures are not entirely matured. It chances of
>> successful implementations are deemed low.  Furthermore,
>> even if it was to succeed, the sceptics are wondering:-
>> of
>> what use is cheap international bandwidth without African
>> (local) Content and an equally developed domestic digital
>> network? Might this not be just another avenue of
>> ‘opening
>> up’ the emerging African e-markets to be exploited by the
>> developed economies?
>> 
>> The Question.
>> So back to the question:- What are the existing Models
>> for
>> provisioning OFC? Plse voice your support, objection,
>> correction or comments on any of the above Models giving
>> reasons why. In addition, feel free to suggest other
>> existing models out there or still under construction. 
>> We
>> have only 2days on this theme so let the views start
>> flowing.
>> 
>> References/Acknowledgements
>> http://www.fibreforafrica.net/
>> http://www.africafocus.org/docs06/apc0612.php
>> http://www.fibreforafrica.net/
>> http://www.diplofoundation.org/poolbin.asp?IDPool=127
>> 
>> 
>> 
>> 
>>  
>>
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