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

Wed Jan 24 18:18:27 EAT 2007

Thanx Kai, for your views...as key National data operator
in the country, your thoughts are quite appreciated.  We
would like to hear also from ISPs, Academia and Consumers
regarding the models for provisioning international optical
fiber...Mucheru, Victor, Eric, Alex and others.  Plse do
not sit on your ideas...

walu.

--- "Kai U. Wulff" <kai.wulff at kdn.co.ke> wrote:

> I would say the models depend on the market and
> regulation!
> 
> There are good and bad examples for each model. For Kenya
> I prefer the model 
> KDN has opted for: We guarantee with our weight that
> sufficient market 
> demand is in existance, an international operator
> (without interest in our 
> market) is therefore attracted to bring a cable to our
> doorstep at his risk. 
> This way this operator has to keep prices down since he
> wants to make is 
> least attractive for another system to come! The second
> system then will be 
> required for redundancy and to keep price pressure and
> ideally should come 
> 2-3 years after the first. The model for the second
> system can now be 
> different and based on the users and usage of the first
> system (because now 
> commercial banks are easier to convince). We herefore
> support Teams and the 
> Flag initiative (and EASSY as a system going south).
> As initiator for Flag to come, KDN will NOT levy any fee
> for accessing the 
> system! This side of the system will be open access and
> the only system that 
> has non-discriminatory (ugaguzi) access to all FLAG
> landing points arount 
> the globe, so no extra onward capacity purchase must be
> done!
> 
> For domestic fiber in a deregulated market there is only
> one model: 
> Commercial whereby the Government as a user (actually the
> largest user in a 
> market) has influence over the cost/price model as a
> consumer.
> 
> You see, OFC cost money to deploy and over a certain
> running period the O&M 
> is higher than the Capex! So no matter how it is
> structured, the economy of 
> a country needs to pay for it one way or the other. This
> payment is easy if 
> the system stimulates private businesses (including the
> business of the 
> owner of the cable).
> 
> Good example is India! Private operators have cabled
> EVERY village and 
> BECAUSE of this, the cost for calls are the lowest in the
> world!
> 
> Rgds
> 
> Kai
> 
> 
> ----- Original Message ----- 
> From: "John Walubengo" <jwalu at yahoo.com>
> To: <kai.wulff at kdn.co.ke>
> Sent: Wednesday, January 24, 2007 3:15 PM
> Subject: Re: [Kictanet] Day 2 of 10: What are the
> existing Business 
> Modelsfor Optical Fiber Provision?
> 
> 
> 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
> 
=== message truncated ===

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