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

Wed Jan 24 18:55:43 EAT 2007

Much of my take is recorded in history @ http://blogs.law.harvard.edu/ 
eric/tag/eassy/

nb: ignore or replace EASSy where necessary and the principles are  
same @ international, regional, national and even rural level.

Eric here

On 24 Jan 2007, at 18:18, John Walubengo wrote:

> 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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Eric M.K Osiakwan
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AfrISPA (www.afrispa.org)
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