[kictanet] NCA Board member gives its price target as an E1 for US$100-500

Mon Nov 30 17:17:16 EAT 2009

Eric,

There must be a balanced approach .

I am against any form of price regulation .. Not because of greed but
because it does not work ..

Even if an E1 was 200 USD . It is still not in the income bracket .

Currently you get 4M straight without contention for 600USD list (so 300 per
E1) . Now show me the uptake and then we see what happens at the consumer
end .

If 90% becomes local content and we are using all the Submarine Capacity
that lands . Maybe we can have unlimited internet for KSH 100,- a month?

Going back to my example of the plane .

You are better off paying 50 USD for a ticket that will bring you somewhere
you can create value than 25 for a trip that is wasted ..

Kai

Von: kictanet-bounces+kai.wulff=kdn.co.ke at lists.kictanet.or.ke
[mailto:kictanet-bounces+kai.wulff=kdn.co.ke at lists.kictanet.or.ke] Im
Auftrag von Eric M.K Osiakwan
Gesendet: Monday, November 30, 2009 16:31
An: kai.wulff at kdn.co.ke
Cc: KICTAnet ICT Policy Discussions
Betreff: Re: [kictanet] NCA Board member gives its price target as an E1 for
US$100-500

Kai,

There is empirical evidence to support the mass update of broadband if the
market price is within the disposable income bracket. You and I had access
to the TEAMS feasibility study and the pent up demand was incredible. 

The business case that changes the market adoption is "low margin, high
volume" as opposed to the current "high margin, low volume". now i tack that
to your example below, the A380 can take 800 seats and charge 25USD so more
people can fly but because the "corporate greed" is high, we decided to fit
the A320 with 120 seats so we can charge 50USD, allowing only few people to
fly - that is an artificial element within the marketplace and sometime you
need the big stick to bring it down. 

Look SAT3 cost an e1 $30k to the Cameroonian market and the same cable in
Ghana cost en e1 $4.5k to the Ghanaian market. The A320 is flying at 10% on
the first flight in Cameroun because of the price to the market, not because
the market is not anticipatory. 

MainOne has not landed and yet they have gone public with an e1 between $500
and $600, are they not also in business to make money?

Eric here 

On 30 Nov 2009, at 02:59, kai wulff wrote:

Define "artificial"?

Did you divide the cost of a cable by the "available" capacity or by the
anticipated uptake?

Example:

If an A320 costs 6000 USD per flight hour "wet" and has 120 seats, the cost
per passenger seat is 50 USD

If an A380 costs 20 000 USD per flight hour "wet" and has 800 seats, the
cost per passenger seat is 25 USD

So do we say that a Tour Operator can only sell a seat for USD 25 plus a
small (and again .. What is small) margin?

What if you only fly at 10% load on your first flight . Isn't your cost per
passenger now 250 USD .

Kai

Von: kictanet-bounces+kai.wulff=kdn.co.ke at lists.kictanet.or.ke
[mailto:kictanet-bounces+kai.wulff=kdn.co.ke at lists.kictanet.or.ke] Im
Auftrag von Eric M.K Osiakwan
Gesendet: Sunday, November 29, 2009 22:27
An: kai.wulff at kdn.co.ke
Cc: KICTAnet ICT Policy Discussions
Betreff: Re: [kictanet] NCA Board member gives its price target as an E1 for
US$100-500

Kai,

I would observe the sabath by writing my last email on this subject.

I was at the said workshop and indeed have worked on the subject extensively
prior to the announcement by the regulator and in the new story, "supply
bandwidth" is the term, otherwise i wont make an apple and oranges analysis.
At least you should credit my non-distortionist approach to this subject.  

The situation we are dealing with is the artificial high price of bandwidth
to the continent which has held back the industry, those prices MUST come
into the realm of reality and then the forces of demand and supply would
make usage and local content the catalyst. Offcourse, education,
electrification etc are all in the value chain.

Eric here

On 29 Nov 2009, at 19:00, kai wulff wrote:

Eric,

Please read carefully what I wrote.

I have no problem with meaningful regulation .. This regulation should focus
on promoting usage ..

Your example of the Central Bank does not fit here .. The rate set by a
Central bank would in our case be the cost for which an Operator (Bank) can
buy capacity (borrows money). The Central Banks don't regulate the retail
end ..

I mentioned before, the main tools to drive down Broadband prices would be
usage and local content.

More usage can be created by education, electrification and other factors.

Rgds

Kai

Von: kictanet-bounces+kai.wulff=kdn.co.ke at lists.kictanet.or.ke
[mailto:kictanet-bounces+kai.wulff=kdn.co.ke at lists.kictanet.or.ke] Im
Auftrag von Eric M.K Osiakwan
Gesendet: Sunday, November 29, 2009 21:34
An: kai.wulff at kdn.co.ke
Cc: KICTAnet ICT Policy Discussions
Betreff: Re: [kictanet] NCA Board member gives its price target as an E1 for
US$100-500

Kai,

The Central Bank as the regulator of the financial sector in every economy
sets prime rates and other industry indicators based on their calculation of
the market forces as they interplay with demand and supply. i dont see why
you sense danger with the regulator of the coms industry setting "prime
rate" based on the commoditized calculation.....

You generate a lot of weight in your submission below on the private sector
factors as a basis to slap the need for regulatory intervention in a market
situation that has held the industry back for a very longtime.  Am a private
sector spice like you but if there is any lesson for us to learn from the
current global financial crisis, it is that, we need regulatory
interventions in the market theatre as markets have mood and are by that
extension in perfect. 

My comment is, all the factors you have enumerated are great but they dont
negate the need for regulatory intervention to bring artificially high
prices down for the masses to have access, a market expansion mechanism. 

Eric here

On 29 Nov 2009, at 17:59, kai wulff wrote:

Eric,

This is exactly the type of statement that is dangerous. It is a little bit
like deflation .

Because everybody expect cheaper prices nobody moves .. And because of this,
uptake is below the potential, usage of the cable is sub optimal and prices
don't come down . Result: People will wait longer ..

I still don't understand why we are so set on the E1 price (actually we
should talk about 2M duplex and not old school) for a BPO .. Quality is what
matters ..

With a good quality compression you can push more than 256 calls at any
given time. So in an 8 hour shift you could have 122880 call minutes with
256 agents .. Assume 70% load, this makes 86016 minutes. Surely, you will
have to terminate them into a network. Assume 0.02USD per minute.

So my question: What is your staff cost? Let's argue 700KSH per day and
person? Electricity? KSH 20 per day and person? Rent KSH 50 per day and
person (assuming you work 2 shifts, 7 days a week).

Add software, overheads ...

So now, what is the cost of communication?

Currently an E1 in Kenya costs 1200 USD (not using the free offer) list
price. So we said 2 shifts, 30 days, 70% load ..

5160960 call minutes a month

That makes 0,0174 KSH per minute (took a rate of 75 to the USD) for the
submarine portion!

We add KSH 2 for termination = 2,0174 KSH communications per minute

Salaries: 1,45 KSH per minute (and this includes the idle ones or KSH 2,08
per minute at 70%

You see the contribution of the pure Submarine portion .. It is NEXT TO
NOTHING.

Any comments?

Kai

Von: kictanet-bounces+kai.wulff=kdn.co.ke at lists.kictanet.or.ke
[mailto:kictanet-bounces+kai.wulff=kdn.co.ke at lists.kictanet.or.ke] Im
Auftrag von Eric M.K Osiakwan
Gesendet: Sunday, November 29, 2009 20:35
An: kai.wulff at kdn.co.ke
Cc: KICTAnet ICT Policy Discussions
Betreff: [kictanet] NCA Board member gives its price target as an E1 for
US$100-500

A two day workshop called "Fiber Optic Undersea (Submarine) cable", in
collaboration with  <http://98.130.227.12/> West Africa Telecommunications
Regulators Assembly (WATRA), the  <http://www.gtz.de/en/> German Technical
Group (GTZ) and also the  <http://www.nca.org.gh/> National Communications
Authority (NCA) at the La Palm Royal Hotel.

The workshop offered  <http://98.130.227.12/> WATRA members the guidance
regarding the regulation of access to new undersea cables and also come up
with adoptable guidelines for issuance of undersea cable licenses and
landing rights agreement. This would ensure the transparency in deployment
and pricing of undersea cables.

A Member of the Board of Directors of  <http://www.nca.org.gh/> NCA, Solomon
Quandzie has observed that the availability of international bandwidth,
coupled with NCA's plans for licensing additional terrestrial fiber optic
cables systems, and also wireless broadband access (through things like
WiMAX) operators would finally set the deployment of broadband networks
throughout the country and further lay the foundation for rapid economic
growth in the ICT sector.

He said, application of Business Process Outsourcing (BPOs) and Government's
decentralization program would enhance various e-government packages which
would increase the social-economic development of the citizenry in a manner
never witnessed in this country over the past several years.

Quandzie said that the NCA is committed to opening up the market base of the
telecommunication industry by offering an additional fiber optic cable
operator (WACS), which would add more capacity to the existing one, all
within a 24 month period.

According to Quandzie, the current SAT 3 cable systems provides an estimated
three gigabytes capacity of international bandwidth to the country at approx
systems to become operational, adding that "They will be adding
respectively, for a total of 1,920 gigabytes or 640 fold increase to the
current capacity of international bandwidth in the country".

Quandzie said that NCA expectation of a supply bandwidth a price goal of
$100-500 per E1 should be possible within the very near future which would
provide the necessary framework for the attainment of such an outcome.

He concluded that with the right regulatory framework established, reliable
and affordable broadband networks, coupled with low cost of available
international bandwidth can be provided through undersea fiber optic cables.
(Source: The Ghanaian Chronicle)

Eric M.K Osiakwan

Director 

Internet Research

www.internetresearch.com.gh

emko at internetresearch.com.gh

42 Ring Road Central, Accra-North

Tel: +233.21.258800 ext 7031

Fax: +233.21.258811

Cell: +233.24.4386792

Eric M.K Osiakwan

Director 

Internet Research

www.internetresearch.com.gh

emko at internetresearch.com.gh

42 Ring Road Central, Accra-North

Tel: +233.21.258800 ext 7031

Fax: +233.21.258811

Cell: +233.24.4386792

Eric M.K Osiakwan

Director 

Internet Research

www.internetresearch.com.gh

emko at internetresearch.com.gh

42 Ring Road Central, Accra-North

Tel: +233.21.258800 ext 7031

Fax: +233.21.258811

Cell: +233.24.4386792

Eric M.K Osiakwan

Director 

Internet Research

www.internetresearch.com.gh

emko at internetresearch.com.gh

42 Ring Road Central, Accra-North

Tel: +233.21.258800 ext 7031

Fax: +233.21.258811

Cell: +233.24.4386792

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