<table cellspacing="0" cellpadding="0" border="0" ><tr><td valign="top" style="font: inherit;">Eric (there),<br><br>Nice post from Russell Southwood. Its always a pleasure reading Russell on ICTs - but he charges a bomb. So when I get a free post like this one it does make my day...<br><br>walu.<br><br>--- On <b>Tue, 10/20/09, emko@internetresearch.com.gh <i><emko@internetresearch.com.gh></i></b> wrote:<br><blockquote style="border-left: 2px solid rgb(16, 16, 255); margin-left: 5px; padding-left: 5px;"><br>From: emko@internetresearch.com.gh <emko@internetresearch.com.gh><br>Subject: [kictanet] Dropping the ties that bind – how Africa can help itself to get lower bandwidth pric es<br>To: jwalu@yahoo.com<br>Cc: "KICTAnet ICT Policy Discussions" <kictanet@lists.kictanet.or.ke><br>Date: Tuesday, October 20, 2009, 10:19 AM<br><br><div class="plainMail">Dropping the ties that bind – how Africa can help itself to get
lower<br>bandwidth prices<br><br>In Kenya two international cables – Seacom and TEAMS – have arrived but a<br>fierce row has broken out over pricing. On the Government-backed TEAMS<br>cable, Permanent Secretary Bitange Ndemo has said loudly and publicly that<br>rates should come down to nearer US$200 per mbps. The cable’s owners say<br>they have to recoup their money and that there will plenty of time later<br>for prices to come down. Russell Southwood looks at some of the blockages<br>to the benefits the international cables might bring and how they might be<br>overcome.<br><br>By 2011, Africa will have eight international fibre cables connecting it<br>to the rest of the world. New infrastructure is already delivering an<br>eight to ten fold reduction in the prices formerly charged by the<br>satellite companies. But the old African mindset of “selling shortage at<br>the highest price” is not changing quickly enough to keep up with the
new<br>future of plentiful bandwidth. A number of blockages are emerging that<br>need to be overcome if Africa is to take full advantage of its new fibre<br>assets:<br><br>* Holding bandwidth prices up<br><br>We have sat in rooms with bandwidth providers in at least two countries<br>where they have argued that the new international fibre will not make that<br>much difference to the prices charged to their customers. Indeed, the<br>first move of many of the providers was to simply increase (rather<br>modestly) the bandwidth their customers were receiving, whilst keeping the<br>price the same.<br><br>So the new cable owners find themselves arguing what might be called the<br>“SAT position”. When the cable is being built, all the rhetoric is about<br>lowering prices but the moment the cable is implemented, it suddenly<br>becomes about getting back the money as quickly as possible for their<br>investment, despite the long-term nature of cable
investment.<br><br>Telkom SA claimed to have recouped its investment on SAT3 in eighteen<br>months but it is unlikely with the new lower rates that cable investors<br>will see a full return for a much longer period. Apparently CCK is so<br>cross with this switchover from promising lowered bandwidth costs to<br>trying to keep the price high that it will be investigating price levels<br>on the TEAMS cable.<br><br>However, all this price-hiking is short-term as with the arrival of EASSy<br>and its WIOCC consortium, prices will fall sharply again. If that has not<br>occurred WIOCC has a price-fall mechanism that will see bandwidth in the<br>market fall to US$100 per mbps. In East Africa, there has been a lively<br>debate over pricing but expect the same price-hiking tactics in West<br>Africa where media coverage may not be as intense.<br><br>* Not granting international landing station licences<br><br>One of the major issues in West Africa has been the
granting, or perhaps<br>we should say the failure, to grant international landing station rights<br>to those building the new international fibre cables. How can this be<br>occurring when everyone at every level has been arguing for cheaper<br>bandwidth? Well, it’s the old self-interests being more powerful than the<br>forces for change and everyone behaving according to the old model of<br>behaviour and protecting the incumbent.<br><br>The most extreme example is Senegal where the regulator has delayed<br>granting landing stations to the cables most likely to be first in the<br>race to complete: Glo One and Main One. In more competitive East Africa,<br>the independently-owned Seacom cable was able to either partner with<br>another independent (KDN) or land using a licence in its own name in<br>Tanzania.<br><br>But life has not been made that easy in Senegal where Main One is seeking<br>to partner with the only possible alternative to France
Telecom-owned<br>Sonatel, Expresso. There is no opportunity to have an independent licence<br>because this might make it too easy to compete with the de-facto monopoly<br>of Sonatel, which is involved in the France Telecom cable initiative ACE.<br>But why blame the regulator when the real delay is coming from Government<br>that takes all the decisions?<br><br>The cynic might conclude that these delays will help Sonatel get ACE in<br>place and keep out other cables for as long as possible. Of course, the<br>speedy licensing of Glo One and Main One would prove the cynics wrong but<br>don’t hold your breath.<br><br>* Rates between landlocked countries<br><br>Once the new cheap bandwidth is at the landing stations, the trouble<br>really begins. Operators do much “teeth-sucking” and say “of course, you<br>know that’s not the real price. We have to charge for transit.”<br><br>In countries without a landing station, this leaves them in the hands
of<br>those accustomed to the old way of doing things. When incumbents dealt<br>only with incumbents for cross-border transit, they both had an informal<br>agreement that they would charge the same high price for each end of the<br>transit. The net result is that prices for cross-border transit remain<br>high. One country we visited recently, it was paying more for the transit<br>to the landing station in a neighbouring country than it was for the<br>onward transmission to Europe.<br><br>In East Africa, this is less of a problem as some thought was devoted to<br>the issue and solutions are on the table. With World Bank prompting, the<br>EASSy partners came up with the East African Backbone System that delivers<br>inland bandwidth at more or less the same priceas at the landing station.<br>Seacom has also delivered on its promise of the same price inland as at<br>the landing station for those countries where it has inland partner<br>(Rwanda and
Uganda).<br><br>But the problem will be much harder to solve in West Africa as the main<br>independent cable Main One has taken the view that its capacity will be<br>delivered by the operators themselves, who will doubtless turn every trick<br>in the book to ensure that prices remain high for the transit portion.<br><br>What regulators should be encouraging is regional carriers’ carriers who<br>can compete with the existing telcos who might seek to keep prices high.<br>The West African and Southern African Power Pools have ample fibre<br>capacity to make a reality of this ambition working with independent<br>partners.<br><br>* The high cost of national transit to reach the POP or the landing station<br><br>If cross-border transit rates are a form of highway robbery, then national<br>transit rates show many of the same symptoms. It is cheaper to go from<br>Lagos to Sessimbra in Portugal than it is to go from Lagos to Abajua. If<br>rates are based
on distance, then the new international fibre cables have<br>exposed the high rates charged for national backbone delivery.<br><br>Not surprisingly, these national transit rates remain high where there are<br>legal or de-facto monopolies. Without competition, it is hardly surprising<br>that the old pattern of charging what you can get away with is maintained.<br>But you cannot have competition at the international level, without it<br>having knock-on consequences at the national level.<br><br>National backbone operators will need to improve their efficiency levels<br>or risk others building out their own backbones (where this is allowed).<br>All operators know that in this circumstance they can cut between a third<br>to a half off of the current rates being charged. The choice is a stark<br>one: either you have a price-controlled monopoly with lower prices or you<br>allow operators to compete and get lower prices.<br><br>The sceptics will say “But who
wants all this new bandwidth? There aren’t<br>the customers. (appropriate shrug of shoulders) This is Africa.” The<br>alternative to this old way of thinking is to have a “low price, high<br>volume” strategy that is about creating volume markets at yes, you guessed<br>it, commodity prices. Then you sell the new customers services and<br>applications on top. In the mobile field, MPesa is the best example of how<br>an Africa-targeted service can take off.<br><br>It’s not about relying on the “same old, same old corporates” but about<br>addressing the residential middle classes with Internet in places like<br>Nigeria and Kenya who will provide the “critical mass” for reaching out<br>more widely. It’s about bringing the small-scale companies and NGOs to the<br>party and persuading them of the virtues of using the Internet to get<br>things done more quickly. In short, it needs a strong dose of corporate<br>vision rather than seeing the
future through the rear-view mirror of<br>history.<br><br>nb: sorry for crossposting....<br><br><br><br><br>_______________________________________________<br>kictanet mailing list<br><a ymailto="mailto:kictanet@lists.kictanet.or.ke" href="/mc/compose?to=kictanet@lists.kictanet.or.ke">kictanet@lists.kictanet.or.ke</a><br><a href="http://lists.kictanet.or.ke/mailman/listinfo/kictanet" target="_blank">http://lists.kictanet.or.ke/mailman/listinfo/kictanet</a><br><br>This message was sent to: <a ymailto="mailto:jwalu@yahoo.com" href="/mc/compose?to=jwalu@yahoo.com">jwalu@yahoo.com</a><br>Unsubscribe or change your options at <a href="http://lists.kictanet.or.ke/mailman/options/kictanet/jwalu%40yahoo.com" target="_blank">http://lists.kictanet.or.ke/mailman/options/kictanet/jwalu%40yahoo.com</a><br></div></blockquote></td></tr></table><br>