The good news is that excessively high international bandwidth prices in Africa, caused by the monopolisation of the SAT-3 undersea cable, are to be challenged by the establishment of a new submarine cable on the east coast of Africa.
The bad news, according to some stakeholders at a conference on the East Africa submarine (EASSy) cable last weekend, is that a similar ownership structure to the club consortium of telecom operators that have monopolised the SAT-3 cable may minimise the benefits of this project.
The 9 900km EASSy cable is set to run from Port Sudan in the north to Durban, and will complete the fibre loop surrounding Africa.
It is expected to be operational by the fourth quarter of 2007 and will have nine landing stations positioned along the east coast.
Stakeholders, investors and governments are divided on the issue of access.
One camp, consisting of the New Partnership for Africa’s Development, NGOs, Internet service providers and regulators, view open access as all operators having equal access in terms of capacitay and pricing to bandwidth on the EASSy cable.
The EASSy consortium of investors, 31 telecommunication companies, view open access as every country having a stake in the cable, which does not necessarily include access to equal capacity and prices.
Attempts at liberalising Southern and Eastern Africa telecommunications markets may come to nothing if open access is not a core criterion in the development of the EASSy cable, the first camp says.
Stakeholders at the conference, titled Ensuring Affordable and Open Access to EASSy: A Consultation for Key Stakeholders on the East African Submarine Cable System, hosted in Mombasa last week, expressed concern that a lack of transparency was clouding the development of the $200-million project.
Russel Southwood from the ICT website Balancing Act, one of the organisers of the conference, said: “If you are liberalising at a national level and opening up to competition as most countries are, does it make sense to have a monopoly at [the level of access to international bandwidth]?”
Willie Currie from the Association for Progressive Communications (APC) said governments were responsible for negotiating the terms and conditions of access and it needs to be made clear to them that they should be open and transparent so we can avoid a monopolisation such as in the case of SAT-3.
Telkom’s domination of SAT-3 is under fire from the South African government, which is threatening to declare it a national asset to make prices more competitive.
Southwood told the BBC that SAT3 prices had been as high $25 000 per megabit per second per month, but had fallen to between $10 000 and $15 000. The actual cost to the operators is about $2 000, said Southwood.
Countries like South Africa, which are further down the road of liberalisation and have up to five operators investing in the EASSy cable, are likely to see the full benefit of significantly lower access costs caused by increased competition.
Stakeholders are concerned that linking access to bandwidth capacity and the price at which it is acquired to the size of investment by an operator will result in smaller African countries with fewer telecoms operators being disadvantaged in the years to come, once these markets are liberalised.
So the larger investors will get cheaper prices, meaning that they can out-compete the incumbent players.
Countries such as Somalia, Rwanda, Ethiopia, Djibouti, Lesotho, Botswana, Malawi and Madagascar, which have only one operator investing in the cable, could still be subject to bandwidth monopolisation in the short term, and takeovers by large telecoms operators from the region in the longer term.
Fears were expressed at the conference that South Africa’s Telkom could be one such operator looking to do takeovers in African markets.
This week, it was announced that Telkom might expand into several African states in one swoop with a potential bid for a share in Portugal Telecom.
The latter has interests in Angola, Morocco, Mozambique, Kenya, Guinea and the Democratic Republic of Congo, among others.
Nepad’s ICT infrastructure project manager Brian Cheesman said an EASSy consortium member was recently quoted as saying that other operators would be able to buy capacity at cost plus 25% for the next five to six years.
“The concept of open access is that all international gateway licence holders and service providers can buy or lease capacity at the same price as all other gateway licensed operators and service providers,” said Cheesman.
“The concept of open access as defined by the regulators is not being applied to the EASSy project.
“Under the club model, smaller investors pay more per unit than the larger ones and this has a long-term detrimental effect on smaller investors.”
Cheesman said governments in Eastern and Southern Africa have expressed that they cannot allow the EASSy cable to go the same way as the SAT-3 with a club consortium structure, and that they were increasingly viewing this infrastructure as a public good.
Theo Mlaki of the Tanzania Commission for Science and Technology welcomed this news, having earlier argued that comparing the EASSy cable to SAT-3 was like “comparing yourself to a sick person”.
Stakeholders called for a rethink on the EASSy business model, calling for one that allows investors to make the money back over a longer period, promoting high-capacity usage at low cost.
The 20-year payback model would avoid a situation like that of the SAT-3, where capacity is severely under-utilised.
It is estimated that only 5% of the potential Sat-3 capacity is currently being used. When investors were sounded out about an upgrade to the cable, more than 20% declined as they had not sold their original capacity.
Southwood says the SAT-3 consortium made its money back in five years because it chose to sell low volumes of the bandwidth at high cost.
“The approach should be to have maximum use from the beginning so you make full use of this valuable asset, rather than letting it waste away,” he said.
Eric Osiakwan, the general secretary of the African Association of Internet Service Providers Association (Afrispa), said there is a desperate need to lower prices to encourage more people to connect.
“The economic and social impact of increased connection should not be underestimated,” said Osiakwan.
During the conference, an EASSy consortium spokesperson said he could guarantee that the bandwidth access pricing would be 65% less than current satellite costs. But stakeholders, asking to see the commitment in writing, expressed scepticism.
“It’s not enough to have promises, it’s not enough to have principles. I’m sure the regulators will tell you the devil is in the detail,” said Currie.
Icasa councillor Zolisa Masiza said a commitment to decrease prices by 65% did not mean anything to him as a regulator. “I have to deal with what is written down,” he said.
An EASSy consortium spokesperson said investors had already committed $110-million of the funding required and that the rest was expected to be finalised in the next few weeks. He said the project was expected to be signed off by mid-May, when the construction and maintenance agreement would be signed and the tender awarded.
Lloyd Gedye’s trip was sponsored by the Open Society Initiative for Southern Africa