Build it and they will come

Just the threat of landing a 15 000km fibre optic undersea cable on South Africa’s shores has forced down broadband prices 90%, according to Seacom’s president Brian Herlihy.

He says that when Seacom announced its intention to launch the $600-million undersea cable project, operators in South Africa were pricing broadband at R8 000 per megabit per month and that prices have now dropped as low as R800 per megabit per month. “We have created competition before we even landed the cable,” says Herlihy.

But Seacom plans to halve these prices again when it enters the market in June 2009 with a price of R435 per megabit per month.

The Seacom cable is well into its production stage—just last week it broke ground in Maputo for the Mozambique landing station, which follows similar developments in Mombassa, Kenya.

Herlihy says the project is set to begin construction of the South African landing station in Mtunzini and the Tanzanian landing station in Dar es Salaam by next month.

The Seacom project will be the first undersea cable to connect East Africa to the rest of the world through links to India, England and France. Besides South Africa, Mozambique, Kenya and Tanzania, the Seacom cable will also link to Madagascar, Ethiopia and Egypt.

The project is 76,25% African-owned, with South Africa’s Shanduka Group (12,5%), Venfin Limited (25%), Convergence Partners (12,5%) and Kenya’s Industrial Promotion Services (26,25%) all on board.
The remaining 23,75% is owned by Herakles Telecom, a New York-based international development group.

“With only eight months to go before the system is ready for service, Seacom remains set to become the first cable to connect East and Southern Africa to the rest of the world with plentiful and inexpensive bandwidth,” says Herlihy.

He says a simple calculation shows that South Africa needs about 50 gigabits of international capacity to service the one million broadband subscribers in the country, but has only 10 gigabits.

“International capacity has been choking the data market in Africa for years now,” says Herlihy.

Initially Seacom will deliver 80 gigabits of international capacity through its cable but can meet more demand easily because the cable has a potential capacity of 1,28 terabits (1 280 gigabits). Herlihy says Seacom managed to sell two-thirds of the initial capacity of 80 gigabits. He says that the Seacom cable could become strategically important going forward, as trade between Africa and Asian giants such as India and China increases.

At present 95% of all African traffic is directed to Europe and North America, but analysts predict that in five years 25% to 35% of all African traffic will be directed to Asia and that in 10 years this figure could be as high as 45%. Nearly 90% of the Seacom cable has been manufactured and the first load of assembled cable and repeaters has been loaded on a Tyco Telecommunications ship so that installation can begin shortly. The second ship will reach Africa in early 2009.

The landing station modules, which take the form of containers, have already landed in Mozambique and Kenya and the two landing stations for South Africa and Tanzania are being shipped. In South Africa Seacom has had to partner Neotel for the landing station, as only Neotel, Telkom or Sentech are licensed to put down undersea cables.

Herlihy says because of South African politics, Seacom had to work with a partner such as Neotel to land the cable, unlike in Tanzania and Kenya where it has set up licensed local subsidiaries. He says that although Neotel partnered Seacom to land the cable, the international capacity will be sold using an open-access model so that any operators can buy capacity from Seacom.

Lloyd Gedye

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