Tag Archives: EASSy

Saturating the African Marketplace With Fibre

By Wairagala Wakabi
Fibre optic cables could flood the Eastern coast of Africa, if plans by the South African and Kenyan governments, as well as various independent investors, come to fruition. Some of the plans are in fairly advanced stages, and seem likely to materialise faster than the inter-governmental East African Submarine Cable System (EASSy), whose take-off has been dogged by wrangles among stakeholders.

Efforts to construct fibre optic cables to link this part [Eastern] of Africa to the international marine cable system have gained momentum over the last year, and are partly attributable to failure by EASSy to take off as planned. Supported by up to 16 regional governments and, 30 telecom companies, and promoted by the New Partnership for Africa’s Development (NEPAD), EASSy was conceived in 2002, and as recently as January last year, its construction was anticipated to have begun by May 2006. Up to now, the ground-breaking ceremony is yet to take place.

Kenya and South Africa (SA), the two countries that have had the most vocal (and often conflicting) opinions about EASSy, have each made individual plans to connect to the international cable, as the misunderstandings over EASSy persist. What is not clear is whether these cables will be complementary to EASSy, or will offer competition that will render the premier regional infrastructure project less viable.

In South Africa, the South East Africa Telecoms (Seat) has been suggested, and the weekly magazine Financial Mail reported in January that the venture enjoyed the financial backing of giant US private equity firm Blackstone. Seat promoters are reportedly talking to South African entities they want to join in, and the magazine reported that local businessman John Mathwasa was among the brains behind this venture.

While details about Seat may still be cloudy, the position is a lot clearer regarding the ongoing expansion of Flag, which is touted as the world’s largest private undersea cable system. Owned by Indian telecom operator Reliance Communications, Flag Telecom owns and manages an extensive optic fibre network spanning Asia, Europe, the Middle East and USA. In the second half of this year, Flag hopes to connect the Kenyan port city of Mombasa to the network it is building in the Gulf region.

Flag Telecom has said the cable will further link SA to Kenya via Mozambique, Tanzania, Madagascar and Mauritius as part of a plan to revamp its global network by the end of 2009.

In mid 2006, Kenya Data Networks, a signatory to the EASSy memorandum of understanding, clinched a deal with Flag Telecom to construct a $115 million link between Mombasa and Yemen. Kenya says it wants to have multiple links to the international fibre optic network, to spur competition, enable affordable services and more reliable communications.

On January 31 2007, Kenyan Information and Communications minister Mutahi Kagwe signed a $2.7 million contract with Tyco Telecommunications to undertake a survey on the construction of The East African Marine Systems (Teams), an $80 million link between Mombasa and Fujairah in the United Arab Emirates. It is a venture where Telkom Kenya (majority owned by the government) will hold a 40% stake and Etisalat of Dubai a 20% shareholding. Private investors, who are likely to buy shares off the Nairobi Stock Exchange, will hold the remaining 40%. The plan is to complete the cable by November this year, though some independent analysts say it is not likely that the cable would come on stream before the second quarter of 2008.

Having alterative fibre optic providers should ideally have the effect of slashing international bandwidth prices which, until now, have been kept artificially high by monopolistic providers, in countries where they exist. In SA, Telkom runs the only two cables linking to the international fibre system, and has been accused of keeping the tariffs artificially high. In much of eastern and southern Africa, the new cables would be able to deliver cheaper bandwidth compared to that currently supplied by satellite.

But will this be case once these cables are in the hands of private cartels over which regulators have no authority? Or should governments take an interest in these planned cables embracing Open Access principles, just as EASSy has?

Telkom has said it is concerned about the number of proposed cables along Africa’s east coast, arguing that deployment of two or more cables within the same region would affect the commercial viability of all of them. But the NEPAD eAfrica Commission’s Policy and Regulatory Advisor, Dr Edmund Katiti, has told Reuters that since EASSy will be operated on a cost-recovery basis, anyone wanting to compete with that will have to operate on the same basis. The catch is that by the time EASSy comes on board, it is likely to find the competitors already entrenched in the market.

For its part, Kenya has argued that Bangladesh with a population of 20 million people has three cables that are fully utilised. It would follow therefore that for countries such as Kenya to become competitive in the global outsourcing business, they need access to more than one cable.

Separately, SA’s department of public enterprises is planning to use a newly created state enterprise, InfraCo (or Infrastructure Company), to build a submarine cable to link SA with other international cables in the British Virgin Islands. InfraCo has been capitalised with R647 m ($89.8 m) to enable it to provide wholesale international bandwidth to telecom operators and Internet service providers, among others.

Lyndall Shope-Mafole, the SA director general for communications, told the SA parliament in January that InfraCo, which was formed by the communications arms of Eskom (a power company) and Transnet (a transport infrastructure company), would be available for any company – including Telkom – to use at cost. With www.fibreforafrica.net

Q&A with South Africa’s Communications Director General

Lyndall Shope-Mafole, Director General of South Africa’s Department of Communications, spoke to CIPESA on August 29 2006 about what her government is doing to increase affordability of telecom services, the East African Submarine System (EASSy) and the future of the SAT 3 cable. Excerpts:

Q. What is the South African (SA) government doing to enhance affordability of telecommunications services?

A. One of the objectives of our government is to make SA competitive and broaden participation of the poorest citizens in our economy. To increase competitiveness in the economy the cost of communication has to be much lower, so we want reliable communication that is affordable. From experience, the cost of communication is cheaper where there is infrastructure and where governments have taken a specific role to see that infrastructure is built and is affordable. Governments can do this using public funds, or tax exemptions.

For SA the challenge is that we are big geographically; we are not small like Singapore where you can put up fibre overnight and cover the whole country. Yet the state has to make infrastructure available. So we have licenced a Second National Operator (SNO), but even then unless you take a deliberate policy to ensure that the network goes beyond big towns, you will not cover all the country.

Q. How does EASSy fit into this picture, and how will you reconcile with private sector players that accuse governments and the New Partnership for African Development (NEPAD) of sidelining them in the EASSy project?
A. It is difficult to argue with people who have invested their own money but our role as governments is to set the policy framework under which the cable will be built. The telecom companies are not terribly thrilled with governments because the governments are saying this cable is not only for profits but has developmental objectives too. Besides, governments will assist to get funding for EASSy under the NEPAD framework. Even the smallest African telecom company can have equity to put in the network. That will promote competition and affordability of EASSy bandwidth.

Q. What benefits will the SNO bring to SA?

A. More competition often leads to lower prices. But the more important thing is that South Africans will have an alternative to Telkom and the mobile operators. It is in the exercise of choices that companies are then forced to attract people, reduce tariffs, and provide a variety of services.

We have already promulgated regulations to enable number portability. What this means is that a customer keeps their number regardless of the mobile operator they are subscribed to. If one is fed up with Cell C, or Vodacom or MTN, they cross to another provider but keep their number. The cost of communication can only go down if you have choices. And if it is easy to make for subscribers to switch, operators will strive to get more customers and to keep those they have. [The Independent Communications Authority of South Africa (ICASA) in early September decided that Mobile Number Portability (MNP) would take effect on November 10 2006 rather than on September 18 as had earlier been announced. Telecom operators had asked to be given up to October 30 or November 30 to ready themselves for MNP – CIPESA].

Q. Telecom companies also need to share infrastructure to lower their capital inputs.

A. There could be government regulations that there should be sharing, because it is rare that those who build their infrastructure allow others to use it. But in some areas in SA there are trials by companies to share infrastructure under the Digital Video Broadcasting venture though which television channels are received via cellphone. For this to be possible you have to build a network afresh. Companies are saying if government says a parastatal will build the network and then they are able to use it, they will be happy. Also, operators also increasingly realising that you don’t have to build five highways to Durban.

Q. What will happen after the monopoly which companies like Telkom SA have in SAT 3 ends next year?

A. Already some of the companies in SAT 3 have indicated that the NEPAD principles that we have adopted for EASSy should apply to SAT 3 at the end of the contract period. But they will have to consult on this. I am sure EASSy [bandwidth] will be a lot cheaper and they will want to benefit from that. The ownership protocol we signed [in Kigali on August 29) puts all those things in context and provides for cables on the continent being inter-linked. Government could also spell out what companies that were party to SAT 3 before we signed the protocol can do, and what those that wish to access it after the signing can do. I don’t envisage major problems in that regard. In SA we shall make sure our international infrastructure is harmonised with the new cable (EASSy).

Q&A with SEACOM President On Fibre Rollout

Construction of the 13,700 km Sea Cable System (SEACOM, www.seacom.mu) is underway and expected to reach completion by June 2009. The cable will comprise two fibre pairs, connecting South Africa, Mozambique, Madagascar, Tanzania and Kenya, to India and Egypt, with an option for connectivity into the UAE and Djibouti. CIPESA/Fibre-for-Africa (www.fibreforafrica.net) spoke to SEACOM Ltd. president Brian Herlihy.

Q. Who are the partners in SEACOM and how much are they investing in the network?

SEACOM has publicly announced its investors, it is 75% African owned with Agha Khan Economic Development Group (IPS) out of East Africa, Venfin, Convergence Partners and Shanduka group from South Africa. The remaining 25% is owned by Herakles Telecom, our New York based development company. Herakles management is also the management of Sithe Global (developer and investor of the Bujagali Hydro in Uganda) and Global Alumina, a $4.5 billion alumina refinery in Guinea.

Q. What do you envisage will be the prices for SEACOM’s bandwidth?

SEACOM’s pricing is the equivalent of $100 to $170 per Mb/s per month.

Q. In what ways will SEACOM be competitive compared to other fibre initiatives in the region, such as TEAMS and EASSy?
SEACOM is the only cable offering a PoP (Point of Presence) to PoP solution for Europe and Asia. I believe this is a large advantage and the purchase of onward capacity is a difficult process. SEACOM understands that TEAMS has very competitive pricing to Fujairah. SEACOM believes that its pricing to Europe is more competitive than EASSy’s pricing to Sudan.

Q. How will SEACOM assure affordability of services, and how has it been responsive to NEPAD’s calls for Open Access?

SEACOM has structured each landing point as an open access unit. This has been accomplished in two formats. First, the capital cost of the landing stations is a sunk cost for SEACOM, in other words SEACOM does not seek to recover the investment costs of the landing station through co-location fees.

Secondly, each landing station is built with an additional building whereby customers can put their own equipment at the cable station. SEACOM has published its prices through many different forums. The pricing is an 80% discount over current satellite charges and is the only cable offering capacity directly from a PoP in Nairobi to a PoP in Europe or India without the requirement to purchase onward capacity.

Q. Would you say the fact that SEACOM is not a local company in the countries where it is going to land fibre places it at a disadvantage compared to other cable systems such as EASSy and TEAMS?

Depending on each country’s regulatory regime, SEACOM has either established a local entity to operate the cable or partnered with an existing cable. SEACOM will bring experienced operators to the cable to ensure that the local entities maintain world class quality service.

Q. What are your comments to the assertion that it is not viable for the eastern coast of Africa to have three competing cables? Do you see a need for the cables to cooperate in some areas rather than duplicate everything?

The current capacity demand on the East Coast of Africa is very small. However, we believe that the future demand will experience exponential growth.  Having said that, the three competing systems would create a large over-supply, which could create a short-term glut.

Q. What is Herakles Telecom and where does it operate from?

Herakles Telecom is a development company set in New York. The management is the same management that works with Sithe Global (www.sitheglobal.com) and Global Alumina (www.globalalumina.com)

Q. There has been talk that Herakles staff were involved in the Africa One project which did not materialise, and that they collected money from African telecom, which money has purportedly not been refunded. How true is this, and how could it affect SEACOM’s operations?

I have noted the slander towards myself and JP (Jean Pierre de Leu) out of Kenya.  I can confirm that both of us worked and spent many years with Africa ONE for the hope that this project would go forward. However, neither of us were principals of this project and left the project from 2002. It was our understanding that the only countries that made a deposit were Eritrea and Mauritania.

We understand that the sales person for Eritrea was able to help that money be returned.  It should be noted that the Africa ONE name was sold by AT&T to a private investment group in 1998 and it was this group who was responsible for that money. ¬JP and myself have nothing to do with this entity.  Since Africa (2002) I have worked as a developer on over $5 billion of projects in Africa, each of which have excellent reputations and large impacts in their respective countries, including Bujagali in Uganda.

–    January 2008