Slow start for African fibre traffic despite EASSy

Details: Michael Schwartz; Category: Trends & Forecasts; 21 August 2006; 11123 views

A recent report on African satellite markets from the London based newsletter Balancing Act strikes a cautious chord on the building of the East African Submarine Cable System. Michael Schwartz reviews their findings...

EASSy with its fibre cable system set to commence operations in 2008, its backbone running the length of Africa, and its cabling crossing national borders, must surely be set for immediate success, as fibre traffic takes off on a steep growth curve?

Well, according to this report from Balancing Act, we will have to wait up to five years to witness an increase in traffic of this nature and scale.

Balancing Act sets the scene for its arguments by reminding the tele-community that approximately 80% of Africa's voice and data traffic is carried by satellite. This figure is in turn likely to fall as the continent embraces fibre. Enter SAT3, Africa's in-place fibre link, at present carrying pretty much all the non-satellite traffic.

Balancing Act has applied its calculations. Its estimate is that current plans and favourable pricing adjustments to SAT3 will mean that the 20% of traffic which is presently non-satellite will rise to 30% and no more in the next three years.

Iconoclastic

This is an iconoclastic argument which Balancing Act justifies in several ways: the slow speed of competitive national backbone roll-out. It has taken Nigeriafive years to get to a point where Nitel is supplying sufficient national backbone connections to SAT3 such that there is now a rising flow of traffic onto the SAT3 cable. By contrast, South Africa's Telkom completed this work prior to the cable opening and now carries the majority of its traffic over the fibre link; the lack of inter-country links.

Although both SAT3 and the proposed EASSy cable connect coastal cities there are relatively few cross-border links in place. Kenya has two sets of links being built to Nairobiby KDN and Telkom Kenya, while a link is being built from Kenya to Rwanda. However, other parts of the 'land-side' infrastructure are at a much earlier stage. For example, Zamtel has just announced its intention to build its connection to EASSy.

In one case, Zimbabwe, the transition has gone backwards: Telkom SA financed a fibre link to the country but TelOne failed to meet the payments and so is now sending its traffic via satellite; the impact of high SAT3 prices on landlocked and 'no landing station countries.' SAT3 consortium member Namibia Telecom is a 'no landing station country' and sends 60% of its voice traffic via satellite, most of the balance being calls to South Africa. Why? Because the costs of transiting via South Africa make it more expensive than sending via satellite (in its report, Balancing Act uses a pricing survey to look in detail at those market distortions that have arisen from the position held by the monopoly market supplier) and the lowering of prices on the proposed EASSy cable. Although final prices have not yet been announced, it is believed that they will fall in the US$500-US$1,000 range (the lower price probably being available after a five-year period). This will give users in the largest Sub-Saharan African market, South Africa, a much cheaper alternative and will drive down what Telkom SA can charge.

Over three-five years, this will have the effect of unlocking some of the market distortion problems identified in the previous point in the southern African region. However, it will leave similar problems in West Africa largely unaffected.

Sub-Saharan satellite summary

In fact, Sub-Saharan Africa has seen a fourfold increase in the level of international Internet bandwidth supplied by satellite over the last four years, from 500 Mb/s in 2002 to 1.86 Gb/s in 2006. There are now 71 satellites with full or partial coverage of Africa and seven more are planned. Two major satellite operator acquisitions were completed during 2006. On 3 July, 2006 Intelsat announced that it had completed the acquisition of PanAmSat. Intelsat now therefore operates 25 out of the 54 satellites over Africa. Beforehand, on 30 March 2006, SES Global completed the acquisition of New Skies Satellites. SES Global now therefore operates 6 out of 54 satellites over Africa.

There have also been moves toward consolidation in the reseller market, as Israel's Gilat Satcom has purchased another Israeli reseller IP Planet. Both companies have a significant presence in the African market. Another large reseller with a significant presence has also been the subject of an unsuccessful bid and a large African corporate connectivity supplier is up for sale.

* Balancing Act is a company that helps develop debate on the internet (and other new media) regarding Africa, aiming to have an impact on people?s lives and to supply information that Africa will want to use. Furthermore, it not only encourages the creative entrepreneurial culture needed to develop emerging new media economies in Africa but also supports the policy and regulatory changes required to produce an effective digital infrastructure on that continent.

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