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Africa: Bandwidth Reports

AfricaFocus Bulletin
Dec 7, 2006 (061207)
(Reposted from sources cited below)

Editor's Note

"Bandwidth is the life-blood of the world's knowledge economy, but it is scarcest where it is most needed ... For those [African institutions] that can afford it, their costs are usually thousands of times higher than for their counterparts in the developed world, and even Africa's most well-endowed centres of excellence have less bandwidth than a home broadband user in North America or Europe, and it must be shared amongst hundreds or even thousands of users. A variety of factors are responsible for this situation, but the biggest cause is the high cost of international connections to the global telecommunication backbones." - Mike Jensen

This AfricaFocus Bulletin contains excerpts from recent reports by Mike Jensen for the Association of Progressive Communications, and by Russell Southwood of Balancing Act, both focusing on issues of additional bandwidth.

Another AfricaFocus Bulletin sent out today contains a variety of reports from Balancing Act's News Update on the IT and telecommunications sectors in Africa.

++++++++++++++++++++++end editor's note+++++++++++++++++++++++

Open Access: Lowering the Costs of International Bandwidth in Africa

Association for Progressive Communications (APC)

APC Issue Papers

Mike Jensen

October 2006

[Excerpts only. Full text, with footnotes and maps, available at http://rights.apc.org/documents/open_access_EN.pdf

  • This paper ... which was finalised in late June 2006, contains annexes available online: http://rights.apc.org/documents/fibre_bandwidth_annexes_EN.pdf
  • A South African, Mike Jensen sent his first email more than twenty years ago. He is an independent consultant with experience in more than 30 countries in Africa assisting in the establishment of information and communications systems over the last 15 years.
  • APC is an international network of civil society organisations founded in 1990 dedicated to empowering and supporting people working for peace, human rights, development and protection of the environment, through the strategic use of information and communication technology (ICTs). We work to build a world in which all people have easy, equal and affordable access to the creative potential of ICTs to improve their lives and create more democratic and egalitarian societies.]

Bandwidth is the life-blood of the world's knowledge economy, but it is scarcest where it is most needed - in the developing nations of Africa which require low-cost communications to accelerate their socioeconomic development. Few schools, libraries, universities and research centres on the continent have any internet access. For those that can afford it, their costs are usually thousands of times higher than for their counterparts in the developed world, and even Africa's most well-endowed centres of excellence have less bandwidth than a home broadband user in North America or Europe, and it must be shared amongst hundreds or even thousands of users.

A variety of factors are responsible for this situation, but the biggest cause is the high cost of international connections to the global telecommunication backbones. This is mainly the result of the lack of international optic fibre infrastructure, which is necessary to deliver sufficient volumes of low-cost bandwidth, and the consequent dependency on much more expensive satellite bandwidth. Less than twenty of the 54 African countries have international optic fibre cable connections, and these are currently controlled by inefficient state-owned operators which charge monopoly prices while neglecting to build the national backbones needed to carry local and international traffic. As a result, circuits from Africa to the US or Europe usually cost more than US$5000 a month1 , while cross-Atlantic links between North America and Europe can now be obtained for US$2.5/Mbps/month and for US$16 30/ Mpbs/month on international routes in Asia.

The only large-scale international fibre link in Africa (SAT-3/WASC/SAFE) connects eight countries on the west coast of the continent to Europe and the Far East. Operating as a cartel of monopoly stateowned telecommunication providers, prices have barely come down since it began operating in 2002. New fibre projects have been proposed which could break this monopoly and add many more African countries to the global grid, but most of these projects are also being developed by state-owned telecom operators. As a result they are following the same high-priced SAT-3 business model. Unless interventions are made to reduce the cost of these existing international fibre links and to ensure that new fibre infrastructure is quickly built, the continent will be prevented from tapping its latent potential and will fall further behind the rest of the world.

This problem is not unique to Africa. Other developing regions suffer from the same problem, but it is at its most extreme in sub-Saharan Africa, which has the lowest teledensity in the world and the highest unmet demand for telecommunication services. Fortunately, African governments and the international community have recently become more aware that action is needed to improve access to communications and to encourage the adoption of alternative business models that can significantly lower the cost of international links. These have centred on what are known as open access models, which are cost-based and owned by the public sector (similar to roads and rail lines), rather than being operated by a club of companies aiming to maximise profits.

Most African country telecommunication markets are slowly moving to a more competitive environment which will ultimately address pricing and national imbalances in demand and supply. However the international sector in developing countries is different from developed nations because the majority of countries have markets that are too small to justify the cost of deploying many competing international fibre cables. With each cable able to carry data at terabit speeds, only one international connection to a global hub is needed, although a second physically separate link is also required for backup (redundant connection) purposes. However achieving competitive pricing between just two suppliers is infeasible. Thus, in order to ensure cost-based pricing, a different model of deployment is needed, where the cable and landing points are operated on a non-profit basis, extending the models used by internet service providers for operating national or regional Internet Exchange Points (Ixs).

This follows a number of recent studies which have identified public-private partnerships and open access models as a more appropriate solution for fibre deployment These also build on precedents set by the oil and gas industries when building pipelines, in which the basic approach is to establish a Special Purpose Vehicle (SPV) to operate the facilities. The main objective of the SPV is not to make a profit, but to facilitate profits made elsewhere by the participating companies. The aim is not to exclude incumbent telecom operators from the process, but to allow the participation of others that might bring additional funding or other advantages to the table such as rights of way to build fibre along power or rail routes

The most viable structure for this approach is likely to be a two-part system in which national cable landing points are managed by national associations of bandwidth providers, while the cable itself is owned by a mix of operators and private or public investors. Given that the most appropriate place for the cable landing point is likely to be at the facilities of the national operator, these would most likely be owned by the state, but operated by a management company appointed by the national association of bandwidth providers.

With the cable itself, different models can be adopted. In one scenario any entity would be free to invest, either as an operator, in which case the investment would be tied to guaranteed amounts of bandwidth, or as a non-user shareholder who might invest funds or provide a right of way (e.g. a gas pipeline operator wishing to minimise the cost of operating their pipeline network). Alternatively, ownership of the cable can be defined on a national basis with shares held by the same special purpose companies that operate the landing points.

In either case, sufficient investment is likely to come from the much broader base of operators that would be able to access the bandwidth at cost, and little additional financing would likely be required However some of the smaller, more remote or less developed countries might require special assistance, and given the general interest by the international community in ensuring more universal access, along with the positive impact on demand for national backbones that would result from affordable international connectivity, donors could provide a demand guarantee that would meet any revenue shortfalls in the early years. This may be a risk for donors if the demand was not met over the life of the cable. However, assuming the long-term business case is sound, they might look to recoup the funding when traffic increased at a later point. Donors could also be invited to meet the cost of additional add-drop units on fibre projects to ensure small and remote communities along the way can be reached. The choice of these locations would be a matter for negotiation between the donors and national governments.

Given the interest of governments in supporting the development of their nations such as through improved access to health and education, along with the broader social improvement and enhanced public services which can be provided through better connectivity, there is a growing interest amongst a wide range of stakeholders in ensuring that open access models are adopted.

The initial focus is likely to be on supporting the adoption of open access models for the upcoming East African fibre project (EASSy, see below) which could then be replicated in West and Central Africa. At the same time SAT-3 and other existing international fibre cables may be declared essential facilities serving the public good with regulated pricing. Specific activities are likely to be:

  • Increased backing for policy makers and regulatory agencies in Africa to implement policy changes and regulations that allow open access to international fibre
  • Support to local associations of bandwidth providers to establish shared international fibre gateways
  • Increased backing for international fibre projects which aim to provide equal access to all bandwidth providers.

There is the risk that the entrenched interests of the incumbent operators and their state-owners will be able to resist efforts to change national telecom policy, and that the EASSy project goes ahead as currently planned. Nonetheless, support from a broad range of stakeholders is expected to substantially improve the chances of an alternative strategy being adopted, which could have a major impact on the way international fibre projects in developing countries are being planned in the future.

In summary:

Most of Africa is as yet unconnected to the global fibre backbones.

Optic fibre is the only way to supply sufficient international low-cost bandwidth.

As elsewhere, the limited fibre that has been laid in Africa is not competitively priced, and uses business models developed by cartels of monopoly telecommunication operators.

A cable planned for the East coast of Africa (EASSy) which will have a major impact on bandwidth availability in the region, was being developed as a club of mostly state monopoly operators with high prices and low volumes in mind.

The strategy for the deployment of an open access model for EASSy is in the process of being legislated by policy makers in the region.

The adoption of a low-cost open access model for EASSy would likely have a major impact on the way new fibre projects are planned in other regions in Africa.

1.The Nature of the Problem

Communication costs in Africa are currently thousands of times higher than in Europe or North America. This particularly affects those with the most limited resources: students, researchers, doctors, scientists, and other public servants, as well as the general public, who are unable to take full advantage of the unprecedented access to knowledge the internet provides. Cheaper bandwidth for African institutions, particularly governments, schools, universities, libraries and hospitals would provide widespread access to the wealth of information available online, facilitate African contributions to the global economy and increase the likelihood of successful solutions to African development problems. So in a nutshell, the constraints on development in Africa caused by the high cost of communications are not being addressed due to inappropriate business models used for deploying international fibre infrastructure.

The developed world is benefiting from the surplus of optical fibre cable laid during the dot-com bubble which has coincided with technology advances that have made speeds of over 1000 Gigabits per second routine on these fibre links. While those in the North reap the benefits of these developments, much of the South, and Africa in particular, has not seen significant deployment of international fibre. ...

There is only one intercontinental fibre link to sub-Saharan Africa (SAT-3) which provides connections to Europe and the Far East for eight countries along the west coast of the continent ,,, Except for some onward links from South Africa to its neighbours, and from Sudan to Egypt and from Senegal to Mali, the remaining 33 African countries are unconnected to the global optical backbones, and depend on the much more limited and high-cost bandwidth from satellite links. Even the few countries that have access to international fibre through SAT-3 are not seeing the benefits because it is operated as a consortium where connections are charged at monopoly prices8 by the state-owned operators which still predominate in most of Africa, and in many other developing regions.

As a result, institutions in these countries pay thousands of dollars a month for internet connections which a home broadband user in North America would pay US$20 a month for. Aside from the general dampening effect this has had on uptake, unaffordable bandwidth has actually excluded African scientists from gaining access to the services of global research networks which now expect their member countries to have at least 1Gbps on international connections in order to access the advanced services and petabit data sets they now provide.

In a chicken-and-egg situation, the constraints on demand resulting from the high tariffs charged by the monopoly operators have contributed to the slow pace of fibre deployment and the severe lack of investment in needed infrastructure. Many of these state-run telecom operators, often mismanaged, inefficient and suffering from much reduced profits caused by the collapse of international settlement rates, do not have the resources to invest the millions of dollars needed to deploy national and international fibre, and neither do their host governments. Understandably, few private investors or donors are interested in financing these moribund organisations that rest on artificially-closed markets. At the same time, continued state-operator control over international gateways and national backbones has meant there are very few opportunities for investment in privately-operated telecommunication infrastructure.

[For detailed sections on SAT-3 and EASSEY omitted, see full text on the APC website]


Balancing Act's News Update 318 (13th August 2006)

Top Story: Africa's Transition to Fibre Likely to Be Slower than Expected, Says New Report

With the proposed EASSy fibre cable coming on stream in 2008 and the steady roll-out of national backbone and cross-border links, it might be expected that the proportion of African traffic carried by fibre would increase very quickly. This appears unlikely to happen within the next three to five years, according to a new report from Balancing Act out this week.

Currently around 80% of all of Africa's voice and data traffic is carried by satellite but this figure is likely to fall as the continent increases fibre links at all levels. The balance of traffic is almost all carried by the continent's only current international fibre link, SAT3.

Based on use of its international traffic database, it estimates that on the basis of the progress of current plans and with favourable pricing adjustments on the SAT3 fibre, just over 30% of the total market in three years time will be carried by fibre, according to the African Satellite Markets report.

Why is this transition likely to be so slow given that fibre is cheaper than satellite for high-volume traffic? There are a number of factors:

  • The slow speed of competitive national backbone roll-out: It has taken Nigeria five years to get to a point where Nitel is supplying sufficient national backbone connections to SAT3 that there is now a rising flow of traffic on to 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 Nairobi by KDN and Telkom Kenya and a link is being built from Kenya to Rwanda. But 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 (see Telecom News). And 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 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. Based on a pricing survey, the report looks in detail at these market distortions that have arisen from the position held by the monopoly market supplier.
  • 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$500-1000 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 3-5 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 Africa has seen a fourfold increase in the level of international Internet bandwidth supplied by satellite over the last four years, from 500 Mbps in 2002 to 1.86 Gbps 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.
  • 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.

For further details of what's in African Satellite Markets, go to: http://www.balancingact-africa.com/satmarks.html To order the report, go to: http://www.balancingact-africa.com/profiles/order/order_form.php


AfricaFocus Bulletin is an independent electronic publication providing reposted commentary and analysis on African issues, with a particular focus on U.S. and international policies. AfricaFocus Bulletin is edited by William Minter.

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