Undersea Fiber Called Key to Africa’s Future Despite Problems

Internet access in Africa is “amazingly and ridiculously more expensive than in the West, for no intrinsic reason,” said Jim Forster, a former Cisco Systems distinguished engineer who’s president of NetworktheWorld.org, a nonprofit working to increase the availability of online services in developing countries. African transmission facilities are dominated by the needs and revenue model of voice service, he said. Mobile-phone use continues to explode, but it’s pricey compared with data and Internet communications, he said. Satellite transmission is convenient and has no lines to disrupt, but bandwidth prices are high, he told us.

Mobile operators have gone as far as they can but they know they need fiber networks to enable WiMAX and 3G -- Africa’s future, Herlihy said. Regulators looking to promote cable must tread a fine line between keeping out monopolies and liberalizing their telecom markets enough to spur investment, he said.

Several underwater cables projects are under way. Like Seacom, TEAMS will connect Africa’s east coast. Another project, the Eastern Africa Submarine Cable System, will also track the east coast and is supposed to be running in the first half of 2010. West coast network SAT3, whose capacity is filling up, is expected to be joined by other lines in coming years, Herlihy said.

Competition Problems Persist

Undersea cable development has been dogged by protectionism from governments and major telecommunications carriers, officials said. This has prevented construction of competing national routes and cross-border links between operators, according to a policy paper written for an international donor.

The success of mobile telephony has led many governments to understand the need for competition to spur innovation, Herlihy said. Some regulators previously excited by the billion-dollar license auctions in Europe and the U.S. acknowledge that would-be operators aren’t willing to pay as much for licenses in Africa and that selling them for less will unblock national economies, he said. Many have opened their national markets and are seeking free movement of services across borders, he said.

Nevertheless, some officials continue to “listen to the wrong people” and take revenue from high license fees at the expense of prosperity, Forster said. “They could just as well put up toll booths on the roads” to raise money, but they don’t, because high tolls would hurt the economy, he said. Telecom cost structures are “a bit obscure” to most people where a toll booth would be obvious, he said.

Infrastructure deployment remains blocked by major players such as Telkom South Africa, Orange and others, Herlihy said. Although many have lost their monopoly protections, some maintain with government support a hold on links between countries and veto power over new infrastructure players, the policy paper said. There are no cross-border links, it said: All links stop at the border where they're handed over to that country’s operator. That allows them to control transit charges on the networks, it said.

Some cross-border infrastructure is being built, said technology analyst Daniel Berninger. Ghana sold its incumbent telecom company to Vodafone to enable improvements, he said. Although the government owns 30 percent of the incumbent, it lacks the incentive to prevent competition, allowing six fiber companies to spring up, he said.

But the central question is whether there’s enough demand to fill the pipes and bring prices down, Berninger said. Ghana has 2 percent broadband penetration and little demand, he said.

Open Access Critical

The Eastern Africa Submarine Cable System began as a shareholders’ consortium led by Telkom South Africa, said Balancing Act consultant Russell Southwood. When some members couldn’t afford their contributions, the World Bank agreed to lend the money if incumbents allowed competitors to buy capacity at affordable, non-monopoly prices, he said.

The Kigali Protocol for the New Partnership for Africa’s Development ICT Network -- a policy and regulatory plan for a broadband infrastructure network -- took effect in February 2008. It forms the basis for construction of an east-coast submarine cable, UhuruNet, to connect all African countries to each other and the rest of the world. It requires nondiscriminatory pricing and open access to the landing stations where the cable meets national networks, said Herlihy.

But the New Partnership retains a sentimental attachment to the “old consortium style” of doing business, particularly on the west coast, Herlihy said. If consortium members get better prices and other advantages, he said, it’s unclear what open access means.

Seacom “took a bold step” when it formed in 2006, allowing rivals to install equipment in its buildings at minimal cost and publicly offering the same prices to all comers, he said. New market entrants know precisely how much capacity costs are for Seacom and everyone else, he said. Another significant development occurred that year when Kenya pulled out of the East Africa Submarine project, allowing the country to accept any cable that arrives on its shores and giving consumers better broadband prices, he said.

Opposition to open access persists, Southwood said. Incumbents want to protect their position, and governments that own incumbents want to protect their asset value, he said

Yet despite lingering problems, Africa is becoming friendlier to investors, Herlihy said. Ironically, as regulators push to open up competition, it’s the big players that are resisting, he said. Problems increasingly revolve around slow licensing and permitting processes, not regulatory policy, he said.

Too many people still make money on the status quo with support from government ministries, Forster said. The situation was roughly the same in Europe 15 or 20 years ago, he said. “It took the euro-zone, with open investment and licensing policies, to knock it wide open,” he added.