Balancing Act (London)

West Africa: Race to Build a West Coast Fibre Promises to Push International Bandwidth Prices to New Lows

analysis

London — Four international fibre projects are racing to complete ahead of each other on the west cost of Africa to give some much needed additional capacity and price competition to SAT3. The drop in bandwidth prices could be spectacular. Russell Southwood looks at the runners in the race and asks whether West Africa is ready for the potentially market-changing impact of cheap international bandwidth.

At last week's US Trade and Development Agency organised event (West Africa ICT Road Map to Opportunities Conference), Funke Opeke of Mainstreet Technologies, the project to build the Main One cable down the west side of the continent promised that an E1 would cost US$400. It might have been my imagination but I'm sure I heard something like an audible intake of breath.

There are four international cable projects racing to complete new routes that will connect that side of the continent to Europe and the USA. They are:

- Globacom's Glo One: The Glo One cable has been built from the UK to Dakar but has not yet been landed in Dakar. Despite an announcement that it would connect most West African countries between Dakar and Lagos, it has not yet been completed. Various cynics say that it has run out of money but this is a company that has just rolled out in Benin and plans to do the same again in Ghana. More credible rumours reaching us are that the countries where it was to have landed are asking too higher licence price, hence the delay.

- Mainstreet's Main One: Previously aired versions of this show a routing that pretty much matches SAT3. You would expect this company to focus its efforts on the growing Nigerian market. If Nitel is anything like sorted by then, a great deal of expansion may come from that direction. Last week CEO Opeke was sounding very bullish about the prospects of completing.

- IWTGC's Infinity cable: Again routing along the same course as the SAT3 cable, IWTGC looks close to signing its financing deal with European investors and a West African financial institution. The latter will put up US$300 million and the former will offer together with that amount a package that will be able to go up to US$1.5 billion. Last week it signed a protocol with Gran Canaria to put "back office" functions there.

Infraco/DTI's Africa West Coast Cable: This South African Government project signed a contract with the company that is going to build it two weeks ago but has not yet completely finalised its financing. Its final list of shareholders will reportedly include both telecoms companies, such as Telkom, Neotel, Equator Telecom Nigeria, and British Telecom, as well as Tenet, Tata Communications, Multichoice, Vox Telecom, Internet Solutions and Gateway Communications. It was touted as being ready for the World Cup in 2010 but looks unlikely to make that deadline.

At least two of these cables look set to be built and a third is more than likely. This will push prices for international bandwidth down to the levels likely to be achieved on the East coast: somewhere between US$500-1,000.

But it is clear that unlike on the East coast and in South Africa, there is not the same focused attention on getting the cables done at the political level. The situation is made more complicated by the cultural differences at many levels between Anglophones, Francophones and Lusophones. No-one seems to be prepared to crack heads at a political level to get regulators to line up (metaphorically speaking) on the beaches of their respective countries as welcoming committees. Without this kind of political determination, the cables will take much longer to be built. Forget the high licence fees and lie back and think about what cheap bandwidth will do for the economy.

Also at present only 4 countries (Benin, Burkina Faso, Mali and Senegal) have connections to 2 or more or their neighbours and only 4 (Cape Verde, Cote d'Ivoire, Nigeria and Togo) have a connection to one neighbour. And unlike South Africa, Nigeria as powerhouse economy of the sub-region is not connected to all of its neighbours.

Inevitably cheaper international bandwidth will begin to push down the price of national bandwidth. If it is cheaper to go from the capital city of a country to Europe than from the capital city to another city in the same country, something is badly out of shape. And when the new cables arrive, then that will be as true for West Africa as it will be for East Africa.

At the same event in Accra last week, somebody asked who were the most expensive countries on the SAT3 route at present in terms of international bandwidth . The answer? Gabon (Gabon Telecom), Cameroon (Camtel) and Angola (Angola Telecom).

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