13 May 2016

East Africa: Race for New International Fibre Build On East Coast of Africa Hots Up but Why Build More Capacity?

analysis

London — Africa is connected by 17 international cables, 12 of which connect Sub-Saharan Africa to the world. However, the East African seaboard has only three cables that connect directly to the rest of the world. Russell Southwood looks at why there are now two new competing fibre projects for this route.

On 18 April, the Africa-1 cable announced that it had signed up some key telcos. These included MTN Group, Saudi Telecom Company, Telecom Egypt and Telkom South Africa. Others are "in the wings" and are likely to be announced as the plans firm up. Telkom apparently does not have much capacity left on EASSy and wants to get more for the future.

The cable will go from South Africa to Egypt with branches off to Djibouti (to meet the cables landing there), Saudi Arabia and Pakistan. The latter allows a connection into China. Thus far the cable is talking of landing in Tanzania and Kenya along the way on the east coast.

One industry insider told me:"There's a lot of interest in the Asia-Africa trade corridor. It's currently relatively small but it's growing and will continue to grow. Investments like this are made for 15-20 years. This is a continent of 1 billion people and (the East Coast) is only served by three cables. You've got to be fairly bullish about what will happen."

Those three cables are WIOCC/EASSy, Seacom and TEAMS. Last week at the Africa panel at ITW, WIOCC's CEO Chris Wood was saying that more capacity was not needed but that if PCCW (who were also on the panel) wanted to lose its money that was their affair.

The cable will be built with 100GB technology and offer several terabits of capacity from day one. The Construction and Maintenance Agreement is expected to be signed by June 2016, with a target ready for service timeframe of the third quarter of 2017.

The existence of the cable could improve redundancy:"Currently this is done on failover to the west coast cables. But the west coast players can now buy in with swaps and these will be much cheaper."

Those who conceived the cable have tried to solve some of the difficulties inherent in the existing cables:"It's been conceived as very open access and the thinking is to try and solve problems that have occurred in other cable systems."

There's a contrast between the ACE cable where consortium members can only terminate in their own country and say, WACS where you can sell from any place to any place competitively. Africa-1 will seek to emulate this more open approach:"You see a lot of telcos trying to sell their stake in ACE as they are not able to sell their capacity." Also on the management level, both EASSy and WIOCC have complicated consortia management issues because of the number of consortium members involved.

There's a need for a cost-effective transit solution through the Middle East, something that both WIOCC/EASSy and TEAMS have issues with. The claim is that with the involvement of both Telecom Egypt and Saudi Telecom Company, this will not be an issue. Furthermore Seacom has a number of issues that affect its ability to upgrade its system.

Liquid Telecom is seeking to build a similar cable and has issued a Request for Tender. The approximately 10,000km route will run from South Africa to the Middle East. The project is already fully funded and it says that it will take 2 years to complete. It will offer speeds of 20-30Tbps, up to 10 times the capacity of existing submarine cables in the region.

The new submarine cable is expected to directly connect all coastal countries along the east coast of Africa and to provide new connectivity to the Middle-East and Europe. The project will also include landing stations in several ports that are currently not served by existing subsea cables.

As prices become more competitive in every part of the value chain - international, national, metronet and local - carriers are understandably looking to affect the base supply price. If it's a volume game, then they need to get the best possible margins at the landing station. If retail prices are to continue to come down, allowing the number of users to continue to grow, this kind of continuing competition can only be a good thing.

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