London — Bandwidth is the petrol of the new global economy and as the price of actual petrol continues to go through the roof, it is an essential component of being able to sell "smart exports" based on "think-work" rather than simply minerals, produce or tourism.
Mauritius has had some considerable success in attracting Business Process Outsourcing and Call Centre work but the high price of international bandwidth remains a key concern. With the new cables arriving on the East coast of Africa delivering lower cost international fibre, Mauritius has got to figure out how best to stay competitive. Russell Southwood looks at the dilemmas faced by this Indian Ocean island.
Mauritius not only identified ICT as a fifth pillar of its economy alongside sugar, textiles, tourism and financial services, it actually went out and turned this ambition into a reality. Cheaper bandwidth was a key element of delivering the vision and the island was connected to the SAFE part of the SAT3/SAFE cable in 2000.
The vision had a number of strands: firstly, Mauritius wanted to attract call centres, business process outsourcing (BPO) and computer software programming; secondly, it wanted to take advantage of the bilingual capability of its citizens who speak both French and English; and thirdly, it wanted to attract computer assembly work. A key element was its Cybercity project, a 12-storey double tower that looked initially like a "white elephant" but is now largely full. A number of financial incentives were put in place to attract investors.
In 2003 the call centre/BPO sector on the most optimistic estimates employed around 2,000 people. The more honest at that point would admit that the island was struggling to find a foothold in this brave new world and was scrabbling around for low-value telemarketing work. In 2008, the more pessimistic estimates indicate that this figure has at least doubled from five years ago. It is now attracting a much broader range of work including being the Help Desk function for Orange serving France and several other countries.
But despite this success, the industry has two problems: the continuing relatively high price of international bandwidth and a shortage of high-quality staff. Both are acting as a dampener on further ambitious expansion. However, the latter is a sign of success and is something that can be addressed through education and training strategies.
The high cost of bandwidth was something the Government who own 60% of incumbent telco Mauritius Telecom (with the other 40% owned by France Telecom) was keen to address. Initially Mauritius Telecom as the monopoly operator was selling international bandwidth for US$6,300 per mbps per month. After a price determination by the regulator ICTA this went down to US$3,450 with a further 25% discount for volume. Since that point, Mauritius Telecom has reduced prices further in November 2007 by 20% and has plans for further reductions.
All of this has been positive but there remain two stumbling blocks to further growth. The first of these is that the island is only connected by a single fibre and when that goes down (as it has done) then everybody has to rely on satellite. The Mauritius Investment Board wants to attract data centres to the island but investors want fibre redundancy.
The second stumbling block will emerge in Q2, 2009 when the SEACOM and TEAMS fibre projects go live: wholesale prices for international bandwidth will go down to the US$500-1,000 range, making one element of the BPO and Call Centre cost base uncompetitive. Worse still, it will deal the South African call centre sector right back into centre stage as it will have overcome its own high calling cost issues.
Finding a solution to these stumbling blocks has posed a number of strategic dilemmas. Ideally, a competitor international cable would be built and/or operated by someone who was not the incumbent in order to provide a measure of genuine competition. Having addressed high fibre prices, the Government seems to feel the issue is not now a problem and has not really courted partnership with private fibre builders or sought to create a public-private partnership like the Kenyan Government.
The project that the Government is focused on is known as Lion and this 1,800-km cable will connect Madagascar with the region's existing Sat3-Wasc-Safe cable. Lion will link Madagascar with the rest of the world via the islands of Reunion and Mauritius, the two connection points of the Sat3-Wasc-Safe cable, which also link Europe to Asia via South Africa. The investment will be made by a consortium, including Orange Madagascar, Mauritius Telecom, and France Telecom, who will operate the cable jointly.
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In other words, the cable will be entirely controlled by the France Telecom-owned incumbents of these three islands. To be fair, France Telecom has been a "price progressive" (offering some of the lowest prices) in the context of SAT3 but it would again be another monopoly on top of the one that already exists. There appears to have been no discussion about co-location or access. Worse still, a well-informed source told us that the project is having difficulty finding the required capital to build.
In these circumstances, it would make better sense to either have a neutral private operator finance and build the cable on which the subsidiaries of France Telecom and others can buy can buy capacity or for the Government to act as the facilitator for a consortium of investors to finance it as the Kenyan Government has done with TEAMS. In both cases it would provide competitive, cheaper bandwidth which will help Mauritius and others to stay competitive in the new global economy.
