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FRONTPAGE VIEWPOINT MAGAZINE BY SECTION Special Report Business Nigeria COVER POLITICS BUSINESS & ECONOMICS BACK OF THE BOOK REGULARS NEIL FORD LETTERS PUBLISHERS NOTE AROUND AFRICA POLITALK WILMOT ADVERTISING Email us for advertising information COMPANY PROFILE MISSION TEAM EDITORIAL BOARD DIRECTORS |
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Click here for the NewsAfrica Special Focus Article Highly charged issue THE MUCH ANTICIPATED reduction in the cost of bandwidth following the arrival of the undersea cables is slowly turning into a mirage. The government and consumers are up in arms as the internet service providers (ISPs) continue to charge the same amount for bandwidth despite the landing of the SEACOM cable, which went live four months ago. The stage is now set for an ugly confrontation, with the government threatening to regulate the cost of bandwidth. The Communications Commission of Kenya (CCK) – the industry regulator – has given the ISPs one month to lower the internet prices or face regulation. Information and communications permanent secretary Bitange Ndemo, who promised Kenyans cheap internet with the coming of SEACOM and TEAMS cables, has been at pains to explain to the public why the cost of bandwidth remains unchanged. ‘The ISPs are being mischievous. The cost should be lower than the $600 per megabyte; it should be $200,’ he told an Internet Governance Forum in Nairobi, adding, ‘We have many options but it’s always good to leave the competition to push the pricing down, but if it doesn’t the regulator can step in’. SEACOM, the first submarine cable to land along the East African coast, went live in July. But consumers, who regularly complained of paying astronomical amounts for bandwidth, were dismayed when the ISPs cited stringent contracts with satellite companies and SEACOM meant they would have to charge the same. At the same time operators have only doubled the bandwidth. Kenya Data Networks (KDN), the country’s largest private data carrier, has quadrupled bandwidth for its customers. ‘The increase in bandwidth is part of KDN’s commitment to support our clients by providing them with a world class infrastructure and adequate bandwidth capacity that will ensure an unmatched quality of service and a world class internet experience.’ said KDN chief executive Kai Wulff. ‘We are able to deliver the same, if not better, affordable telecommunications advances enjoyed by most countries in the developed world,’ Wulff added. ‘KDN has been very proactive in upgrading its capacity and the quality of its bandwidth infrastructure to provide our enterprise customers and the common public with enough capacity to meet their varying personal and business needs.’ But ordinary consumers are yet to enjoy the benefits despite Kai’s promises. According to James Wekesa, the chief commercial officer of WIOCC, the “special purpose vehicle” that manages the yet-to-land East African Submarine Cable System (EASSy), said the ISPs signed long-term contracts with SEACOM, not to mention the high capital outlay spent on the investment. ‘The ISPs and telcos had no choice but to agree to the contract that is eligible for a maximum of 20 years and allows them to buy excess capacity at a cost of between $3.8m and 4m. Obviously, the cost of the excess capacity had to be passed on to the consumer. That is why they would rather double the bandwidth because they have it in excess and continue charging the same prices,’ argued Wekesa. Under the circumstances, efforts of ISPs to offer affordable internet have been frustrated as they struggle to recoup their investments, a process that will take some years. In essence, the stringent contract closed the doors for negotiating for smaller capacities. It does not help matters that the operators were forced to pay their fees upfront, with a provision of heavy penalties in case of default. Industry analysts aver that the cost of bandwidth can only come down once the other cables-TEAMS, EASSy and Lion go live. Still, the monopolistic nature of SEACOM’s shareholding continues to act as a deterrent to cheap internet. An industry analyst who wished to remain anonymous because he is a competitor said that buyers have little chance of negotiating for better prices since there is only one international shareholder in SEACOM. ‘The more the international partners in an ownership of a cable, the easier it is for buyers to bargain’, said the analyst. But Ndemo is not amused. He has dismissed the offer to double capacity for the same price because the majority of Kenyans cannot access affordable connectivity. ‘If few Kenyans could afford the bandwidth, who are you doubling for? he said. ‘For the economy to grow broadband has to be available to Kenyans. The operators cannot expect revenue to improve with old tactics. The cross connect in Fujairah is as low as $15 per MB. It should not be a problem at all. Onward capacity to all destinations of the world starts from as low as $50. Therefore the cost for a full duplex should not be more than $100. The payback period for the capex between Mombasa and Fujairah should be at least five years to attain the prices we are hoping to get.’ Meanwhile, the government-fronted The East African Marine System (TEAMS) is set to go live in December while EASSy is expected to land in March next year. It remains to be seen whether the arrival of the additional cables will ultimately result in cheap internet. |
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