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No cheap Internet in a long time despite fibre landing PDF Print E-mail

By Esther Nakkazi. Additional reporting By Edris Kisambira


It is three months since high-speed Internet from fibre optic cable arrived in Kampala from Mombasa. First it was SEACOM then The East African Marine Systems (TEAMS)
came on board and later next year we will have the East African Submarine Cable Systems (EASSy).

To the relief of many Internet Service Providers (ISPs) the price cuts have become a reality but not so for ordinary consumers. ISPs that have realized up to 80 percent price cuts on fibre from their providers on switching from satellite have not dispensed cheap bandwidth on to their customers.

A number of ISPs including Uganda Telecom, DataNet, and Infocom have connected to fibre and are migrating their customers to double speeds but at the same satellite
prices.

MTN Officials told I-Network that they are in negotiations with owners of recently landed cables to access systems to meet customers demands. However, this will only be
temporary because MTN is a significant player in the submarine cable space.

It has investments in EASSy, West African Coast (WACs) and Europe to India (EIG), which are to be ready for service after 2010 and will give MTN coverage around the entire continents of Africa, Europe, Asia and beyond.

ISPs can now purchase capacity for short time contracts at $650-$700 per Mbps at least three times less than $2,000 for the same amount from satellite. While those who
sign up for long-term contacts of up to 20 years with Seacom, buy capacity at $150 per Mbps.

Infocom, the sole capacity reseller in Uganda and Rwanda for SEACOM as well as Uganda Telecom Ltd which has 75 percent market internet share have signed such contracts.

Hans Haerdtle the CEO Infocom said their contract is an Indefeasible Right of Use (IRU)- a contract agreement between operators of a submarine communications cable or a fibre optic network and a client. And UTL has also signed an IRU with Seacom.

But only Infocom and their sister company Kenya Data Network (KDN) hold a Point of Presence (POP) tenancy agreement with SEACOM and they do not expect any other POPs because “we can ably serve all the small retailers or the customers could contact SEACOM directly.”

MTN officials who declined to comment on price said they would still maintain the expensive satellite contracts even after connecting to cable, which has outages. It is therefore unlikely that when they connect to the existing cables customers’ prices will be cut.

“We are migrating our customers to fibre which will take sometime. The price will not change but we shall double their speeds,” said Mark Kaheru the public relations manager, Uganda Telecom. Also saying that UTL has phased out the 64 Kbps.

We are going to increase bandwidth delivered to each customer, but at the same price. I think it is a great opportunity for us to increase the broadband capacity we deliver at no extra cost, said Eng. Abdulbaset Elazzabi, managing director Uganda Telecom during a press conference held at Serena hotel.

This is the trend with all ISP companies that have so far migrated customers to fibre lines-double speeds, maintain satellite prices. This means customers will not enjoy fibre price cuts until ISPs decide to dispense lower prices.

“We have been on broadband fibre connection for a month now. The speeds have gone from 64/64 to 512/512 which is sustained for 24 hours in a week with limited outrages,” said Simon Vass technical manager E-Tech Uganda Ltd also a customer of Infocom.

Uganda Telecom officials argued that their customers’ number one complaint was slow speeds rather than prices. But as a price setter in the Internet space with the majority market share, it is likely that if customers remain appreciative of faster speeds and complacent  about prices there will be no cost saving benefits in a long time.

Internet users are quite optimistic that as more ISPs connect to SEACOM and TEAMS, prices will come down. There is faith also in especially new players, that they would take advantage of the new profit margin to attract clients.

New companies in the market like the Broadband Company, which has also signed up, with Seacom is anticipated to follow this trend to lure customers-both ISPs and small providers.

Reinier Battenberg director Mountbatten Ltd says as long as enough ISPs sign up with Seacom the competition will be similar to the telecoms war for customers which would nose-dive prices. “We are waiting for competition. After that it will just be a matter of time before prices are slashed.”

Lack of competition has for now left many end users miserable, most of whom had anticipated instant cheap Internet prices as fibre reached Kampala. Most ISPs are only promising new pricing policies in months, UTL has promised to do so in 9 months time or until when they can get 100 percent redundancy on fibre.

“I am sure all ISPs are reworking their pricing to bring benefits to customers as much as possible. But at times the IT industry is like the oil business where price reductions take time to trickle down to the end users because of vigorous dynamics,” said Samuel Sentongo an IT expert in Kampala.

Paul Bagyenda an IT consultant and trainer said the few ISPs that have connected to fibre so far are the bigger players, which are the ones being targeted by SEACOM and this is inevitable like in any gold rush. “The magic word is competition. When the other two submarine cables land the market will sort itself out.” Government should set Internet price caps But with the same players, analysts argue, the market is not open enough to initiate a price war that would bring down prices. It is only when many other fibre cables land that there would be a change in the game.

“Until that moment when all other cables have landed the status quo is bound to remain,” said George Lule a senior Software engineer at Warid Telecom. But to others the government could play a role in the market by setting caps on prices.

Badru Ntege, director One2Net suggests that  capacity would become affordable overnight, which would allow for a fair playing ground for small and big ISPs creating a win-win situation if government intervened.

“I think something should be done about the asymmetry between prices charged and the cheaper broadband. If two other cables land ISPs should not charge the same prices,” said Paul Asiimwe of Sipi Law Associates.

But the stand for competition as the number one option to bring prices down remains paramount. “It is competition alone that
will bring down prices and reliability of service not government intervention,” said James Wire of Linux solutions. 

Unfortunately competition has not brought down Internet prices for customers so far in Kenya. The government wants to intervene but it will most probably spark a confrontation with industry players.

In Uganda it is argued that Government, which funds semiautonomous regulators, is more inclined to immediate revenues that accrue in the short term than the social impact in the long term that could bridge the digital divide.

For keeping the status quo in terms of prices, ISP officials I-Network talked to said it is inevitable because they still have to maintain some satellite capacity, which is tried and tested, for redundancy and to guard against any problems that SEACOM may face as a new operating fibre cable.

“When the fibre is on I absolutely get twice the speeds as on satellite plus the lower ping advantage. Having said that the fibre breaks regularly which forces Datanet to revert back to satellite,” said Battenberg a Datanet customer.
 
Already it has been observed by some customers that although the quality of the SEACOM cable is good, the initial up time has so far been disappointing. In its initial operating months, the fibre had an average 2.5 hours downtime per day. This in effect represents an uptime of 89.58 percent compared to a satellite link of over 99.5 percent.

However, these interruptions were regional outages between Kampala and Mombasa only. With limitations of terrestrial networks to carry backup, satellite is still the solution. Infact to assure customers that prices will not come down anytime soon, one provider said that they signed a long term contract with a satellite vendor (a practice with most satellite vendors) which means they can not exit their contact instantly without paying heavy penalties.

But maintenance of satellite connections as backup to submarine cables is necessary due to frequent failures and for the long time it takes for them to be repaired. Early this year several fibre cables in the Mediterranean Sea got damaged which took about two weeks to get repaired.

Cheap Internet is far off for customers because of another issue the last mile delivery. Last mile solutions largely delivered on wireless platforms like 3G and WiMAX are not served by fibre and are still expensive. It is only when all these costs are factored in their pricing that the end users will have cheap internet from ISPs. But this is not so soon!

Over the next 3 months, we would like to hear your experiences with the use of fibre optic cable for Internet, please send in your experiences for publication to This e-mail address is being protected from spambots. You need JavaScript enabled to view it . Some of the comments in this article are from the I-Network discussion list.
 

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