Fibre comes East - Royal Holloway, University of London

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Fibre comes East - Royal Holloway, University of London

    Fibre comes East

    Is Kenya Prepared?

A preliminary report on

    the impact of the arrival of

    international sub-marine

    fibre on development in


Prepared for DFID Kenya & Somalia

    by Victor Gathara

April 2009

Executive Summary

The imminent arrival of the sub-marine fibre optic cables to East Africa has elicited much

    interest and debate. On the one hand many are referring to their arrival as a defining moment

    in Kenya‟s development. Others are more sceptical, based mainly on the experience of

    Southern and Western Africa when their fibre arrived. Surprisingly little research has been

    done on the expected impact that the cables will have on development in Kenya. This report

    seeks to increase understanding (and better articulation) in DFID of the implications of the

    arrival of the fibre-optic cables for Kenya‟s development and limiting factors that need to be

    addressed if Kenya is to benefit from plugging into the global fibre-optic network. It may be

    circulated wider among other UK government departments and the donor community.

The arrival of the cables starting with SEACOM this June, TEAMS shortly thereafter and

    EASSY in early 2010 will have a significant impact in reducing the cost of bandwidth in the

    country. However a disconnection among the stakeholders, poor marketing, a shortage of

    skills, funding constraints (especially with the global recession) and a major shortage of

    qualified staff in coming years, present key challenges. In making the case for a vibrant ICT

    industry as the best way to take advantage of the arrival of the cables, this report identifies

    the need for Kenya to adopt an open access policy, develop a national IT stragety, build up its

    terrestrial infrastructure, and pull together all key stakeholders in an effective national

    association. Principal success factors are identified as a clear government vision and policy,

    appropriate regulation, low wages and costs, an effective national association and well

    planned ICT parks.

The donor community, can do much to support Kenya in this. The report recommends action


    - targeted funding for the ICT industry to help mitigate the effect of the global recession;

    - direct investments in infrastructure to help spread points of presence to rural areas;

    - supporting a Kenyan success story in the Business Process Outsourcing (BPO)

    sector through marketing support, technical and financial assistance (borrowing

    loosely from the MPESA model);

    - lobbying the government for regulation aimed at preventing monopolies developing

    and speeding up the passing of the Freedom of Information (FOI) act currently

    (stuck?) in the Prime Minster‟s office;

    - encouraging debate on the benefits of the sub-marine fibre in the public domain

    through collaboration with the media and supporting the Ministry of Information and

    Communications communication strategy.

    - factor support for the development of a vibrant Kenya ICT industry in the Enterprise

    Development Programme

    - lobby for ICT issues among donors to be coordinated via the Harmonisation

    Alignment and Coordination (HAC) group

    - support for the Kenya ICT Action Network (KICTAnet)

The arrival of the cables presents Kenya and indeed East Africa with an opportunity to build a

    successful ICT industry that could rival agriculture, or Tourism. The donor community should

    be fully aware and engaged.


The majority of Kenyans lack access to even basic technology and the opportunities it provides.

    Experts agree that investments in technology are crucial to economic growth and development to

    raise the vast majority of humanity out of poverty.

The development community recognize the need for and potential of developing a thriving

    business sector. Quite a few initiatives relate to ICT-enabled entrepreneurship in which the use of

    Information and Communications Technology (ICT) as a business enabler is promoted. Very few

    of these initiatives seem to focus on enabling the ICT sector itself.

ICTs can be used to improve operations and program impact, and the development community

    can play a key role in transforming development approaches by leveraging ICTs1. Affordable and

    accessible information can help nations to improve their global standing by lowering the cost at

    which they deliver economic and social activities. This can also enhance their ability to

    differentiate themselves by increasing the range/scope of activities they can deliver to distinguish 2themselves in the global marketplace.

In recognition of the potential of ICTs, many (developing) countries have adopted extensive

    and expensive programs of investment in infrastructure and high technology. The Republic of

    Kenya First Medium Term Plan 2008-2012 in Foundations for National Transformation under

    ICT has its goal as to facilitate provision of equitable and affordable quality information and

    communication services countrywide. A huge part of the budget allocation for this plan is investment in the sub-marine (and terrestrial) fibre cabling projects. Further allocation is

    planned in the upcoming budget.

    Such projects aim to address the situation that for a long time Africa has had the least

    amount of capacity/bandwidth available to her population, the most expensive connection

    charges, and (not surprisingly) the lowest Internet usage rates in the world. East Africa 3remains the only large, inhabited coastline cut off from the global fibre-optic network.

    Three under-sea fibre-optic cables are making their way to the East Coast of Africa with the

    first expected to land in June 2009. An „internet revolution‟ is anticipated as the inevitable 4outcome of their arrival. In 30 reasons to Celebrate in 2009 broadband for East Africa was

    listed in position 16 (the new US administration got position 1) promising enormous and

    immediate benefits.

    However there is surprisingly little research that has been done to support this view. How will

    the cables arrival bring the „revolution‟ to the region? Is the region and Kenya in particular, ready to exploit the opportunities that the cables will present? What can the donor community

    do to help prevent the celebration ending on the beach in Mombasa (and in Dar es Salaam) once the cable arrives?

    This report presents the findings of a preliminary study on the impact the arrival of the sub-

    marine fibre may have on development in Kenya prepared on behalf of DFID Kenya &

    Somalia. The report aims to increase understanding (and better articulation) in DFID of the

     1 Summary of Findings: report on HIVOS ICT Entrepreneurship programme. Research by Mechtild van den

    Hombergh and Paul Tjia, presented to HIVOS on March 5th 2009, The Hague, Netherlands.

2 The case for Open Access communications infrastructure in Africa: impact of international submarine cable

    infrastructure [SAT-3/WASC] in four African countries, Abi Jagun; Case study research by: Ben Akoh, Peter Lange,

    Eric Osiakwan, and Russell Southwood

3 Last piece of fibre-optic jigsaw falls into place as cable links east Africa to grid: Leap in capacity will allow cheap

    internet access and knowledge at speed of light, Xan Rice,The Guardian, Monday 18 August 2008

4 New Statesman, 18 December 2008, Edited by Alyssa McDonald

implications of the arrival of the fibre-optic cables for Kenya‟s development and limiting factors

that need to be addressed if Kenya is to benefit from plugging into the global fibre-optic


Why all the fuss?

    The basic answer lies in the cost of internet bandwidth. In Africa, the channels of communication are underdeveloped or inappropriate due to numerous factors. After independence in the 1960s, the lack of an adequate telecommunication infrastructure impeded national development in many African states. Until the 1980s, the principal means of communication were still newspapers, books, telephone and radio. With the development of advanced technology, such as satellite and fibre optic networks, advances in the computer industry and the advent of the Internet, countries rushed to develop modern

    telecommunication infrastructure. Africa was slow to recognise their potential and was always going to be playing catch up.

    In Africa the infrastructure was essentially built around copper cables laid around major towns in the country connecting to satellite systems giving international access. The international gateway was in most cases controlled by the state owned Telecommunications provider. As the „information super-highway‟ developed in the 90s so did the digital divide and Africa was

    left behind as it faced more pressing problems with corruption, poverty, disease and hunger. Soon most countries in the continent had systems that ran on outdated infrastructure that was difficult and expensive to maintain or expand. Satellite communications were also expensive as demand for capacity on existing satellites increased and supply diminished. It is an expensive business to send up a communications satellite! Meanwhile the rest of the world was plugged in to the global information superhighway running mainly on undersea fibre optic cables.

    The use of fibre optic technology has certain distinctive features over other means of communication. In terms of broad bandwidth capability, fibre optic systems offer users more bandwidth than any other type of transmission medium. This means that fibre optic cables are capable of transmitting very large volumes of data, audio and other multi media applications when compared with copper or satellite systems. In addition, fibre optic cables offer room for future expansion at minimal extra cost and without the need for excavation or 5construction and laying of new cables. There is also the advantage of substantially lower

    latency compared to satellite communications giving much better performance. The obvious result has been a substantial cost difference in bandwidth between Africa and the rest of the world. Due to the resulting dearth of sufficient bandwidth, Africa has largely been a peripheral player in the global information marketplace that has developed. Several initiatives have been taken to connect the African continent with submarine fibre optic cables and through them, access to the international market. Among the first of these were two projects advanced by trans-national telecommunication companies in 1993 and 1994. Siemens submitted a proposal called Fibre optic Link Across the Globe (FLAG). ALCATEL, in collaboration with AT&T, presented a different proposal called Africa Optical Network, simply called African One. The initial 400, 000 km of fibre optic cable was valued at $1.6 billion. The Africa submarine project later materialised as the Third Southern Africa Telecommunication 6/West Africa Submarine Cable/ South Africa-Far East Project (SAT3/WASC/SAFE).

    The experience of Western and Southern African countries with SAT3/WASC/SAFE merits attention as it illustrates some of the challenges that East Africa faces as it keenly awaits arrival of its cables.

     5 Flattening The World -The Prospects for Fibre Optic Technology in Africa

    By Ebenezer Malcalm

    6 ibid

SAT3/WASC/SAFE…the party starts…then stops

SAT3/WASC/SAFE is an international fibre optic network that connects Portugal to South

    Africa linking the entire west coast of Africa then crossing the Indian Ocean to East Asia. The

    fibre cable system is divided into two main subsystems namely SAT3/WASC (the Third

    Southern Africa - Western Africa Submarine cable), a 15,000km fibre optic cable linking

    Europe with South Africa and ten countries on the West African coastline. The African

    countries are Senegal, Nigeria, Ghana, Ivory Coast, Benin, Cameroon, Gabon, Angola and

    South Africa. Non African countries who form part of the project are Canary Island, Portugal

    and Spain. SAT3/WASC and its SAFE (South Africa - Far East) extension continues the

    connection another 13,800km as far as Malaysia via Reunion and Mauritius, with a landing

    that brings India into the network. SAT3/WASC/SAFE was launched on May 27, 2002, in 7Senegal.

Information about the cable is difficult to obtain and verify as the agreement governing its

    development, operation and management is deemed “commercially confidential”. Reported

    amount invested in SAT3/WASC/SAFE differ, and has been stated to be as high as US$650

    million. The consortium that owns the submarine cable comprises a mix of African, American,

    Asian, and European (predominantly telecommunication) companies; in total 36 investors

    from 35 countries. How much each company invested and the complete list of who these

    investors are is hard to ascertain. Individual participants in the consortium, through their

    investment, own capacity; allocations can therefore be used as a proxy of the level of 8investment that was made.

Since its inception, the cable has had a number of significant benefits for the countries


    ? increased competition and reduced costs of bandwidth and hence an increase in

    bandwidth availability

    ? enhanced access to ICT services among the beneficiary nations, enhanced speed of

    transmission of data, voice and other interactive multimedia applications

    ? business process outsourcing (BPO) and off-shore ventures creating job avenues

    and investment opportunities

    ? business opportunities for countries with landing stations as they provide landlocked

    countries access to the cable

However the SAT/WASC/SAFE project has not had the desired major impact in the African

    countries to which it connects. Certainly not enough to warrant the term „revolution‟ or indeed

    be a cause of „celebration‟. The project has been criticized by telecommunication experts for

    not solving the high costs associated with broadband. A key impediment to realising this 9potential is the “reinforced monopolies” that are enjoyed by the SAT3/WASC signatories.

    There are severe conflicts of interest when one signatory has sole ownership of the landing

    station, dominates the international gateway market (or is the legal sole provider of

    international connectivity in the country), and also owns the national terrestrial backhaul

    network. The provider dictates the bandwidth capacity of country, the cost of bandwidth to

    other operators, and can also influence (by granting, denying, or delaying access) the

    activities of operators in the market (who are also often its competitors).

The lack of an extensive national backhaul also severely limits the utilisation of the

    international cable and the ability of the various regions of the country as well as neighbouring

    countries to access its capacity. Nationwide terrestrial (fibre) backbone infrastructure are

     7 Ibid

    8 The case for Open Access communications infrastructure in Africa: impact of international submarine cable

    infrastructure [SAT-3/WASC] in four African countries, Abi Jagun; Case study research by: Ben Akoh, Peter Lange,

    Eric Osiakwan, and Russell Southwood

9 Ibid

generally underdeveloped with disparities in nationwide connectivity. Urban areas are

    significantly better connected than rural areas. Weak terrestrial infrastructure has implications

    on the cost of access to backbone networks on the one hand (particularly when multiple

    networks are required in achieving nationwide coverage and the cost of interconnection has

    to be factored in), and on cost of bandwidth and demand on the other.

The failure of SAT3/WASC/SAFE to solve the problem of high cost of bandwidth is among the

    reasons why other fibre optic projects have been proposed. No less than 7 under-sea fibre

    cable projects are underway as well as numerous terrestrial cabling endeavours in an effort to 10„wire up‟ Africa. Industry experts and commentators have expressed doubt as to the likelihood of all cables being built; stating that there is not enough market demand to justify

    them and that some projects will therefore find it hard to secure the required financial 11investment, especially given the current global recession. The following section details the

    state of play regarding the various cables on their way to the East Coast of Africa.

     10 Appendix i

    11 All wrapped up! Progress on the deployment of fibre-optic submarine cables in sub-Saharan Africa. Abi Jagun,

    Research Fellow, Department of Management Science, University of Strathclyde Business School, Glasgow

The cables come East

Three under-sea fibre-optic cables are making their way to the East Coast of Africa with the

    first expected to land in June 2009. A fourth may (or may not) also be on it way.

EASSy…not quite

The failure of SAT3/WASC/SAFE to solve the problem of high cost of bandwidth and the

    absence of any submarine fibre-optic cable along the East Coast, led to the adoption of a

    Business Manifesto to build a submarine fibre optic cable at an East African Business Summit

    in late 2002. The resulting cable project - named the East African Submarine Cable System

    (EASSy) had the main goal of improving the quality of telecommunication services and

    reducing cost of bandwidth in Eastern African countries. EASSy is expected to run from South

    Africa to Sudan and proposes to land in seven countries along the coast. A further 13

    landlocked countries will connect to the cable through cross-border terrestrial backbone

    networks. It was initially expected to be operational by the last quarter of 2007.

From the onset there were misunderstandings among the members of the consortium funding

    the cable with regards to the “open access” policy being canvassed by some. Nepad e-Africa

    commission insisted that all local telecommunication and Internet Service Providers (ISPs)

    should have free access to the EASSY cable network to avert the problem associated with

    the SAT3/WASC project where Telekom South Africa and other businesses level high

    bandwidth charges. Not all business partners of the consortium were in agreement with the

    policy. Some insisted that the project should be run like a business entity to maximize profit.

    They further insisted that only telecommunication companies and ISPs with international 12gateway licenses become members of the network. This impasse among members resulted

    in a delay in the commencement of the project. The cable is expected to land in the second

    quarter of 2010.

Investment in the cable has been through direct investments by some and through a Special

    Purpose Vehicle (SPV) called West Indian Ocean Cable Company (WIOCC) for others. The

    SPV was created to facilitate open access. WIOCC is owned by Djibouti Telecom; Dalkom, of

    Somalia; Telkom Kenya; Uganda Telecom; Zanzibar Telecom, of Tanzania; Onatel, of

    Burundi; U-Com, of Burundi; Botswana Telecom; Telecommunicacões de Mocambique; the

    Lesotho Telecommunications Authority; and Gilat Satcom, of Nigeria. Together, these

    companies contribute US$20million to the project. Along with the WIOCC parties‟ equity

    contribution, a syndicated loan of US$70.7million was also secured by WIOCC from five (5)

    international developmental financial institutions - African Development Bank, the

    Development Bank of France, the European Investment Bank, the Germany Development 13Bank and the International Finance Corporation.

    It has also been reported that new operators in countries connected to EASSy will be able to

    invest in WIOCC at any time (this has however not been confirmed by the SPV). WIOCC will

    purchase and own capacity on EASSy and is authorized to sell this capacity to any entity -

    subject to the laws and regulatory restrictions of the country the entity operates in. WIOCC

    will also directly retail capacity and at the same price to all users. Whilst EASSy/WIOCC has

    stated that capacity will be sold on a cost-basis, it is yet to publicly announce what projected

    prices for capacity will be.

     12 EASSy broke away from theNEPAD ICT Broadband Infrastructure Network an amalgamation of several network ,development initiatives in Africa. This overarching “Network” is now made up of a submarine segment that will wrap

    round Africa (with connections to Europe, Brazil, India and the Middle East) called the Uhuru Submarine Network

    (UhuruNET). There is also a terrestrial backhaul network that would (1) connect landlocked countries to UhuruNET,

    and also serve as back-up should a segment of the submarine cable be cut or otherwise disrupted. This is called the

    Umoja Terrestrial Network (UmojaNet).

     13 An update on the east african submarine cable system [EASSy]by Abi Jagun

TEAMS…Kenya goes it alone

    Due to the delays in the EASSy project, Kenya decided to go ahead to construct its own fibre optic network. Named The East African Marine System (TEAMS), it is a joint venture between the Kenyan government and Etisalat (a United Arab Emirates‟ [UAE] telecommunications

    operator).TEAMS will connect Mombasa to Fujairah in the UAE. The exact shareholding is controversial. 85 per cent of the project was originally owned by the GoK and the rest by Etisalaat of the United Arab Emirates. GoK sought local investment in the cable and the TEAMS (Kenya) Ltd holding breaks down as follows:

    ? 20% - Government of Kenya (through Min. of Finance)

    ? 20% - Safaricom Ltd

    ? 20% - Telkom Kenya Ltd

    ? 10% - Kenya Data Networks Ltd

    ? 10% - Econet/Essar Telecom Ltd

    ? 5% - Wananchi Group

    ? 3.75% - Jamii Telecom Ltd

    ? 1.25% - Broadband Access/AccessKenya Ltd

    ? 1.25% - Africa Fibrenet (Uganda) Ltd

    ? 1.25% - InHand Ltd

    ? 1.25% - iQuip Ltd

    ? 1.25% - Flashcom Ltd

    There have been allegations of corruption in the division of shares with some accusing the government of not being open in the process.

    Laying of the cable is expected to start in April and the cable is to be commissioned in October 2009. The manner in which capacity on TEAMS will be sold, as well as projected prices for units, have not been publicly announced.

SEACOM…comes first

    It would seem while the two other cable projects were mired in controversy, SEACOM a privately funded initiative got on with the job. Within East Africa it will have landing points Kenya and Tanzania. There will be a connection from Kenya to France (Marseilles) and from Tanzania to India (Mumbai). SEACOM has also purchased fibre capacity from France (Marseilles) to London.

    The ownership of the cable is shared by Industrial Promotion Services, an arm of the Aga Khan Fund for Economic (25%); VenFin Limited (25%); Herakles Telecom LLC (backed by Blackstone US) (25%), Convergence Partners (12.5%) and Shanduka Group (12.5%) According to their newsletter of February 2009 the first portions of deepwater cable are now resting on the seabed of the Indian Ocean and Red Sea. The cable has been laid from the edge of the South African waters to Mozambique and cable laying is also proceeding in the Red Sea from Egypt towards the coast of Yemen. A third ship is currently being loaded with the remainder of SEACOM‟s deepwater cable which will be deployed from India towards

    Africa, where these three cable segments will be joined.

    Capacity on the cable will be sold at wholesale prices. SEACOM is offering bandwidth between US$50-300 megabits per second (mbps) per month.


    Lion is a cable proposed by France Telecom and Orange to link Madagascar to the SAFE cable via Reunion and Mauritius. No other information of the cable has been released into the public domain since its announcement in March 2008. According to a document from France

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