Jennigay Coetzer – Business Day – 30 July 2009

The new undersea cables being constructed up the east and west coast of Africa are creating considerable excitement in the market, with Seacom being the first of these to go live. Seacom CEO Brian Herlihy says the most significant benefit of the new undersea cables will be better quality connectivity and reduced bandwidth prices.

“You would expect bandwidth prices in this country to be on a par with India and Western Europe, but they are ten times higher.” He says Japan and the US have the cheapest prices, at $3 and $4 per megabit a month respectively.

In the US, users have spent the same amount per month for connectivity for the past 10 years, but the speed and quality has improved more than a 100 fold. “Today, I have a 50 megabit per second (Mbps) connection to my home in the US that costs $100 a month, and operators are now launching 100 Mbps services at the same price,” says Herlihy.

Higher-speed connections are needed to support applications like video-on-demand, which is in common use in the US where users can choose from between 300 to 400 titles to download and view. He says with sufficient bandwidth it will even be viable for post-production houses to collaborate and edit movies on the internet.

As the demand for bandwidth hungry applications increases operators are being forced to increase the capacity of their networks and the same thing will happen in SA. Herlihy says in the US recently, AT&T had to upgrade its network to cope with the increasing amount of bandwidth smartphone users were using to download web content to their devices.

Operators will also need to constantly re-invest in their networks to cater for the increasing number of users who want to create content and upload it to websites. “Apple iPhone users can now take a video with their phone and send it anywhere in the world, and this will place a strain on the networks.”

Irnest Kaplan of Kaplan Equity Analysts says over the past 10 years the price of bandwidth has been kept artificially high due to Telkom’s monopoly of the international link, and this has been a major stumbling block to progress. “There is now hope that bandwidth prices will drop and this will be good for consumers and will stimulate demand because customers will use more.”

However, he says the new Seacom cable will only provide more capacity on the links in and out of the country and will not change the reliance on the existing national infrastructure. “We will still rely on the existing incumbents to pass on the benefit of reduced costs of international bandwidth.”

The advent of new services such as the Dark Fibre Africa, which is building local fibre infrastructure and renting it out to operators and service providers will help. “But the incumbents will still dominate the national infrastructure.”

He says when it comes to the last mile connection between the customer and the backbone network, this infrastructure is still mainly dominated by Telkom with its copper wire telephone infrastructure and MTN and Vodacom with their cellular networks.

Even then, while the mobile networks have thousands of base stations across the country, the transmission networks that link their base stations still rely heavily on Telkom’s fixed line infrastructure. Although the mobile operators are starting to build their own fibre infrastructure, they are unlikely to ever replicate Telkom’s national infrastructure, says Kaplan.

Andy Brauer, chief technology officer at Business Connexion, says with key local operators and service providers, like Neotel, Internet Solutions, MTN and Vodacom buying international capacity from Seacom and more players building local infrastructure this will pave the way for increased competition and reduce costs.

He says both Neotel and Telkom have recently reduced the price of international bandwidth and Telkom has reduced the cost of its local ADSL service. “Telkom is realising the game is changing and wants to retain its customers.”

As costs come down it will increase the scope of services and the dream of internet access for all in this country could become a reality. With more high-speed links in and out of the country it will also open up opportunities for offshore outsourcing and for local service providers to offer hosted services to other parts of Africa.

However, it will also make it more viable for overseas players to provide outsourcing services to SA companies, says Brauer. Wayne de Nobrega, CEO of Altech Technology Concepts says the two predictions driving the hype around the new Seacom cable are the cost and availability of bandwidth.

“Apparently the costs will drop between 25% and 90%, depending on which pundits you listen to.” He says other predictions being bandied about are that South Africans will have access to 40 or even 50 times more international bandwidth and that the jump from the existing SAT-3 130Gbs cable to Seacom’s 1.28Tbs is significant.

On the surface of it, both of these predictions are true, but the cable is new and is yet to be proven. ISPs will therefore need to have a backup alternative and this will have an impact on the prices they charge for access.

It will also take time for ISPs to include Seacom in the blend of connectivity options they provide. He says it will take till 2010 or 2011 for there to be enough capacity in the international links, the long haul inter-city links and the last mile links to the consumer, with enough service options to see the prices and speeds envisaged.

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