Don’t miss this chance

By Mubatsi Asinja Habati and Patrick Kagenda

Telecoms, government challenged to grab opportunity in fibre optic cable

Since the Kenyan government announced the landing of The East African Marine Systems (TEAMS) fibre-optic cable at Mombasa in mid-June, excitement has mounted over the anticipated switch from the more expensive and unreliable satellite connections.

TEAMS is the first of three broadband cables expected to land on the East African coastline this year. The others are the East African Submarine Cable System (EASSy) and Seacom.

Until now, East Africa has been the only coastline without a submarine cable.

“This is a great milestone because we can now truly become an integral part of the global digital community and start to embrace the full potential of the “information””age,” says Fred Massade of Zain Uganda.

These high capacity undersea telecommunications will link East Africa to the global telecommunications infrastructure and enable transmission of large amounts of information at the speed of light.

“The impact of the fibre optic cable will be significant but it will be most felt when all three cables under construction are operational. The capacity will be abundant at this time and the competition most intense. Costs, to operators and tariffs paid by end users, should come down significantly and quality of services significantly improved,” says John Paul Bagiire, General Manager, Strategy and Planning at MTN Uganda.

The main beneficiaries are expected to be users of telecommunications, the internet, and the World Wide Web.

If all three fibre optic cables land, bandwidth will be cheaper, broadband monopolies will not crop up, adequate capacity for future need would be ensured, and the apparent redundancy can provide seamless fail-over recovery in case the physical cable systems (and landing stations) are damaged.

“More applications will be developed and websites will be locally hosted. Academic institutions will comfortably collaborate with those abroad,” says Michael Niyitegeka, head corporate relations office at Makerere University’s CIT faculty.

But Niyitegeka is also doubtful that the fibre optic cable will be exploited fully.

“To me it will not deliver a miracle unless we change our attitude of doing business in Uganda,” he says. “Why are institutions not fast moving towards automating some of the services, like paying workers salaries online, and media houses not updating the audience with latest mobile phone enabled content?”

Full exploitation of the fibre-optic cable capacity is critical.

A 2008 study by the Association for Progressive Communications (APC) on the effects of ownership of the South Atlantic 3/West Africa Submarine Cable (SAT-3/WASC) on the communications markets in Angola, Cameroon, Ghana and Senegal found that the potential of the cable had not been properly exploited.

The study found that ownership of the cable by telecoms incumbents, such as MTN and UTL owning shares in EASSy in Uganda, reinforced their market positions.

As a result, while the cost of internet access, international calls, and international bandwidth to consumers decreased over time, it was not to the levels anticipated by the market.

In the case of Uganda, “the cost will come down over time because companies involved need to recover money invested,” says Michael Niyitegeka.

At one point, former ICT Minister, Ham Mulira, predicted that the fibre optic cable connection could cut the cost of voice and data transmission in the region by up to 80%.

These costs will be dependent on the price that governments and private sector investors pay to the bandwidth merchants.

Even where fibre optic cable exists, broadband prices in Africa remain the highest in the world, largely due to lack of competition and fibre capacity.

Uganda’s liberalised telecommunications market should catalyse competition and lower prices but operating the cable as a public good would ensure greater efficiency.

Complex ownership, especially involving regional governments with different bilateral agreements, tax structures, and political and regulatory requirements can also complicate agreements on usage.

To derive maximum benefit, however, the cables need to be open-access architecturally, meaning that any service provider should be able to gain access to capacity on a nondiscriminatory and reasonably priced basis.

That has not been the case in some places where the focus has been on locking in high profit margins for the consortium members on a long-term basis.

EASSy has a free access model supported by the World Bank, the African Development Bank, and the Development Bank of Southern Africa (DBSA).

Even if the price of broadband connectivity comes down, it will never be as low as in Europe and America that are closer to the main activity of the internet and have larger markets of potential broadband users.

Today, very few Ugandans are computer literate and about three percent is connected to electricity grid and analysts are saying that the high broadband cable may not be fully utilized unless improvements are done in those areas.

Fortunately, improvement in the communications sector can be almost miraculous. Since 2001, Uganda’s mobile telephony penetration has grown from 1.9% to 39%. Forecasts are that by 2015, 70% penetration will have been attained with up to 27 million Ugandans connected to mobile phones.

Still, Uganda needs to broaden the broadband market to attract investors, spur competition, and enjoy lower user rates.

ICT-linked service industries, such as outsourced call centres, back-office business processing and research centres should be policy encouraged to blossom.

Among ordinary consumers, such modern amenities as high- definition television, peer-to-peer networks, Internet Protocol television, and faster Internet should be made accessible.

Martin Musumba, former Prime Minister of the Busoga Kingdom, understands the benefits that improved ICT-related business presents. But he also knows how quickly the benefits can melt away if not adequately exploited.

Musumba’s model was Business Process Outsourcing (BPO). This is where an organisation hands over part of its work to another company. In the ICT era, it has come to mean that companies in Europe and America move some of their low end software development, help desks, or call centres to low labour cost countries.

Musumba and the InterGlobal Services (IGS) of the U.S. planned a 150-seater world-class call centre in Jinja. The call centre was to employ 450 operators, working three shifts everyday, and seven days a week earning an estimated salary of about US$1,000 every month.

Compare that to Nile Breweries, one of the leading industries in Jinja which employs only 430 people directly.

At the time, the government through the ministry of Education and the Global Management Consortium-Trade Information Network (GMC-TIN) and Serebra Learning Corporation (Canada) were to provide low cost and affordable education in ICT, professional development courses including call technologies and call centre management through a programme known as EasyLearning.

Busoga Kingdom set up an e-Learning centre in Jinja called IT Synergies to train call centre operators and managers.

But Musumba’s vision and the IT centres he set up have all shut down.

“The moment I was removed as PM everything died,” he says. “Among those who took over nobody has the interest or the know-how.”

Over the same period, India has emerged as the leading destination of ICT-related BPO earning up to US$6 billion annually and employing about 350,000 people.

In East Africa, Kenya has the US$ 3.3 million KenCall in Nairobi and the US$6 million Horizon Contact Centres designed to employ 5,500 people. The government is also investing in getting IT to contribution up to 10% of GDP.

To maximize benefits from the fibre-optic cable, Safaricom in mid-June signed a partnership deal with Jamii Telecommunications Limited (JTL) to be Safaricom’s preferred broadband infrastructure provider.

JTL, which is a leading broadband infrastructure provider in Kenya, has up to 1,000 Km of fibre network.

Both Safaricom and Jamii own 20% and 3.75% of TEAMS respectively.

Kenya also has Kenya Data Networks, a KShs 3 billion local company with the second largest IP network in Africa. It has partnerships with top organisations.

Among the incumbents in Uganda, Uganda Telecom appears to be the most prepared for the new data era.

Its products appear to have already moved beyond the internet, 3G broadband and Wi-Fi wireless internet hotspots, to business communication solutions, data connectivity/leased lines favoured by confidentiality-seeking entities like banks and embassies, and virtual private networks, managed data networks.

MTN data solutions appear more centered on the internet by offering GPRS, EDGE, 3G, and HSDPA for such applications as live broadcasts, video clips and emails but it appears poised for the fibre-era.

“MTN is an investor in EASSy,” says Bagiire. “MTN has enormous capacity on this cable which forms an important part of MTN future plans in terms of providing international connectivity. There are other cables landing earlier than EASSy, that is TEAMS, MTN is making plans to procure capacity on one or more of these cables pending the landing of EASSy.

UTL, MTN, and the government have already invested in fibre optic cable networks within the country, including a national optical fibre backbone infrastructure which has been laid out by the government.

MTN has fibre laid up to Malaba to link up with Kenya’s Telkom fibre.

UTL has fibre up to Katuna on the Rwanda border.

The government has completed phase I of laying the fibre optic cable connecting Kampala, Entebbe, Bombo, Mukono and Jinja. The 165 kilometre optic cable will set off the e-government scheme under the National Data Backbone Network according to Geoffrey Kirya, the principal information scientist in the ministry of ICT. Also 27 ministries are hooked with voice data and video services.

The second phase of the government project, which is to cover 1,542 kilometres and connect 20 districts including Luweero, Gulu, Hoima, Soroti, starts next month.

Phase III will cover 407.8 km. The national fibre cable connection will link Uganda to the global network through Kenya.

Africa Fibernet, a relatively unknown entity set up in 2008 that controls a strategic 3.5% of TEAMS could prove a major player in the provision of broadband services. In other places, firms trading under the Fibernet name are involved in cable television.

In response, telecommunications companies such as MTN and Uganda Telecom have cable rings in areas like Malaba, Katuna and Busia to ease the competition they are likely to face from such optic cable providers. Others, like Zain, are developing their infrastructure to buy broad-bandwidth from the most economical supplier.

Whichever route is chosen, however, ICT-related businesses hope the opportunity presented by the arrival of the fibre optic cable on the East African coast will be optimally exploited.