ISPs uneasy with pricing of fibre-optic

by Macharia KamauThe pricing policy adopted by the owners of the undersea fibre-optic cable networks will determine the pace at which the cost of data access comes down. Already eyebrows have been raised by various Internet Service Providers (ISPs) over the pricing model adopted by Seacom, the only network to have come online so far — although Teams, which has been dogged by delays, is also not far behind. Financial Journal has established that most of the Internet Service Providers (ISPs) cannot afford the huge cash commitment required to buy space on Seacom. Rather than tie up $3 million dollars (Sh240 million) of their money over 20 years for a minimum 155 megabits per second — as the Seacom policy requires currently — they would rather wait for the other fibre-optic networks, Teams and Eassy, to come online, before committing themselves to such lofty goals.As it is, only companies with massive turnovers like Safaricom, for instance, can afford to tie up that much cash at a fixed price for what — in the world of information and communication technology (ICT) — amounts to several lifetimes, by which time international prices should have dropped so low as to make it a costly investment. The ISPs can still make huge savings in terms of access costs (at least 90 per cent less), for the minimum capacity sold by Seacom, compared to what they have been paying in satellite access costs.However, other than resellers and telecommunication companies, very few ISPs really need that much capacity, and if the pricing on Teams is structured differently, it stands a good chance of pushing down access costs faster than thought.Take, for instance, key customers like cyber cafes. A large cyber cafÈ, with about 20 computers will often lease capacity of 256-512 kilobits per second. Faster speeds and download times for Web browsing would significantly reduce the amount of capacity it requires to lease, and increase competition in terms of pricing.One ISP that asked not to be quoted, as it is customer of one of the investors in Seacom, said it is currently buying bandwidth from vendors who are already on the Seacom connection.It added that though it would have been better to buy directly from Seacom, the vendorsÌ offer was better, since they could buy amounts that match their clientsÌ demand and for a shorter period — sometimes even a month. contract signing"Unless Seacom revises the set conditions we feel that signing a contract with them would be tying ourselves down. The reality of technology is that it is dynamic and things might drastically change in the next five years," reckons an official with one of the ISPs.There are over 70 ISPs in Kenya, most of which are relatively small and have been banking on the undersea cable to grow their customer bases."Maybe in a couple of years, when the number of Internet users has gone up, and our subscriber base grown, we might need larger capacity,Ó"said the official.Some of the ISPs have gone on to warn their clients not to be expectant of any changes in their connection pricing, at least until other cables are launched. In reality, therefore, overpricing of the fibre-optic network would mean a lot of idle capacity, with no buyers.While expectations were that prices for data access would drop after the first fibre-optic network came online, the chorus of voices dismissing this grew significantly last month, with the loudest being those with key investments in the networks.Those dismissing the expectations of lower prices have based their reasoning on the fact that investors in the project have to cover their costs. The fact that they are also the same investors in Teams and Seacom has therefore raised more than a couple of eyebrows.Service providers across the region are now adopting a wait and see strategy and hoping that the commercial launch of The East African Marine System (Teams) will bring relief. The Teams cable, which was first to land in Mombasa in June, is yet to go live, but shareholders said it would available for commercial use early next month.Raised expectationOther than Teams, other cables expected to connect the region and the world in the next year through undersea cable are the East African Submarine System (EASSy) and Lion.The situation is not unique in Kenya. One of the large ISPs in Uganda has said Seacom had not been open in its communication and led the public to anticipate too much. In a communiquÈ to its clients dated August 7, Datanet asked its customers to be patient. It said Seacom had not been open enough in its communication to the public, and may have raised their expectations of price cuts too high. "There have been some press release statements from Seacom in which they have stated that they will be selling capacity at $150 per megabyte per second (Mbps). After direct discussions with them, these claims have turned out to be very misleading to both us, the wholesale buyers, as well as the consumers," said the statement."These prices have strict terms and conditions such as having to pay 20 years upfront, as well as buying a minimum of 155 Mbps. Investing for this term in the amount of over $3 million does not constitute good business practice."According to Seacom, however, the uptake of capacity on the cable has been good. Mr Noor Mahmud the Seacom station manager in Kenya said seven ISPs in the region have already subscribed to capacity on the cable. Network testing"Three of these are already active, while the others are still doing internal network testing. One of the ISPs has taken up capacity of 2.5 gigabits," he said. However, he did note that the company was flexible, given the capacity it has and the need to fill it up. The seeming stand off between the international bandwidth supplier and the ISPs could mean further delays before Internet users can access the inexpensive and fast Internet that the cable promises.The West Indian Ocean Cable Company (WIOCC) — which is laying the EASSy cable — concurs with the ISPs.The service providers should not be tied to buying unnecessarily large capacities that they would not be able to utilise or be forced to stick to a supplier for as many as 20 years, despite new developments that may come up in a few years,Ó Mr James Wekesa chief commercial officer WIOCC said.He added that the company would offer ISPs flexible terms, selling capacity as low as two megabits per second and for a minimum period of a month, to suite the needs of different players in the industry. They would however have to wait till June next year when it plans to go live.The ISPs also note that both Seacom and Teams cables are inadequate, as they lack redundancy features, which would sustain connectivity in case of a breakdown at some point. Without these, connectivity would be rerouted to satellite, which would to a certain extent erode the purpose of having the undersea cables.Macharia Kamau is the chief ICT correspondent for ‘The Standard’. emacharia@standardmedia.co.ke

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