Beyond Eassy and Teams: The economics of fibre optics

By XN IrakiAcross the country, trenches are being dug as if there will be a war soon. The trenches are connecting cities, small towns and hamlets, they follow roads and highways.Soon, they will all be filled with fibre optic cables. Our national network will then be connected to Middle East and the rest of the world through Eastern Africa Submarine Cable System (Eassy) and The East African Marine System (Teams) cables, which will soon land along our coast. Teams connect us to the rest of the world through Fujairah in Middle East. Eassy is through Southern Africa. Once connected, we shall be a wired nation, technologically speaking, leaping into space age.What is all this buss about optic fibres? Are all the trenches justified by solid economics?First, some simple science from Columbia Encyclopedia and your high school physics. Fibre optic cables unlike the conventional copper cables transmit digitalised data by light pulses, which are internally reflected, and does not escape from the cables. Do you recall total internal reflection from your high physics (if you did not sleep in class)? Such cables are lighter and thinner but carry more information. The cables are more immune to electromagnetic inference, and harder to tap into. They require fewer repeaters (boasters) to stop the signal from attenuation or deterioration.The use of fibre optics will hopefully bring down the cost of phone calls, internet and communication. It is also hoped that fibre optic cables are not as marketable as copper cables and vandals will be disinterested in digging them up.Observers suggest that communication costs will fall from about $7000 (Sh546,000)per megabit of bandwidth to about $500 (Sh39,000). This could fall farther if we encouraged more cable connections and competition. Already, the fibre optic cables are having an effect long before they land. Why has Safaricom lowered the price of their Modem from Sh9,999 to the current Sh3,999? affordable internetAre they trying to lock us before Teams and Eassy make Internet affordable to all? Competition will always bring down prices and encourage innovations. Things will not be different in ICT, an industry that also obeys the laws of economics.The Government through Vision 2030 envisages Kenya as a business outsourcing hub. That is one justification for Teams and Eassy to make the country more competitive. Already, we have a well-educated workforce. What is missing is the infrastructure and, of course the supply of jobs to be outsourced. We cannot assume that jobs will just come because the cables are in place.The big question we should be asking is: What will flow through the fibre optics? Is it sensible to assume that once you build a road people will buy cars? Who will develop the content? Who will make money out of Teams and Eassy? The media has been sensational about hackers, equivalents to focusing on road accidents and not the people who arrive home safely every day.We could learn from others. In 1989, Sony bought Columbia pictures, a US entertainment firm. Sony may have reasoned that with computers and TV becoming so common, the issue was no longer that of hardware but software, the content. They reasoned that acquiring a content developer was the way of the future.With Sony’s hindsight, we need to focus on what will flow through the fibres. If we let only foreign content flow, we shall have lost an opportunity to leverage on this communication link. In other countries, TV, Internet and phone flow through such cables. Will our comedians and film-makers make money from this cable? We should think about how Kenyans will use the cable before "foreign investors".Cheap servicesTwo industries should take advantage of this cable. One is the Government through e-government. One way to bring services closer to the people is through the Internet, where we can fill the forms electronically and get information on government policies. We can file out taxes online, apply for IDs, passports, birth certificates, licenses, and so on. It is interesting that while the fibre cables are supposed to reduce the number of administrators, we are getting more through more districts!The other industry is education. If we can connect all the schools, our kids will get an opportunity to be on the digital fast lane, sourcing current information than is available in textbooks. The question that arises is: Who will develop this digital content? There is a vast market, for content development in education from elementary school to University.What of retailing? E-commerce should allow me to shop on my computer and do banking too?Apart from content development, we must ask who will drive the industries around fibre optic cables. Is it the private sector or the Government? The Mobile phone industry has grown so fast because the government has been at bay, only coming in when the industry has matured. A similar model should be applied in the nascent fibre optic industry, let the private players exploit opportunities available, with the Government as a facilitator giving incentives to arouse the creative genius of the younger generation.The fibre optic cable will compete with satellite and wireless technology. In the long run, this will spawn new innovations and make communication cheaper. Hopefully, the money saved will be invested in other ventures. Whoever is ready for content development will reap from this technology, handsomely. Think of the money being made from ringtones only! Pioneered by Cellulant, ringtone business appeared irresistible to Safaricom and Zain.If we can leverage on this communication link, we can turn into Silicon Valley, the same way Indians turned Bangalore into mini-silicon valley. The writer is a lecturer at the University of Nairobi, School of Business. xniraki@aol.com

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