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Mon 6 Apr 2009 04:00 AM

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Wholesale change

Wholesale international traffic carrier Six Telecoms hopes to take advantage of the boost in capacity to Africa as a number of submarine cables come online

Wholesale change
Wholesale change
SHAMTE: Greater links are needed between East Africa and the rest of the world.

Africa's connectivity with the Middle East and the rest of the world is set to increase with a number of submarine cables going live this year. Wholesale international traffic carrier Six Telecoms hopes to take advantage of the boost in capacity.

The continent of Africa has experienced some of the fastest internet subscription growth rates in the world, second only to the huge growth witnessed in the neighbouring Middle East. Figures from the ITU show that over the past eight years, the number of internet users in Africa has risen by 1100%. And the number of broadband subscriptions is set to quadruple to 12.7 million by 2012, according to a survey conducted last year by research firm AfricaNext.

If the growth is to continue and Africa's internet penetration rate of 5.6% is to continue moving towards the worldwide average of 23%, then the lack of connectivity between African countries and the rest of the world needs to be addressed.

It has been estimated that 75% of Africa's internal internet traffic is routed through the US and Europe, and when neighbouring countries want to exchange information the data sometimes has to be routed through countries as far away as France or Canada. Such a convoluted means of sending data and voice traffic not only increases the risk of failure, it also adds a significant amount of cost to the process, which is inevitably passed on to the consumer.

Fibre backbone developments, such as Telkom, MTN and Neotel's US$197 million, 5,000km fibre-optic cable across South Africa should help to address cross-Africa connectivity. Such an initiative will help to increase data transfer rates between African nations, but it will not address Africa's limited connectivity to the rest of the world.

One stark illustration of the bottle necks that limit international capacity was referred to in a document produced by the US Office of the Director of National Intelligence. It claimed that the 900 million people in Africa have to make do with the same level of international internet connectivity as the 480,000 residents of Luxembourg.

The benefits to emerging economies of a robust ICT infrastructure have been widely acknowledged by aid agencies, and as a result fibre optic submarine projects that promise greater connectivity have been given substantial backing by aid banks, with submarine cables receiving particular attention. Indeed, analysts estimate that annual spending on the global undersea network market will average $2 billion in four years.

Underserved East Africa

Many international fibre optic cables that link North and West Africa to neighbouring regions are already in place, leaving East Africa in particular as the most underserved part of the continent. This was meant to change four years ago, when the East African Submarine Cable System (EASSY) cable linking countries along the east coast of Africa to the Middle East via the Red Sea was due to go live. But work on the cable only began in March last year, and it now has an anticipated completion date of 2010.

The Du-backed EIG cable, which will connect Fujairah in the UAE to Djibouti in the Horn of Africa and India, is expected to complete by the second quarter of 2010. For other countries along the east coast, connectivity should be improved this year, with two cables due to be ‘lit' in 2009. The East Africa Marine System (Teams) consortium of the Government of Kenya and the UAE's Etisalat is working on a 4,900km cable that it says will have an ultimate capacity of 640Gbps/sec. that will link the port city of Mombassa in Kenya to Fujairah.

And rival submarine cable outfit Seacom is planning to launch its own cable at around the same time, with an anticipated launch date of June 2009. When it is fully functional, Seacom's fibre optic cable will link Southern and East Africa, Europe and South Asia. All of this increased connectivity will not only enhance performance for consumers, it will also present an opportunity for companies that route international voice and data traffic that will be carried on the cables to users in the countries along the coast and internally to landlocked countries.

International opportunity

Tanzanian company Six Telecoms, which describes itself as a "carrier's carrier", is one such company. It claims to handle 60% of Tanzania's out-bound international traffic. At present, all of Six Telecom's international traffic is routed via satellite, and this is something that CEO Rashid Shamte is not very happy about.

"We're 100% dependant on satellite, which is a pain," he says. "It's extremely expensive, which is why we are really excited about Seacom. The largest challenge for us, especially in Eastern Africa, has been access. We're working on an infrastructure project interlinking eight countries around East Africa with fibre projects and extensive microwave projects, because over the past 30 years, before we came in, just to call Kenya (from Tanzania), you had to backhaul it through Europe," he says.

With Tanzania's position on the east coast of Africa, Shamte describes the country as "a natural hub", and he says it is ideally located to act as an access point for other African countries that need to connect to the Middle East and beyond. Demand for extra capacity has grown since the telecoms regimes in the region were liberalised, and it was after the process occurred in Tanzania's telecoms sector and incumbent operator Tanzania Telecommunication Company's (TTCL) monopoly was ended that Six Telecom was established in 2004, with Shamte as one of the founders and a 15% shareholder in the business.

"Once the incumbent's monopoly was over, we were the first company to get the licence," Shamte says. "So we set up an international gateway. We currently run traffic for all of the mobile operators in Tanzania, and the role shifted from the incumbent to us," he says.

The company has infrastructure in Dar es Salaam that acts as a transit and connectivity hub for local and regional partner operators, and it owns and operates hubs in London and New York that facilitate traffic aggregation from the company's international carrier interconnections. Both these locations also have dedicated fibre connectivity to Intelsat earth station for connectivity via satellite to Tanzania.

"We're present in Tanzania, we're present in Kenya, Uganda, Malawi, we're working on our presence in Zambia. They haven't opened up that market yet, so it's quite difficult," Shamte says. "Our presence in those countries is very basic. We do have interconnection agreements which we've honed into alliances, so we pretty much have equipment which helps us do our voice and our data across the border."

Shamte wants more partners in the Middle East to enable a greater flow of traffic between the two regions and into Asia, but the cost of satellite troubles him. "We're paying far enough for our voice business, which at least the margins are good and the revenue's good, and the business model justifies the satellite cost. But as far as bandwidth is concerned, that's going to be handled by the Seacom situation," he says.

Middle Eastpartners

One of Six Telecoms' partners in the Middle East is the UAE's second operator, Du. Executive vice president for Du's international and wholesale division, Andrew Grenville, says that the operators' priorities for international connectivity are decided by its customer base, and although Africa is not a region that demands the greatest level of connectivity, it is considered a growth area. As well as connecting via point of presence (PoP) in London, last year Du announced that it would invest $50 million in the EIG cable, increasing the operator's ability to reach into Africa and India and offer more bandwidth and IP services."I'm hopeful we can grow the connectivity in and out of Africa, and it's a place that is fast emerging in terms of mobile penetration and internet penetration so it's only going to go one way, and that's up," says Grenville.

Shamte describes the current situation of connecting clients in the Middle East as "a total nightmare, a total headache", with landing stations in Europe needed before traffic is routed back to the Middle East by fibre. "You see how many cost centres there are?" he asks. "Seacom will be one company to deal with, and significantly cheaper, with less point of failures. It will open up a complete new revenue stream, it's optimising my opex, and it's providing me with the ability to expand my services."

Seacom connection

Seacom's US$700 million cable landed at Mombassa in Kenya last month, with an additional express fibre pair from Kenya to France into a PoP in Marseilles and another express fibre pair is from Tanzania to India into the PoP in Mumbai, with an overall proposed capacity of 1.2Tbps.

Such high capacity will enable bandwidth hungry use of peer-to-peer networks, as well as IPTV services. It will also allow high definition TV pictures to be fed in and out of Africa, just in time for two major football tournaments that are due to take place in South Africa, the Confederations Cup in 2009 and the World Cup in 2010. Both are sure to test the capacity of the new cables.

Seacom president Brian Herlihy says that the cable is on course to meet the launch date of June this year, with testing due to be completed ahead of the launch date. So far, 10% of the capacity of Seacom has been allocated to various operators and telcos, but Herlihy is confident that it will prove to be popular with telecoms companies in the region. "If you build it, they will come" Herlihy says, acknowledging the cliché.

Grenville agrees that when submarine cable is laid, operators will inevitably gravitate towards it. "Most operators will use submarine capacity where it exists," he says. "It is usually more cost-effective, and it is invariably faster. As and when the cables (in Africa) come up, people will definitely reduce their reliance on satellite, because it's expensive and it's slower. History has shown that wherever more cable goes in the world, it starts to bring the access point down. And we would welcome that, because then there is more choice and we can pass those benefits on to customers.

"If models elsewhere in the world hold true then we will see a reduction in pricing to consumers, in whatever shape or form that takes place, because our underlying costs will be lower," he adds.

Shamte thinks that benefits of increased broadband access for Africa will be enormous. "The more capacity there is, the more people will innovate in the business place," Shamte says. "The Gulf is such a huge trading transit point for us, between Africa and Asia and China, it's quite important now for us to find partners here who have real cross border reach," Shamte says.

At present, Six Telecoms routes some of its traffic through Du, and it is also in talks with STC about establishing voice and data connections with the Saudi operator. Shamte lists "reach" and "the ability to execute" as his two main priorities in looking for partners in the Middle East to do business with. "All the markets into East Africa are liberalised. If we have the right partner here (Middle East) they can be the pick-me-up point. And we can be the drop-off point," he says.

Seacom is expected to have a significant effect on the price per megabyte of data compared to satellite, reducing the cost by as much as 15 times which, Shamte says, will open up a whole range of new opportunities which would otherwise be prohibited by the cost of satellite.

Herlihy says that the cost will be 95% less than West Africa's submarine cable Sat-3, and he is confident that the savings will be passed on to consumers. Universities have been targeted by Seacom as potential beneficiaries of the extra capacity, and they will be offered connectivity at cost.

"You also have banks, large multinationals, property developers, China coming in, Japan as well. Africa is open to huge data business, and huge IP transfer businesses, clearing businesses, all of which will diversify our business,".

Herlihy points out that while Africa has never been considered an information based economy, with enough bandwidth, that could change. Outsourcing in particular is a trend that Africa could stand to benefit from, with masses of available and cost effective manpower, ripe for working in service sectors such as call centres.

International connectivity to call centres came under the spotlight at the end of last year when several high profile instances of severed submarine cables showed the degree to which the world relies on a handful of submerged cables. Fishing boats and seismic activity were blamed for the cuts that reduced internet connectivity between Europe and the Middle East. While it is impossible to completely guard against cables being cut, Herlihy says that considerable work has been done to ensure that the cables will not pass through potentially troublesome areas.

While Herlihy is keen to highlight the proposed constancy of Seacom's connection, Shamte thinks stability will help to attract more businesses to East Africa.

"Africa is an emerging market, based on our mineral resources and Africa is the only place where you can have a safe financial investment at the moment," Shamte says.

The long way roundDu's executive vice president international and wholesale, Andrew Grenville, says that commercially it is important to strike a balance between connecting directly and using a point of presence (PoP).

"The London PoP, which we recently opened, is useful for reaching into Africa as a lot of African operators use London as a natural hub for their telecom services, so by having a PoP there we have very ready access to some of the players that it wouldn't make economic sense for us to reach on a bilateral basis.

"We go where our customers dictate we go, so if we have a lot of traffic requirements to South Africa, then we will do direct relationships with the South African operator...however, if you take a smaller African nation where it really doesn't make a lot of economic sense for that operator or us to put capacity to each other and connect, it may be far more cost effective if they have got a pipe going to London to cross connect there," he adds.

"The incremental cost is lower, and we can get the benefits of the relationship. Directs are very important, and we have hundreds and hundreds of direct relationships, but where they are not economically feasible we either do it through partners who can reach operators that we don't have contact with, or maybe the London PoP which enables more of those," Grenville says.

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