East African Internet cable expected to lower prices | Science| In-depth reporting on science and technology | DW | 01.09.2010
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East African Internet cable expected to lower prices

New submarine cable is bringing high speed Internet access to East Africa. One month after its launch, there is some evidence of prices dropping, analysts say, but that will likely take years to fully take effect.

An Internet cafe in Mombasa, Kenya

Internet cafes like this one in Kenya should see prices drop

One month ago, the Eastern Africa Submarine Cable System, or EASSy, finally came online.

This $250 million (195 million euro), underwater fiber-optic cable now provides a very fast Internet connection between many countries in East Africa and other regional networks that connect on to Europe and the Middle East. It is the second such cable to begin operation since 2009, when the Seacom cable went online.

Many African telecommunications firms, and other agencies including the World Bank and the German Development Bank, contributed funding for the project.

Prior to its deployment, some countries in the region had to rely on expensive satellite connections to get to the wider Internet. Many industry analysts hope that this new cable will bring prices down over time, and expand the quality of service to more people across the region -- and a few such examples are already trickling in.

"One contact of mine [in South Africa said] that his price for usage of the Internet has gone down from 69 rand (7.30 euros) per gigabyte to 19 rand (2.01 euros) per gigabyte in the last month," said Eddie Murphy, a telecom expert with the UK-based Communications Research Network, in an interview with Deutsche Welle.

Too soon to tell impact

But in the four weeks since its launch on July 30, there have not yet been many examples of such significant drops in prices for consumers.

"When you actually introduce new cable it takes time for the price effects to come into play, because the operators are not going to slash their prices immediately," he said. "They're going to do it incrementally as they're forced to by competitive pressure."

Other analysts agreed, saying that it was still too early to tell how fast prices could drop.

"Looking forward, we expect the wholesale prices to drop significantly over the next few years,” said Mark Williams, an economist with the Global ICT Department at the World Bank in South Africa.

"Competition is still at the early stages yet. EASSy was only launched a month ago. If you look at the history of submarine cables around the world, it takes some time, competition builds and prices continually fall."

Rural internet kiosk

East African nations have had to rely on expensive satellite connections to get online

Now, analysts say, the pressure is on for national telecom regulators to ensure that proper de-monopolization and free and fair competition is, in fact, occurring. Otherwise, that could slow down the effects of the data cable, as has been the case on the other side of the continent, in West Africa, with the SAT-3 cable, which came online in 2001. That cable runs from Spain, down the west coast of Africa, to South Africa.

"What was disappointing in the years after commissioning of SAT-3 was that the cost for the people, but the phone companies did not reduce in proportion as expected," said Klaus Gihr of the German Development Bank, "The services that the telephone facilitates and Internet access were better quality, but at the same time the costs were and are still very high."

For example, in the case of Senegal, the incumbent telecom provider, Sonatel, controls all the access to the SAT-3 landing point in the country's capital, Dakar. So any other Internet provider must buy access from Sonatel, thus effectively creating a local monopoly. Furthermore, neighboring landlocked countries like Mali, must buy access from Sonatel, keeping prices artificially high.

But EASSy, analysts say, is different, as it there are inland networks also set up in place, and that there is competition beyond the landing point.

High demand anticipated

European and African business leaders see great economic opportunities ahead – better access to markets, call centers and cheaper communications over the Internet – for companies on both sides of the Mediterranean.

"It can not really fail," said Michael Monnerjahn, a spokesperson with the German-African Business Association.

"What is happening now in Africa, which in Europe is ten, twelve years ago, or happened in America, the Middle East it's happened maybe six, seven or five years. This means that the companies know exactly what to do, they know that Africa is completely underdeveloped in the market, but demand will rise in any case, and that should create really good investments for companies."

Author: Cyrus Farivar and Jutta Wasserrab
Editor: Stuart Tiffen

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