KDN Pips EASSY To The Post

June 25, 2006

KDN pips EASSY to the post in $115M deal with flag. The cost of bandwidth – around $150 per Mbps per month.

The EASSy saga, which has had more twists and turns than a mountain road, took what may be a final turn. Kenya Data Networks announced that it has secured a separate deal with Flag Telecom to build a spur from off the cost of Yemen to Mombasa.

The deal is believed to be worth US$115 million and the pipe will be built before EASSy was planning to come on stream. And the cost of the bandwidth? An eye-wateringly low figure of around US$150 per mbps per month for Mombasa to London.

Flag is in the process of completing the Falcon system that runs through the Gulf and it will be up-and-running in early 2007. The spur to Mombasa will be completed at the latest by September 2007.

In the deal with Flag, KDN is believed to be putting up a capacity guarantee and will in turn sell capacity to others in the region. The cost of this capacity will be at cost plus operating, maintenance and interest charges. Therefore this effective cost price will be around $150 per mbps per month, a figure that is considerably lower than any of those mentioned verbally by members of the EASSy consortium. Flag will manage the system and be responsible for maintenance.

KDN’s Kai Wulff has a very clear attitude to capacity sales:”We will take the capacity. We will be the guarantor. We will sell to all serious players at the cost price. We want everyone to be able to offer value-added services and infrastructure in the (national) market. We will not mark up capacity and we don’t see why others should do so. We will have a huge chunk of capacity and will keep competition open by capping bandwidth at cost. When it comes to the next upgrade of the pipe, everyone can negotiate their own deal.”

“I don’t want to dominate the market. If the international bandwidth is cheap, I will be so busy with other business that selling capacity will look like a joke. I’ll leave that to the ISPs.”

He hopes that by 2008 that it will be possible to offer a 4 mb DSL line to users at between US$20-22, coming well below the current cheapest continental price being offered by Maroc Telecom.

“We already outsource as many of KDN’s function’s as possible. We do it with satellite. We will do the same with fibre. There are not many serious private fibre operators and this is why we have ended up making the deal with Flag.”

And what of the EASSy consortium? “We will continue to be active in the EASSy consortium but we need to rethink the purpose of EASSy”.

He points out that having built this first link that the balance of the cost of the submarine link will halved:”We need to reach the other countries. They could follow us and speak to Flag and use the same model as we are. You can even bring in the Governments if they want to be involved.”

And are there any political or regulatory obstacles?  ”We have to make an environmental study but I don’t see any problems there. We already have an international gateway licence.”

EASSy may not turn out as some had intended but the discussion of price and access terms may yet deliver an international bandwidth price that will connect a significant chunk of Africa into the global economy.

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