SEACOM reveals bandwidth utilization

SEACOM has been disappointed with the South African market thus far, but remains optimistic

During the recent MyBroadband conference Suveer Ramdhani from SEACOM described their business strategy by saying: “It’s quite simple – we took 600-million dollars, threw it in the ocean, and said ‘we need this money back in five years.’ Whatever comes after that is profit. We expected higher market share, but it didn’t quite come through that way.”

Ramdhani revealed that of the full SEACOM design capacity of 1.28Tbps, ten wavelengths have been lit, supplying 100Gbps of bandwidth.

A common complaint is that the anticipated price decreases brought about by the arrival of SEACOM have to a large extent not been realised. There have also been complaints that SEACOM bandwidth has been slow to filter through to consumers.

Ramdhani attributes this to the bottleneck issues surrounding national backhaul systems. “The limiting factor is backhaul. There are those on the consumer side that want bandwidth, and there is us on the undersea side that want to give it – we just can’t seem to connect.”

“It’s kind of disappointing. We don’t have direct control over the retail market. I think everyone wanted to let SEACOM prove itself in the market – nobody wanted to make the first move. After a few months we saw [price] reductions in the market.” Ramdhani said that these reductions have generally not come from Tier 1 SEACOM clients, but from those who have bought from their Tier 1 clients.

“The people who are willing to reduce prices in the market don’t necessarily have their own access network. It really comes down to our channels to the market. The big boys that have [direct] access to customers, and have access to the national [backhaul], need to start dropping their prices as well,” he explained.

 “Whilst there is some competition in the national leg, with [Broadband] Infraco and Neotel coming online, there’s a lot of capital being pumped in only [recently], and the price reductions that come with that national backhaul will only [emerge] a few years later,” said Ramdhani.

“The other major point is the access network,” he continued. “Even if you do solve national backhaul bottlenecks, how do you actually get to the consumer in his house or office? Local loop unbundling is still many years away.”

“These issues need to be addressed before consumers really begin to see the benefits of the cable initiatives,” said Ramdhani.

Undersea competition

The operator consortium of Telkom, Vodacom, Broadband Infraco, Neotel and MTN are in the process of implementing their own undersea cable, the West African Cable System (WACS) with a design capacity of over 5Tbps. They made their agreement official on 8 April 2009, just as SEACOM was nearing the Durban coast.

The consortium members will own and have direct access to a large amount of bandwidth over the cable, and hopefully this will spark aggressive pricing competition in the market. Ramdhani discussed the impact this may have on SEACOMs business.

“We are concerned that the operators have chosen to do this. SEACOM being a private open access initiative, it really encourages as many operators [as possible] to purchase from us and access our [points-of-presence].  With operators building their own systems and bringing their own capacity directly to the market, it leaves us with fewer channels to which to market,” said Ramdhani.

Apart from SEACOM and WACS, there is the established undersea cable system SAT-3/SAFE and EASSy – set to arrive in 2010 – which will serve the international bandwidth needs of local companies.

SEACOM bandwidth usage - discussion

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