International bandwidth and lower prices

Rudolph Muller

Rudolph Muller is the editor at MyBroadband and covers telecoms and broadband news. Rudolph comes from an academic background, but left the University of...

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When SEACOM landed earlier this year the media heralded the event as the end of South Africa’s broadband woes.  These predications were based on a failure to understand how the local broadband market operates and gave many consumers the false hope that broadband prices would plummet within days or weeks. 

The benefits of lower international bandwidth tariffs are only now starting to filter through to the consumer market with packages advertising more aggressive ADSL bandwidth prices and higher monthly usage limits.  Over the last few weeks many ADSL service providers have dramatically reduced their per-GB pricing with many cutting their prices by over 50%.

The good news is that SEACOM’s arrival is only the first of many new cables.  South Africa is likely to see at least two new cables land in the next two years bringing with them more competition in the international bandwidth arena.   

EASSy, with a design capacity of 1.4 Tbps, is set to land in South Africa in mid-2010.  This submarine cable system will run along the East Coast of Africa and therefore provide redundancy to the SEACOM cable.

WACS, with a design capacity of 5.12 Tbps, has a planned launch date of mid 2011.  This cable system is a collaborative effort between Telkom, Vodacom, MTN, Neotel and the state owned Broadband Infraco, and will bring direct competition to SAT-3 on the West Coast of Africa.

Another West Coast cable system, Main One, with a design capacity of 1.92 Tbps, will also potentially be extended to South Africa.  Telkom has also recently upgrade the SAT-3 cable to 340 Gbps and SAFE to 440 Gbps, effectively tripling the capacity on the SAT-3/SAFE system.

The combination of these cable systems will result in significant international bandwidth price reductions and even create a bottleneck on local terrestrial backhaul capacity.  Vodacom, MTN and Neotel are all addressing terrestrial backhaul constraints by building a national fibre network which will have a launch capacity of 80 Gbps, but which will be easily upgradable to 800 Gbps if the demand increases.

Pricing pressure expected

Telkom CEO Reuben September this week said that international bandwidth prices have already declined by 90% since SAT-3 became operational in 2002, and that the new cable systems will result in further price pressure. 

At the recent MyBroadband Conference Sameer Dave, CTO at MTN SA, said that they expect further international bandwidth price cuts of between 15% and 20%, but SEACOM’s Suveer Ramdhani said that while the cable consortiums may use fairly high prices to sell their business plans to investors, prices may fall far more than expected as a consequence of competition.

September further said that the new cable systems will also ensure superior availability and true redundancy on international connectivity.  The Telkom CEO added that the additional bandwidth will mean that the cost per Gig will decline dramatically, enabling broadband price reductions.

International bandwidth competition – discussion