Submarine cables untangled

[rpm]

Submarine cables untangled

The issue of international bandwidth has dogged South African Internet users since the first dial-up access became available commercially roughly 15 years ago. The intrigue associated with the moves either to deploy submarine cables or block their deployment provides almost endless material for debate.

An excellent article by Geoff Rehmet about the undersea cable systems and pricing - well worth a read.

 

[Tns]

telkom will not drive prices down but rather up, they do not care about making friends nor enemies, they are here to make money.

 

[.Froot.]

Telkom's always been here to make money. But think of Telkom as M$ and someone else as Linux.... you know how that story goes....

 

[HaltAndCatchFire]

Any company is "here to make money", it is a basic goal of any business maximise profit. So in a free market system this means to offer the best deal and get the most customers, but as we all know there still is no real competition for Telkom, NeoWhat? Well ok they are doing there bit, but I will not be surprised if one of the mobile operators becomes the next big thing in broadband, vodacom and Mtn are working hard on their infrastructure and the Vodacom-Telkom relationship bubble is soon to burst.

The penetration rate of broadband in SA is starting to grow, and competition is hotting up, but most of the access is still provided by Telkom, that is why you always see sort of the same offering in terms of cost per gig, a couple of ISP's are operating at a loss to "grab" more clients, by offering cheaper rates, but this is a short term solution. The only way we will see prices being forced down is when the sub-cables are opened up for all to use, in other words invest a sum into access and self provide all access to clients, this will also mean that the local loop unbundling should happen sooner rather than later otherwise telkom will just dominate there, by transferring costs to access last mile services.

But the major problem at this stage is the cost of bandwidth and hopefully all the new cable developments will push down costs.

 

[LancelotSA]

Telkom's always been here to make money. But think of Telkom as M$ and someone else as Linux.... you know how that story goes....

Yes, the story goes that everyone except those in the know still use Microsoft as this is what ships with their system, what they know or what their company insists they use and support... so Bill still gets richer.

 

[.Froot.]

Yes, the story goes that everyone except those in the know still use Microsoft as this is what ships with their system, what they know or what their company insists they use and support... so Bill still gets richer.

You also know how that one goes. Linus Torvaldus and Billy Gates duel and then Linus pops Billy with a bullet of the root. Then M$ dies.

 

[rpm]

I think the SEACOM model is far better - the shareholders are not telecoms players, so they just want to sell capacity to whoever wants it (the more they sell the better for them). No wonder their prices are so much lower...

 

[TheRoDent]

Slight flaw in the article. Telkom didn't exactly pay for the SAT3 cable did they ?

Wasn't it us muffins that paid for it with our tax monies?

 

[aborg]

I agree with rpm, I think this model will be the most successful one.

 

[tjunyat]

My thoughts are that despite Telkom being able to afford to drop their pricing as the cable is paid off (by the people's tax money, not Telkom) they just aren't interested in dropping it. They'll be forced to at some point, but they'll wait until the last possible moment.
Personally I believe when any other technology becomes available that supplies a decent service, people should leave/boycot Telkom on principle.

 

[geoffr]

I think the SEACOM model is far better - the shareholders are not telecoms players, so they just want to sell capacity to whoever wants it (the more they sell the better for them). No wonder their prices are so much lower...

You need to keep in mind however that players like Seacom are in it for one reason alone - profit.
Because of the limited competition in the SA environment, the opportunities for profit are higher than, for instance, in the North Atlantic. Seacom are trading that profit opportunity against the risk of doing business in Africa. If you play those risk-reward trade-offs well, the resulting gain can be phenomenal. The examples of the likes of MTN are cases in point.

The Seacom backers have a background in resources and energy. Submarine cables fit those kinds of business models as well. So they are well-placed to understand whether an opportunity like this is profitable or not.

You can therefor expect that even Seacom's margins will be very high by international standards.

 

[Just_Ice]

You can therefor expect that even Seacom's margins will be very high by international standards.

AGreed, but there prices will be far lower than telkoms though! There is no reason for them to offer rick bottom prices because they dont have competition (for now) so why should they? But we shouldnt complain because when another string of fiber eventually lands prices of both will be lower

 

[geoffr]

My thoughts are that despite Telkom being able to afford to drop their pricing as the cable is paid off (by the people's tax money, not Telkom) they just aren't interested in dropping it. They'll be forced to at some point, but they'll wait until the last possible moment.
Personally I believe when any other technology becomes available that supplies a decent service, people should leave/boycot Telkom on principle.

History, which tends to repeat itself, shows that incumbent monopolists tend to maintain market dominance. Just look at BT, Telstra and Deutsche Telekom as examples. Many customers just stay with the incumbents through inertia, or lack of knowledge, even though the incumbents offer inferior value to the competitors. For instance, in Australia just look at the number of people who use Telstra Bigpond, despite the fact that they are often the most expensive or offer the worst value!