Use it or lose it
Russell Southwood, CEO of BalancingAct-Africa, recently pointed out that SAT-3 is under utilized. Currently only a small portion of the bandwidth available to Telkom is used, making SAT3 a ‘wasted’ resource.
Some countries, like Mauritius, improved on their under-utilization of the submarine cable system by imposing strict cost guidelines on the incumbent telecoms operator who controls the sale of bandwidth on the cable system.
With high prices Mauritius only used around 12 % of their allotted capacity. When stricter pricing policies were enforced to lower prices the usage shot up to over 80%, making Mauritius a relatively international bandwidth rich environment.
But with profit being the primary objective for a telecoms company like Telkom, why should it be considered such a problem if capacity on the cable is not utilized?
Apart from the obvious concern of creating an international bandwidth starved environment, these submarine cable systems have a limited life span.
Cable systems like SAT3 and SAFE have a design life-span of around 25 years, which means that if it is not used during this period, it is simply wasted. “Use it or lose it”, as Russell said, becomes a very appropriate phrase in the SAT3 debate.
Telkom hurting the local telecoms environment
Ajay Pandey, Neotel’s MD, recently pointed out that the discrepancy between Telkom’s access charges and that of other players like BT on SAT3 is to blame for South Africa’s high bandwidth costs.
Pandey is quoted by ITWeb as saying “The leg from SA to London is priced at a certain level and that is an agreement Telkom has because of its exclusivity rights. However, if the London to SA circuit is priced at ‘x’, then Telkom charges five times that for the half circuit from SA to London”.
VSNL currently owns 33% of SAT3, a higher percentage than Telkom’s share in the cable. This means that bandwidth on SAT3 should be reasonably priced for Neotel, but because of Telkom’s exclusivity rights on SAT3 bandwidth out of the country this saving from Neotel will only come into effect for bandwidth into the country.
Hope on the horizon
There is however hope. Telkom’s 5 year exclusivity agreement comes to an end in April 2007, after which Neotel may be able to get equal access to SAT3.
Another change which could open the international bandwidth market is to allow for co-location. Southwood encouraged co-location on the SAT3 landing site, enabling SAT3 shareholders like Verizon, British Telecom and VSNL to sell bandwidth directly to the local market.
This competition will help to drop prices and create a far more bandwidth rich local environment.
The EASSy Submarine Cable will bring further competition to the international bandwidth arena. It is expected to be operational in 2008, but this is partly dependant on all participating nations signing the current agreement.
In a recent interview Eric Osiakwan, executive secretary of the African Internet Service Providers Association, told ITWeb that he expects EASSy to reduce prices by 85%.
With all these possible changes to Telkom’s exclusivity on the SAT3 cable in the pipeline it is inevitable that the local broadband environment will change, but the big question is how long will this all take.
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