Fibre prices: South Africa versus Africa

Contrary to popular belief, there is plenty of fibre laying fallow in Africa, and the right commercial models could make it viable to use this fibre to deploy better broadband services to people throughout the continent. This is the view of Suveer Ramdhani, Head of Product Strategy for Seacom.

Ramdhani says that African governments and incumbent operators have funded massive fibre infrastructure rollouts over the years.

However, many of these projects are commercially unviable because the correct pricing and business models are not in place to entice carriers to use this infrastructure.

“Governments, National Broadband initiatives and incumbents could make this infrastructure profitable and productive by adopting global best practices around selling the capacity to operators and service providers,” Ramdhani said.

He argues that this would result in better and cheaper broadband services, where private operators have little access to affordable metro and long-distance fibre.

“In many countries, we have seen private operators roll out their own networks in parallel to government-funded infrastructure because the commercial model offered by government just doesn’t make sense,” he said.

“Taxpayers’ money is spent on underused infrastructure that private operators duplicate at great cost, a situation that keeps broadband prices higher than they need to be.”

According to Ramdhani, there are a number of commercial business models used in Europe, the Americas and Asia that could help to unleash more fibre capacity in Africa and help bring broadband prices down in the process.

Suveer Ramdhani SEACOM
Suveer Ramdhani SEACOM

One key lies in making dark fibre available – a case in point would be the disruption that South African company, Dark Fibre Africa, has brought to certain national routes in South Africa, where the availability of dark fibre made pricing along those routes a lot more competitive and has encouraged capacity uptake.

Similarly, considerable progress has been made by UETL in Uganda, and NOFBI and KPLC in Kenya, just to name a few. By laying down, and making dark fibre available, infrastructure providers can create scalable infrastructure which is both future-proof and low in operational cost, Ramdhani said.

With dark fibre, operators can light up capacity as their requirements evolve.

“State-owned enterpises must note that it is easier to be a company that provides dark fibre than one who tries to provide a suite of fully-managed capacity services reliably,” said Ramdhani.

“Operating the monitoring systems and maintenance organisations needed to deliver certain levels of uptime to carriers can be complex and costly, and private companies will always win the battle for skills,” he added.

Another key to tapping the potential of Africa’s fibre lies in changing the approach from leasing infrastructure to providing Indefeasible Right of Use (IRU) contracts to creditworthy carriers.

This approach can relieve taxpayers of some the funding burden, since an IRU typically ensures upfront payments but also ensures that the customer contributes to operating and maintenance costs in exchange for rights to use the capacity for the life of the fibre.

These upfront payments can be used to fund expansion rather than solely relying on tax coffers.

Distance-based pricing can also help make much of Africa’s fibre more viable, Ramdhani said.

Terrestrial pricing does not work the same as submarine pricing, and equal PoP to PoP pricing has resulted in higher pricing for short routes such as in metropolitan areas.

Ironically, it is cheaper to build short routes which tend to carry more traffic. This dichotomy has resulted in operators replicating public infrastructure.

Below is an extract of information comparing dark fibre pricing across three key markets, which shows that South Africa has a long way to go to catch up.

Country Supplier Type Infrastructure Type Pricing Monthly
Kenya Electricity Company Overhead Dark Fibre $40/pair/km/month
Kenya Government Network Underground Dark Fibre $50/pair/km/month
Kenya Private Provider Underground Dark Fibre $60/pair/km/month
Uganda Electricity Network Overhead Dark Fibre $100/pair/km/month
Uganda Government Network Underground Dark Fibre $90/pair/km/month
South Africa Private Provider Underground Dark Fibre – Rural $100/pair/km/month
South Africa Private Provider Underground Dark Fibre – Metro $400/pair/km/month
South Africa Electricity Provider Overhead Dark Fibre Not Available
South Africa Government Network Dark Fibre Not Available

“In many countries in southern and east Africa, an abundance of fibre is available, but it is frustratingly underused,” said Ramdhani.

“However, we hope to see a larger number of national carriers and governments take more flexible approaches to commercial arrangements and pricing models that will drive greater efficiencies in fibre usage. This will be critical to improving broadband penetration and pricing in Africa.”

More on fibre in South Africa

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Fibre prices: South Africa versus Africa