Bandwidth costs must come down

By Paul Vecchiatto for Gartner
Johannesburg, 12 Sep 2007

International ICT research firms Gartner and Frost & Sullivan say the most important result for SA from the undersea cable issue is that the population benefits from lower bandwidth costs.

However, both firms also point out that consistency of policy is important for investment in the telecommunications sector.

They were commenting on communications minister Ivy Matsepe-Casaburri's recent speech. She said any undersea cable landing in this country would have to be majority-owned by South African companies and that the cable should conform to the Nepad principles.

Gartner analyst Will Hahn says: "It's interesting that the minister would like SA's submarine cables to agree to link up with Nepad - this is an indication to me of a shift in emphasis in the policy-making of the authorities, as the stated goal of this project is to allow open access to smaller players.

"The ministry has clearly frowned on old-style consortia agreements, when Telkom's agreement got the now-former CEO in hot water. This trend is very encouraging for those who hope for SA's advancement, through increasing liberalisation of its telecoms market."

Lindsey MacDonald, Frost & Sullivan ICT analyst, says the most important result of the undersea cables for SA is that the country's population benefits from lower bandwidth costs. Therefore, government's main priority is to ensure this end-result.

Finding the balance

"A balance has to be achieved between attracting foreign investment and ensuring the development of South African companies. It is important that majority ownership guidelines are not unattractive to foreign participation in the cables landing.

"One of the main goals of Nepad is to ensure the continent's development through African co-operation; these guidelines should uphold this objective," MacDonald says.

Hahn has not heard of any major security issue surrounding cable ownership in the last decade since he started to track the issue, but governments have on occasion intervened to pressure players over local ownership or related issues.

Ownership tussle

The US Senate threatened to veto an Asian consortium planning to buy some of Global Crossing's assets, because one of the partners was based in mainland China.

Hahn says it wasn't a "local" ownership issue, but it was construed as a concern about foreign ownership, by a power not sufficiently friendly to US interests for the taste of the Senate on that day.

"If South African authorities make similar demands of the cable franchises trying to land here, I assume the same will happen, namely, the players will reshuffle their ownership papers to conform to the government's demands and then proceed with the cable as before. This certainly appears to be the case with Seacom, which has promptly announced its compliance with the government's terms as it understood them on more than one occasion," Hahn says.

Overcoming obstacles

The worst case scenario could be that one of the projects could be relegated to landing elsewhere in Africa, still covering its route, but requiring South African providers to interconnect to another nation before being able to access the new capacity, Hahn says.

This would not be optimal for any of the concerned parties, he adds. But the government would be mistaken to assume that it could completely stop a cable project merely on the basis of its own landing rights.

"Thus, I expect the benefits of increased bandwidth and lower prices will still come to the nation, once these needed hurdles have been cleared," Hahn says.