Wanted: cheap bandwidth

By Segun Oruame
For over 130 million people that make up Nigeria and the over 220 million that make up the West African sub-region, costly bandwidth continues to make the Internet an inaccessible window. 

A proposal to build six IT Resource centres with Internet access in Nigeria by a Paris based not-for-profit (NFP) organisation working through the French embassy in Nigeria appeared splendid on paper. But when the officials of the French embassy and the NFP organisation met with some top government representatives last September to work out ways of implementing the project, the whole plan collapsed because of one factor: Bandwidth.

Virtually all of Nigeria’s Internet traffic, as is most of the continent, depends on satellite connections, which are several times more costly than the fibre-optic links between the US and Europe up to Asia.

Under the scheme, the French NFP organisation would build the centre, pay for bandwidth access for one year after which the local community and a local non-government organisation (NGO) would run the centre. Government officials bulked. It was not certain that a Nigerian NGO, perpetually faced with the challenges of sourcing funds and a local community still grappling with subsistence economy would be able to pay for the bandwidth after subscription ends for a year.

As all players in Africa’s fast changing IT sector know, bandwidth is scarce and expensive despite the presence of marine fibre optic cable facilities such as the Sat-2/3 WASC, and SEA-ME-WE1/2, and an increased activity of bandwidth retailers offering satellite-based alternatives. Dedicated bandwidth price in Nigeria hovers around $4800/Kbps (about N6.1m) for a month while in Ghana a month for a 1MB shared connection goes for no less than $8,000 or about 10 times what it retails for in the United States. No operator buys bandwidth in local currencies; international bandwidth is sold in hard currency effectively depleting the foreign reserve of the continent to about $500 million (about N70 billion) a year, more than the annual national fiscal budgets of half of the continent’s countries.

More than two years ago, the expected take-off of SAT-3 and execution of pan-African satellite projects such as RASCOM and African One heighten prospects for a likely bandwidth glut on the continent as supply of international bandwidth was predicted to increase in folds and outstrip demand. In fact, London based Pyramid Research group predicted a tenfold increase in Africa’s international Internet bandwidth spread over the next five years from 2002. Demand for data services, an explosion in North African traffic and the deployment of at least one submarine cable system along Africa’s coasts would mostly drive this. The forecast for markets such as Algeria and Nigeria was even higher as international backbone traffic was expected to double the African average with liberalisation of the telecom sector in Nigeria helping to boost voice and data services.

But not much of that has happened. A mix of factors has stalled both the RASCOM and Africa One initiatives. The use of fibre optic cable for international traffic has remained still in its infancy in Africa with nearly 87% of international telecom connections relying on satellites as rightly noted by one report by the International Telecommunications Union (ITU). There are currently five submarine cables providing international fibre connectivity to Africa. These cables are SAT 2 & 3 and SEA-ME-WE1/2 that connect most of the North African and West African coastal countries from South Africa to Morocco, and then to the global backbones in Europe. Satellite providers, primarily Intelsat, New Skies and Panamsat, provide all remaining international bandwidth.

Statistics by the ITU indicates as at 2000, the total number of 64Kbps international circuits in Africa was close to 59, 000 in 2000 or four per cent of the world total. Because satellite access for bandwidth is exorbitant, Internet penetration has been slowed down, though there has been remarkable increase in the number of users and licensed ISPs in both Nigeria and Ghana. In 2001, there was more international IP bandwidth (1.3Gbit/s) available to the 450 000 citizens of Luxembourg than the 820 million citizens of the African continent (1.2Gbit/s).

That record no longer suffices but that is not to say that the continent has been able to address the problem of low uptake of International bandwidth.  As a recent report indicates, Africa is not only a continent of some of the world's poorest countries; it has also the world's highest costs for international calls and bandwidth. It is far more expensive for African ISPs to operate than their developed world counterparts and as the experience of BusyInternet in Ghana would show, owing to high cost of bandwidth, “no cybercafes have the kind of high-speed connections that are found in almost all American businesses. Indeed, African cybercafes can't even match the speeds available to the typical home user in the US.”

Not only cybercafes get depressed with low availability of bandwidth. The fast growth of mobile telephony has been replicated in other sectors even if not with the same speed. Most banks have integrated IT into their banking processes enabling them to do online banking and connect several of their disperse or remote branches. There is more hunger for bandwidth as banks open and maintain transaction links with other banks abroad. In the last few months, web hosting has become extremely popular with an unprecedented increase in the number of individuals and corporate entities seeking to have web identity and host their websites.

Perhaps, it is the schools that are losing so much. An Internet culture has failed to evolve in most university campuses even when authorities have succeeded in acquiring large number of computer systems to facilitate computer usage. The systems are not connected to the Internet because the schools cannot afford to pay for a large pipe that would enable them conduct online activities. Most universities still cannot tap from vast opportunities that exist online to gather research materials or have access to digital libraries because they cannot afford to pay the annual subscriptions for bandwidth.

SAT-3 is in operation but much of its resources are not being harnessed owing to the attitude of the incumbent operators to limit raw access of emerging competitors to SAT-3. There is a raging debate in Nigeria over whether Internet Service Providers (ISPs) and an army of pre-paid calling card operators could be granted unfettered access to the marine cable. Ghana telecom is not disposed to allowing unrestricted way-in to its own marine access. Nitel has ruled against such likelihood arguing that such operators are not licensed to have international gateway access. The battle over the management of SAT-3 with the second national operator (SNO) Globacom recently ended in Globacom’s favour.

But a bigger problem for the public telco is its inability to provide efficient fibre optic links across country and open access to a market that would without doubt swoop on bandwidth delivered through such a large pipe. SAT-3 has capacity for up to 1.2 Gb. An initial plan to build a national fibre optic ring by Nitel’s contract management team, the Dutch Pentascope, has not been able to fly. Globacom appears to have stolen the initiative and is aggressively deploying fibre cables to link up the country; until that is completed, the cost of connecting to the Internet at a productive data transfer speed remains exorbitant.

The absence of terrestrial link means that consumption of international bandwidth will remain pricey. With these limited options for gaining Internet bandwidth access, many providers spend almost three-quarters of their profits to buy bandwidth, Alloy Chife said. Overall, he said, African countries pay about $500 million per year simply to hook up to the Internet.  Once there is terrestrial network in place, it reduces the dependence on satellite and that makes it cheap. Globacom is putting a terrestrial network in place to connect everyone and hook to SAT-3. “ We have no say on this, everyone connects to Europe via satellite and buy bandwidth at whatever price is quote,” said Chife. In countries like Nigeria and neighbouring Benin and Togo, absence of Internet Exchange (IX) makes it unavoidable to carry even intra-country traffic first to some remote hubs in the US or Europe. That creates an unnecessary and wasteful use of international bandwidth.

A couple of African countries are already using their SAT-3 link for Internet connectivity but there are huge disparities in the pricing of access to the fibre that tends to limit the potentials of the resource.  An E1 costs $50,000 a month in Nigeria, Ghana and Benin but $225,000 in neighbouring Cameroon and far away Angola. It is $300,000 in South Africa with a more matured International bandwidth market.  So this disparity does not necessarily translate to improve or save-costing access in countries such as Nigeria and Ghana.

For in stance, Michael Blair of GS Telecom told news media earlier this year that his “corporate networks have connected Accra to Takoradi, Tema and Kumasi in Ghana and customers in North Mozambique send by satellite to Maputo and then go by fibre into South Africa. It is achieving a 750 second latency on data from North Ghana that travels up to London and back to Accra. But dealing with monopoly incumbent providers on SAT-3 fibre is a problem: “Nitel restricts the use of SAT3. It won’t give us another E1 unless we use their facilities and who would want to do that?”

Because the undue restriction of some incumbents is putting off gateway operators such as GS Telecom and Virgin, VSAT

 service providers still maintain a control of the market for international bandwidth. “VSAT operators are maximising their cash haul in Africa right now,” said Sunday Folayan, managing director of Ibadan (Nigeria) based SKANNET. Sunday, who is also the secretary of ISPs Association of Nigeria (ISPAN), believes VSAT operators are making a kill on the continent and dictating, much like a cartel, the price at which they would ‘hawk’ bandwidth to ISPs.

With these limited options for gaining International bandwidth access, ISPs spend almost three-quarters of their profits to buy bandwidth, Alloy Chife of ….told IT Edge from his Lagos office. In his estimated, over $500 million is paid yearly by African countries to hook up to the Internet. “Once there is terrestrial network in place, it reduces the dependence on satellite and that makes it cheap. Globacom is putting a terrestrial network in place to connect everyone and hook to SAT-3.  We have no say on this, everyone connects to Europe via satellite and buy bandwidth at whatever price is quote,” Chife said in one report early this year.

If Nitel were well managed, said Lai Omotola, chairman of Cybercafe Association of Nigeria,  “It would have the capacity to pull nothing less than 72MB down to Nigeria. Nitel has the capacity to buy a transponder, and not only one transponder but also two or three, which no company in Nigeria has the money to buy. So if Nitel buys the transponder and builds the hub in Nigeria because they are buying international bandwidth in wholesale, it is cheap and when they are going to retail it, it also becomes very cheap and because Nitel is Nigerian, you pay for the bandwidth in local currency. What operates now is that other companies probably in US or Israel buy the bandwidth in wholesale and because they are not in Nigeria, we have to communicate with them via VSAT. If Nitel buys the bandwidth in wholesale because it is in Nigeria, then Nitel can communicate through phone lines, through SAT-3 and through radio so it will be cheaper for cybercafes and for individuals.” It would take nearly N200 million to set up a domestic hub that could retail bandwidth locally to operators, said Omotola. He was convinced only Nitel could afford to invest such huge amount of money.

Everybody is bypassing Nitel to access international bandwidth using VSATs complained Omotola adding “in advanced countries, only the big companies use VSATs and not cybercafes that need just a cable to connect to the Internet. Naturally, this is the role NITEL suppose to play.”

Getting the fund for the required heavy investment in VSAT by ISPs and cybercafes is a big challenge in the absence of options for information connectivity, observed Omotola. Because the continent is shackled by huge cost of bandwidth, countries like Nigeria with a thriving telecom market have only been able to explore not more than 10% per cent of the existing potentials in IT. Although, some operators are touting advanced services such as ISDN and video conferencing, their availability in a market with plenty of hypes cannot be completely accepted without some doubts.  There is a substantial grey-market use of Voice over Internet (VoIP) services in Africa wherever international bandwidth allows; these services are cheap compare to those from the plain old telephone system (POTS) but service quality could be higher and price lower should interconnectivity options exists on terrestrial cables.

“These services eat bandwidth and would depend more on fibre,” said Executive Vice Chairman of Lagos based 21^st Century Limited, Wale Ajisebutu. The privately owned telco is building a fibre optic ring in Lagos to avail its subscribers of new suites of service that include video-on-demand, videoconferencing, telemedicine and the likes. 21^st Century is not in this alone. There are other PTOs including Victoria Garden Communications Company (VGCC) selling similar services in Lagos and Ghana Telecom in Ghana.  But how far they can go once their services extend beyond the country’s borders depends on how much the cost of bandwidth eventually comes down to or how fast companies like Globacom (Nigeria) and Westel (Ghana) moves to build a fibre ring that has potential to carry connectivity backbone than mobile phones.

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