According to experts, subsea cable operators have already been driven to light up more capacity in order to bring down cost-per-unit.
Since the landing of SEACOM in 2009, there has been a decrease in the wholesale price for international capacity in Africa of more than 90%. The subsequent launch of EASSy in 2010, followed by the commercial launch of WACS in May 2012, is said to have driven a further decrease in prices of approximately 40% (see chart for pricing example).
“There is still no degree of confidence in how the markets are going to behave. This is why smarter operators prefer to buy on a short-term period of six months to a year,” said Dobek Pater, director and analyst, Africa Analysis.
Pater expects the market to stabilise by 2015, with single-digit decreases year-on-year thereafter. However, uncertainty remains concerning the impact of further cable build-outs by players such as ACE.
According to TeleGeography Senior Analyst Paul Brodsky, the need to broaden service portfolios has seen submarine cable operators work more closely with terrestrial players to better exploit assets by offering IP services, hosting and enterprise services.
“The fact the private cable operators have moved up the value chain tells you that a pure wholesale play only gets you so far,” Brodsky suggested. “If you are in the business only to sell circuits, then you are already missing out on some other important opportunities.”
Increased capacity is also enabling more companies to employ ICT solutions to generate efficiencies within their business. Deployment of 3G, smartphone proliferation and data usage are also contributing to market growth.
In addition, more operators are introducing Fibre-to-the-Home (FTTH) from the outset, which in turn drives demand, as consumers and businesses buy more services.
Increased activity in the oil and gas industry in markets such as Nigeria, Kenya, Sudan, and Uganda has sparked further build-outs of communications infrastructure, as has the discovery of major gas reserves off the coast of Mozambique. Meanwhile, demand has continued in Africa’s more traditional verticals, such as mining – most notably in Botswana, Democratic Republic of Congo, Namibia, and Zambia.
"Another good thing about the arrival of all this submarine cable capacity is that there is a big reduction in latency if you are not using satellite,” said James Walker, VP for managed network services at Tata Communications. “The subtle side of this is that it brings markets into an area where they can interact more efficiently with the global network. The whole proposition of existing within that market becomes more attractive financially, the returns look better and it attracts more foreign investment. So a virtuous circle gets created.”
As markets have flourished, Tata has been able to build out its enterprise-facing networks by taking capacity from partners and overlaying services either with international offerings, or cloud and security services, mobile signalling and telepresence rooms. Tata is deploying the latter in hotels.
“We are working with Safaricom in Uganda and Nairobi, and with MTN in Lagos, Port Harcourt and Abuja. It is really expensive to buy one of these rooms, so this initiative allows people to connect back to offices or HQ locations without the expense of having to deploy a telepresence room themselves,” said Walker.
According to Mike van den Bergh, CMO of PCCW Global, one of the most important elements many carriers ignore is the need to continually invest in new services that both add value and improve margins on the raw capacity delivered. Although unable to divulge the company’s investment plans, van den Bergh hinted that a new venture launched this year in Hong Kong aimed at delivering quad play services is attracting a great deal of interest amongst many African operators – both on the fixed and mobile side.
“The need to keep reinventing oneself – and to keep enhancing the services we deliver – is vitally important. This is why we have recently introduced services such as switched high-definition video conferencing. We use it ourselves and therefore appreciate the value it brings to geographically dispersed organisations. Its success of course relies on the availability of cost-effective and reliable bandwidth, but that is exactly what is now available to users in Africa, hence the next generation of value-added services coming through,” he said.
