Why is Internet access still expensive in Africa?
Early 2009, the African continent was heavy with expectation as several fiber optic submarine cables landed on its shores. This it was hoped would avail copious amounts of bandwidth to the continent and reduce its dependency on the existing satellite based connectivity to the Internet.
This development was also accompanied by sweeping changes in the telecoms sector in Africa such as:
- Market liberalization and the end of dependency on the incumbent operator for international connectivity.
- ISPs and NSPs offering ‘smart’ pipes instead of the more traditional ‘dumb’ pipes hence moving up the IT value chain.
- The Rapid increase of the value of broadband connectivity to businesses and individuals in the world. corporates wanted bigger and faster pipes to do business and cut costs while individuals wanted to access the media rich content on the internet such as streaming videos and social networks.
- Deeper penetration of the mobile wireless network into Africa that carried with it mobile data services
The above happenings could not be sustained over the existing satellite bandwidth which was limited in quantity and speed and hence the need to deploy submarine cables.
Industry analysts predicted a massive drop of up to 90% in connectivity costs as consumers migrated to the undersea cables. The Kenyan and South African blogosphere was awash with predictions and expectation of cheaper broadband in these two countries. However, this was not to be as ISPs were slow to adjust prices downwards and gave various reasons as to why they could not do this. some of the reasons are:
- The cost of providing broadband connectivity is made up of many other costs and not entirely on the cost of international backbone connectivity.
- The submarine cable utilization was low and the economies of scale could not come into play to lead to a reduction in pricing.
- They needed to first recoup their investment in the new submarine connectivity systems before the end user can enjoy lower pricing.
- etc etc
What they did instead was to offer more bandwidth for the old price. This ensured that they sustained positive cash flows.
This did not go down well with most consumers who felt cheated by the ISPs. The fact of the matter is that prices did indeed drop by a considerable margin even though this drop wasn’t what was promised or envisaged.
I am however of the opinion that as consumers, we are ignorant of the fact that the ISPs made promises to us based on US and EU pricing models which are totally not applicable in Africa. Whereas a user in the US pays an average of $3.33 per Mbps and a user in Japan pays $0.27 per Mbps, His counterpart in Nigeria will pay $2,400 and in Kenya will pay $700 for the same capacity. The question that arises is why this big difference in pricing?
The answer lies in historical factors of infrastructure development in Africa and the issue of local content.
History of Infrastructure
The years between 1995 and 2001 witnessed an intense investment in ICTs in the United States and Europe characterized by many start-ups and massive capital investment in Internet infrastructure based on speculation of an impending IT explosion. These companies had envisioned a huge market for high speed broadband internet.
In their investment quest, many of these businesses dismissed standard and proven business models, focusing on increasing market share at the expense of the bottom line and a mad rush at acquiring other companies leading to many of them failing spectacularly.
This period before the burst saw the laying of hundreds of thousands of kilometers of fiber optic cables both on land and under sea as companies invested based on pure speculation not on strategic market research information. When the envisaged market failed to materialize, these companies could not get a return on their investments or be profitable and went burst culminating in what is known today as the dotcom bubble burst. Some of the casualties include WorldCom, Tyco, global crossing, Adelphia communications and many more.
When these companies went bankrupt, their massive investment in national and international fiber optic networks lay underutilized and was bought for throw away prices by new investors such Comcast and Sprint. So low were the prices that some cable was bought for 60 US cents per Gbps per kilometer in 2002 compared to the 37 US dollars per Gbps per kilometer the Seacom cable is costing to build in 2009.
Because of the heavy investment in the cables connecting Africa, the operators have no option but offer prices to the consumers that will ensure profitability to the investors because any attempt to emulate their American counterparts will lead to failure to break even or even make a profit.
I believe one of the key differentiating factors between African Internet and the US or EU version is the aspect of local content. By local content i do not mean content such as regional news, websites in local languages and the likes, I mean content hosted locally within the African continents local loop network.
The fact that nearly all Internet content is hosted outside Africa, means that we are fully dependent on international backhaul to access this content. A user in Atlanta Georgia does not need to cross the US shores to get cnn.com because CNN hosts its content in Atlanta (and many other cities in the US) so to him, its a local connection. A user in the UK will traverse few local loops within the UK to access sky.com and will therefore not need international capacity. The same US and UK users will do few hops to access a verio.net hosting server (where nation.co.ke is hosted) The concept of what the ‘Internet’ is in the US or UK is totally different from what it is in Nairobi because a user still has to leave the continent to access nation.co.ke hosted at Verio.net servers. It is therefore more expensive for the African user to access the Internet because he always has to traverse international links that are private commercial ventures.
However, if we work on development of local content by hosting content within the continent of Africa, we can drastically cut the dependence on international capacity. If for example the nation.co.ke website was hosted somewhere in Nairobi, we would not need international fiber capacity to access it. Now take this and apply to majority of the websites we visit (facebook, CNN, soccernet etc) If we had good hosting and cache services locally, only cache updates would need to utilize the international capacity as all African traffic will remain within Africa. A good example is a user in the UK accessing cnn.com (a US website), they do not need to leave the UK because cnn.com is cached in London. The same is not true for the African user.
There is therefore a need for a paradigm shift in the efforts being put to make African broadband Internet cheaper. I believe it does not lie in the laying of more submarine cables from Africa to Europe and US. The solution lies in the provision of reliable data centers within Africa in which content can be hosted cutting down the cost of Internet access drastically.
Just to prove that international capacity is not the solution, the combined internet traffic traversing the trans-Atlantic cables between the US and Europe accounts for less than 30% of the total traffic on these cables with the rest being business data (VPNs etc) and voice traffic. All this is because to the US and EU, the Internet is a local network.
We need to make the Internet local in Africa.