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Definitely, reason to celebrate

The recent defeat of South Africa’s Springboks at the Rugby World Cup may have resulted from their players’ desire to return home quickly and snap up some very enticing new pricing plans available for broadband service. Despite the rugby loss, South Africa is poised to become the Southern Hemisphere’s leader in telcoms.

A retail pricing war is underway in South Africa. Vodacom, MTN, incumbent carrier Tellkom, iBurst, and others are dramatically lowering prices while improving consumer choice and service quality.

An example of some of the changes:

…stepping up to the plate is MTN, which has launched an unlimited and uncapped data promotion that gives customers navigating options on MTN’s network at peak HSPA+ speeds from as little as R289 (FJD 70) a month.

And iBurst has also introduced new data packages ranging in price from as low as R49 (FJD 11) per month for 1GB to 50GB at R445 (FJD 105).

New devices such as smartphones and tablets drive consumer demand for data. Serame Taukobong, MTN South Africa’s chief marketing officer, said that with the increase in smartphones and tablet technologies data usage has gone up:

“We have seen a significant number of our customers taking up latest smartphones, tablet PCs, wireless routers and laptop deals that MTN is offering. This promotion is a response to the increased data appetite that comes with the usage of these devices,” he said.

At the same time, the Vodacom Apps Store has reached 100,000 downloads in its first month of operation and the company is now launching a program to support local talent in applications development.

New devices driving consumer demand for data

South Africa has achieved that enviable balance where the pipes are in place, and there are adequate numbers of players at wholesale and retail level to drive widespread adoption. As more consumers buy smartphones and tablets, increased data usage will enable even more volume discounting. Most importantly, there will be a user base in place to support an app development community that will have a local market of millions who are in position to buy their creations.

This thriving ecosystem is something the Pacific Islands can only dream of—as I was reminded by a local telecom CEO who said, “we don’t do applications and services”. You might as well be telling me that you don’t do the future. So much for all the empty rhetoric on ‘innovation’. 

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Several weeks ago, I came across this new Submarine Cable Map from Telegeography Research. It’s a great visualization for understanding how the underpinning physical layer of the Internet actually works. By clicking a cable on the map, you can view when it came into service, locations it connects and the companies that own it. Note that cables appearing in gray are projects expected to come online in the near future.

The map reveals a lack of infrastructure in the Southern Hemisphere while, the East Asian corridor reveals the most number of new cables coming into service.

Around the time I started writing this blog in 2006, S. Hemisphere nations of disparate size such as Fiji, Australia, and South Africa faced the same dilemma: lack of cable infrastructure resulting in very costly wholesale pricing.

Cable projects ready for service in the near future shown in gray

In that time however, Australia and South Africa have pushed forward with several new cable projects. In October 2009, Australia added the Pipe Pacific Cable-1 (Read 2009 CW Post) and has since seen dramatic reduction in Internet costs for users.  South Africa has several cable projects that will be ready for service in the near future. As a result, their consumers are beginning to taste considerably lower prices.

Meanwhile, Fiji and New Zealand, without real competition at the wholesale level lag considerably behind as seen in this table comparing budget plans:

Fiji Australia NZ South Africa
$ FJD/Mo. Data Cap $41/2 GB

(Mobile)

$55/20 GB

(Fixed Line)

$80/5 GB

(Fixed Line)

$11/1 GB

(Mobile)

Sources: Fiji, Australia, New Zealand, South Africa

This is not the best comparison as the pricing for Fiji and South Africa are from mobile service providers, while ANZ pricing is for fixed-line service. Still, it does help to paint the contrasts. South Africa is poised for major competition as one mobile provider now offers an unlimited cap service for FJD 70. 

If there is one variable that has the most effect on retail Internet pricing, it is competition in wholesale.

Barring that, only an effective regulatory intervention can bring about a more competitive outcome. It is no coincidence then that New Zealand and Australia have been at the forefront of movement to enact functional separation of incumbent operators.

Taking a closer look at the South Pacific region reveals some interesting information. If you recall, the SPIN project promised to connect New Caledonia to Tahiti, via the islands in between. It does not appear on the map and its unlikely it ever will. The Governments of Vanuatu and Tonga are investing in cables connecting to Fiji’s Southern Cross Cable connection that should come online in the next two years. Other cables that have come online in the past few years are Gondwana (New Caledonia – Sydney), Honotua (Tahiti – Hawaii) and ASH (American Samoa – Hawaii).  

From New Zealand, there’s news of a major new cable project getting underway. Pacific Fibre, has announced an alliance with Australia’s Pacnet to build a $US400 million undersea cable between Australia, New Zealand and the US. The project might just be an opportunity for those Island nations who do not sign onto the SPIN cable project to land a submarine cable.

Meanwhile, in Fiji there are unconfirmed whispers that Telecom Fiji Limited has signed a memorandum of understanding with SPIN Cable to land the submarine cable in Fiji. I will attempt to get confirmation of this news from the CEO of SPIN.

This is promising news. Competition to the Southern Cross Cable Network is much needed. However, without a muscular regulatory framework, consumers are unlikely to see much by way of cheaper and more innovative services.

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