Recently, Ory Okolloh (aka @kenyanpundit) asked a pertinent question on Twitter, that I would paraphrase as: “Tanzanians – what are your thoughts on why Internet access prices are not dropping and bandwidth speed is still slow, even after undersea fiber cables landed at Dar es Salaam, as compared with other countries, especially Kenya?”
I happened to see this tweet while meeting with a major Tanzanian ISP and posed the question to them. Their answer is enlightening for everyone in the ICT space. Essentially, its a failure in regulation and transparency with the national fiber optic backbone infrastructure.
Tanzania fiber cable history
Back when SEACOM and EASSy were in the planning stages, the Tanzanian government entered into an agreement with the Chinese government to build a National Information Communication and Technology Broadband Backbone (NICTBB) to transport that bandwidth nationwide. The national network was designed and installed by Huawei and connects most of the major population centers to the landing points at Dar es Salaam. So far so good.
Pricing at SEACOM landing point
Trouble began when the government gave Tanzania Telecommunications Company TTCL, the incumbent national telecommunications operator the monopoly rights to manage the backbone, as evidenced by bandwidth pricing. SEACOM will sell 1 Megabyte per second (Mbs) of bandwidth at $230 USD per month at its landing point in Dar. If an Internet Service Provider wants to use another bandwidth provider, they can get it for as low as $175 for 1 Mbs per month at the SEACOM landing point.
Companies that connect their network infrastructure at the SEACOM landing point have dropped prices and increased bandwidth speeds. Mobile phone companies now offer great plans like Airtel’s 3GB of mobile data for $10 and the Holiday Inn Dar es Salaam has the fastest hotel bandwidth in Africa.
Transmission is the issue
ISPs operating outside of Dar es Salaam still have a transmission problem – how to get bandwidth to the paying customer? TTCL charges a flat $180,000 per year to transport Internet bandwidth across the country. In addition, to connect to the backbone requires custom Huawei routers because of the way Huawei built the network. These specialized routers cost $18,000 and take 6 months to manufacture. By comparison, a similar Cisco router for standard network architecture is $8,000 and in stock across Dar.
If ISPs want to buy the bandwidth from TTCL rather than transmitting it on their own, its $700 for 1Mbs per month in Dar and $900 per month in Arusha. If you think TTCL’s $470 per Mbs per month mark up extreme, it gets better. TTCL has a 20-year agreement with SEACOM for bandwidth that averages out to less than $65 Mbs per month.
Regulation is the problem
The excessive markups by TTLC should not come as a surprise to anyone in the African telecom industry. Incumbent telcos have been using their monopoly position for rent seeking for years now. What is surprising is that this is happening in Tanzania. The mobile operator marketplace is open and very competitive – there are several private operators fighting for market share. In other industries, government-run companies were privatized and markets liberalized, unleashing a privitization economic boom that the country is still enjoying.
Yet with TTCL, the Tanzanian government has given one company a monopoly power, which that company is using to monopolize the bandwidth transmission market, keeping Tanzanian citizens from enjoying the African bandwidth bonanza.
Update: Be sure to also read the Tanzania Domestic Broadband Internet Infrastructure Policy Analysis post by Jenny Stefanotti