ICTworks by Inveneo

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

Google Africa just announced it has a new website, http://www.google.com/africa/ which finally lists the goals of Google Africa (vs. the goals of Google in general). They are:

Google Sub Saharan Africa (SSA)

The Internet is a powerful source of information. Google's strategy in Africa is to get more users online by developing an accessible, relevant and sustainable internet ecosystem.

• Reducing access as a barrier to all potential users
• Making the Internet relevant and useful to Africans
• Helping strengthen an Internet ecosystem in Africa that is vibrant, and sustainable and self-sufficient in the long-term

Add to it, they hired Ory Okolloh away from Ushahidi to be part of Google Africa, and I'm thinking we could see a whole new focus and activity.

Not that Google Africa's been slacking. We've covered Google Africa for a while now. GTUG are the new LUG's, they're innovating on phones, and promoting ICT to businesses.

I for one hope to see more from Google Africa in 2011.

Here is a very heartening tweet from Ory Okolloh about Safaricom, Kenya's largest mobile phone operator:

If in deed, Safaricom broadband modems and their use are making Safaricom more money than SMS, its a great day for both mobile phone users and Internet business opportunities in Kenya.

Internet Business Opportunity

Obviously, the more people online and consuming data, means there is more opportunity for existing businesses of all kinds to use the Internet to reach new customers and create more revenues.

Yet this is an amazing opportunity for new businesses - new models and new entrepreneurs. The barrier to entry for online businesses is very low and with organizations like iHub, we will see a cornucopia of new businessmen trying out ideas.

Mobile Phone Opportunity

Regardless of the Internet business opportunites, we should rejoice at the news that SMS is no longer the huge cash cow. Maybe now, mobile line operators will realize that Africa's mobile phone future is IP based, not SMS and loosen up on SMS restrictions.

This would release a second wave of innovation - SMS is still a killer app and would be even more revolutionary if prices were low and it had the openness of IP-based software code development.