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
This is simply wrong. Blaming TTCL for prices of internet is wrong. TTCL has less than 1% market share of subscribers. Mobile operators who control 99% of the telecommunications business do not depend on TTCL to deliver their services! why should they?
The price cap for transmitting the bandwidth to customers who are not in Dar does not choose who to pay. TTCL pay this price as well to get access to NICTBB resources. Why then should you expect TTCL to charge less than what the mobile operators are charging?
If what you say on the 5th paragraph is right, why then complain of high price? Why don’t all subscribers buy that cheap plan from airtel and we forget the high price?
Your article is misleading than informing
Okollo,
This article is completely a lie and based on assumptions, i urge writters of this nature to think before they write. I totally disagree with the point that Kenya is better than Tanzania in terms of bandwidth affordability. Now, here are the facts:
Who Designed the NICTBB is the Government and not Huawei nor any other contractor. further, though Huawei equipment are used, it is not mandatory that Operators should the same type of equipment…there is even no routers in the NICTBB as pointed out!!! You also cannot copmare Cisco and Huawei when it comes to backbones, note that Huawei now leads the world in providing backbone equipment.. I’m supprised that you only know about routers….there are other equipment which are more powerful than the the routers you are talking about.
on the issue of price drop, don’t you see that US$ 180,000/mo/STM-1 distance independent is a cheaper model than you can find in the whole EAC region??? Do you remeber that in 2009 an E1 was sold US$ 20,000/mo from Dar to say Kigoma? a distance of 1200KM?
Now, with US$ 180,000/63E1, don’t you recognize that an E1(2mbps) is now US$ 238 only ???.
Please write when you do have the correct info and not try to mislead at a cost of your ignorance.
I don’t have the technical expertise to challenge everything the two previous commenters said, but some of their points are clearly wrong and/or don’t make any sense at all. Let me make a list:
For the first commenter (Anonymous)
– TTCL surely has far more than 1% of internet subscribers in Tanzania.
– Mobile operators DO depend on TTCL to deliver services in some areas, particularly up country.
– Airtel’s low prices are only meaningful where there is decent connection speed. Even in Dar, speeds are too slow to make use of 3GB within 7 days.
For the second commenter (also Anonymous)
– the writer of the blogpost is not Okollo, it is Wayan Vota
– the NICTBB was not designed by the government, but by Huawei
I also note that neither of these comments challenged the main point of the original post – that TTCL has a government-mandated monopoly on the NICTBB and is abusing that power to create/maintain a monopoly on the up-country ISP business.
Mtega,
I said earlier in my first comment. Assumption is never informing the truth. How do you believe that the designer of the backbone is Huawei? is it because you believe there are no competent people in TZ? and what leads you to believe that there is monopoly by TTCL? TTCL pays the same rates as other operators do, I can’t figure out if monopoly exists in an open access policy agreed by all Operators “Principals of Managing the NICTBB”.
In fact, the NICTBB has been built quicker than any operator expected and therefore business models are yet to be modified to suite the current situation. It’s amazing to see an Operator (ISPs) complaining on rates, the same who were able to pay US$20,000/mo for an E1 but can’t afford to pay US$ 15,000.00/mo for 63E1s!!! Again, the NICTBB is designed to be a wholesale and not retail, should the NICTBB attempt a retail model(Selling E1 granualities) we have to expect most of ISPs out of business.
I would’nt argue why the Cabinet decided long time ago (2005) that the NICTBB shall be managed/operated by TTCL but technically I may ask.. Which firm in Tanzania has the experience of managing such networks with regional/district presence? It is very easy to manage a mobile network than a cable network as it requires phisical presence to avoid long downtimes in case of emergence cable cuts.
I would be interested to hear a good model from developed countries (but this could be in 1980’s) when this nature of infrastructure (government owned) were being constructed. many appeal for an agency to manage the NICTBB, but … does the agency get itself isolated from the Government? why are we not focussing on ensuring that TTCL practises transparence and confidentiality? Is there any operator who has been discrimanted from using the NICTBB so far? I hope there is none as it would have appeared in the media. One may argue on poor customer care/services from TTCL, but how do we forget that it could take an hour to get hold of a call center staff who may also not help on your mobile???
I think monopoly/non-democratic in Africa/Asia/South America is when right decisions are made. the same scenario would have been praised if it could have been in US/Europe. In early 2000 politicians and others sang a song TTCL is a monopoly and therefore there should be other operators allowed to have international gateways, a decision was made…any company can own an international gateway in Tanzania without any restriction.. Now, do we think this was the right decision??? where is national security then???
I’m not trying to be a dictotor but I would conclude that China/Libya/Zimbabwe where foreign is treated foreign are much better off than where we sare being used to mention we are are democratic!!!
If you’re seriously suggesting Libya, China and Zimbabwe are the model to follow, then I don’t even need to respond to such a ridiculous idea. Have you not been following the news this year?
As for Huawei, I confess I didn’t know who designed the NICTBB, but from my experience with Chinese-funded projects and in other sectors, I thought it was extremely unlikely that the Chinese would do the works unless they also did the design. And friends in the ICT sector have confirmed that to me.
And as to your points on TTCL, NICTBB and monopoly power, I suggest you read this thesis: http://www.ictworks.org/news/2011/05/13/tanzania-domestic-broadband-internet-infrastructure-policy-analysis. It covers all your points and explains very clearly why this will lead to slower speeds and more expensive connections.
The problem in all of this is government involvement. The telecoms companies could have easily laid their own fiber and voila we would still have more competitive rates. The bottom line is corruption and greed on these governments. They want to have their hands directly in the pie, under the guise of security and other flimsy excuses. These people do not have competent personnel to maintain a fleet of buses and trucks, but they want to get into the high tech world of telecommunications. The sad thing is that the examples like France Telecoms is not helping the situation. France telecoms have the transparency needed to operate a national company and therefore they operate rather efficiently. In small developing countries like Tanzania deals are created by people who have no clue of what they sign on the dotted line for, and no one knows about it until after the deal is done. The worst monopolies are government monopolies.
For those with an interest in the Tanzanian NICTBB, some interesting news articles and blog posts came out earlier this week, including the following:
http://blog.daraja.org/2011/05/sungura-na-kobe-up-country-internet.html
http://www.thecitizen.co.tz/magazines/31-business-week/11059-sh150bn-deal-reached-to-build-ict-backbone
http://www.thecitizen.co.tz/magazines/-/11065-value-addition-costs-raise-internet-charges-prohibitive
http://www.thecitizen.co.tz/editorial-analysis/19-editorial-comments/11048-promote-brandband-use-to-cut-internet-charges
Response to last comment on this topic.
I have never seen in any country where Private Companies engage in building infrastructure, look back in the 80’s where most of the companies invested in Optic fibre went bankrupt and that is why in US and Europe the Bandwidth is cheap compared to Africa since most of the Optic Fibre Infrastructure are liquidated assets…
Where were the Telcos in Africa then when they couldin’t invest until when Governents decided to invest, as part of developmental agenda? whoever believes if such networks could be cheap if built out be private companies may have not done a good study. Remember, Operator build networks only when there is a justifiable business case, so it is literary not very true to say private companies could reduce the cost on their networks. further, there are also private operated Backbone in Tanzania, the biggest being owned by Vodacom (Dar-Dodoma). can we find another reason for the cost then?
Response to last comment on this topic.
I have never seen in any country where Private Companies engage in building infrastructure, look back in the 80’s where most of the companies invested in Optic fibre went bankrupt and that is why in US and Europe the Bandwidth is cheap compared to Africa since most of the Optic Fibre Infrastructure are liquidated assets…
Where were the Telcos in Africa then when they couldin’t invest until when Governents decided to invest, as part of developmental agenda? whoever believes if such networks could be cheap if built out be private companies may have not done a good study. Remember, Operator build networks only when there is a justifiable business case, so it is literary not very true to say private companies could reduce the cost on their networks. further, there are also private operated Backbone in Tanzania, the biggest being owned by Vodacom (Dar-Dodoma). can we find another reason for the cost then?
Greetings…..from Dar es Salaam, Tanzania. Ministry of Communication, Science and Technology. No need of being anonymous… I have read the entire thread so far and thought clarification on some issues sorrounding the NICTBB should be posted to make this blog stand out! I will be writing with the moto: Kick darkness until it bleeds light!
I start with the original Posting by Vota.
FACT I: Contractually – the Client is the Government of The United Republic of Tanzania (URT), represented by the Ministry of Communications, Science and Technology (MCST). Not Tanzania Telecommunications Company Limited (TTCL) !The Contractor is China International Telecommunications Construction Corporation (CITCC) not Huawei. Huawei is the supplier to CITCC of Transmission equipment. The project has other Technology Vendors for Power, OFC cable, etc. The Supervisor to the Project (call it the Consultant) is a group of experts (from Private sector, public sector and individuals) appointed on merit to work together as a Technical Team. I chair the Technical Team!
So, dear Vota, your Original posting need to be cleaned up competently and responsibly to allign it to these facts for it to begin to have some merit, if any. You seem to have gone deeper to analyse some of the roles of the parties within the project. I am more than ready to clarify where necessary. But it is hard to read your posting when the facts are doctored! My interest is to make a good tasty cucumber and avoid making a pickle that needs vinegar to give it some taste:-)!
The next posting will go directly to discuss that the issue of pricing for Internet access has only partly to do with Transmission costs at backbone level or the coming of Seacables to the shores of Tanzania. You got to understand the value chain into which the NICTBB fits in. You also got to get the History of broadband in Tanzania right! You also got to understand the thinking behind the design of the NICTBB. Then you got to understand the vision of the Leadership in Tanzania who said: Let there be an NICTBB – the vision that has been driving the NICTBB agenda.
Otherwise, consider your original posting to have been a draft carrot document for you to collect the right information. I know you are not a lawyer. So, I will respond with a professional (engineering) accountability. Certainly: No facts, no talking or writing!
More …later….
It is not what or how much you know that matters most…it is what you do with what you know that matters!
I think the problem in all of this is government involvement. The telecoms companies could have easily laid their own fiber and we would still have more competitive rates.
Sorry i was reading your comment. I ust have one question. how fast is the internet in DAR at the moment. and how is the pricing?
i know its a german site but on http://www.speedmeter.de/speedtest/
you can find out how fast is your download or the upload. if somebody could do that and send me a screenshot would be great. just for me to know and compare.
please if u could send it to me on [email protected] would be great.
big thanks
stephan
people complain that tanzania has a very fast int internet speed but the compnaies dont allow users to take advantage of youtube. eg cats-net has a fast internet speed but they only allocate 50kbs speed were a 3min youtube clip will take you 10minc to watch is this fair? ats-net the worst internet compney to subcribe internet with them.
Zaipuna, chairperson of technical commitee, where is the continuation of ur thread..em eagerly waiting for it.
ZAIPUNA WE ARE WAITING FOR YOUR REPLY I STRONGLY THINK TTCL IS THE PROBLEM AND THE AMOUNT OF TAX WE PAY IN THIS COUNTRY THE GOVERNMENT SHOULD BE PROVIDING THE CHEAPEST FORM OF INTERNET CONNECTION IN THE COUNTRY YET WE DON’T GET THAT WHAT’S THE CHEAPEST RATE U HAVE ? NONE ! NONE AT ALL I DON’T SEE ANYTHING COMPETITIVE
2500 FOR 400 MB AIRTEL THE CHEAPEST AND SUPER FAST ON 3G CAN SKYPE COMFORTABLY AND ALSO DO OTHER THINGS ! TAP SOME BONG !
On its charges for STM1s-STM64’s, it has since 1 April dropped its prices by 35% since 1 April this year. When we asked Ngota whether there would be further price cuts, he told us:”Let’s see the market response. I’d like to do tariff revisions on IRUs. All operators want to increase their capacity on the basis of the new rates.
But what about the small operators who might not be able to afford an STM1?”We’re looking at how best to accommodate the ISPs at the lower level. It should be possible to create a shared tariff between several ISPs on a single STM1.” And what about the vexed question of the charges for multi-dropping along a route bought? “This will now cost, for example, 20% (per drop) of the STM1 you have bought.”
To get higher levels of take-up across the country – for individuals, corporates and the Government – the operators we spoke to are convinced prices need to come down more and that the multi-dropping charges need to be lower. As one told us:”It’s amazing the backbone’s there but we need to see the rates come down by at least half again, particularly if we are to get demand moving in a range of places across the country. It’s our responsibility to figure how to get the take-up of the services but the wholesale has to be at the right price to make it work.”
http://www.balancingact-africa.com/news/en/issue-no-602/top-story/tanzania-government/en