Open vs closed approaches to international fibre Russell Southwood CEO, Balancing Act

Closed consortium: Monopoly and investment barriers Monopoly structure: Liberalising at the national level but leaving monopoly at international level? Consortium the historic approach but new structure needed for the period of liberalisation Lack of access for potential investors - the case of Nigerian SNO Globacom. Investors change over time? Creation of artificial barriers to investment: One per country, international gateway licence Public funding and accountability - SAT3 included significant element of public funding but public interest not expressed

Transparency, pricing and access Although a monopoly, no transparency on contracts or pricing (Telkom SA & SAT3 contract) Unfair competitive advantage privileges to a self- selecting set of investors Short-term payback? Short-term profit taking at the expense of developing the market Creates price and access “gatekeepers” through which landlocked countries have to pass (Lesotho & Namibia) Results in the inefficient staying inefficient (20% of SAT3 consortium members in Africa not upgrading capacity). Wasting the asset given

Starting assumptions for a new approach? Fibre is a time-limited asset. Lasts 25 years. Every day some part of it is not used, it is a wasting asset It makes commercial sense for the fibre to be as well- used as possible from day one Lowest possible prices assuming payback over longest possible period but including… Need to manage, maintain and repair the cable over its life Not an NGO activity but run as a commercial entity

Layered Network Model Open Access / Reseller Model Physical Infrastructure Network / Transmission Services - Voice, Internet Layer Wholesale Retail From “Open Access Models”, infoDev, 2005

What is an Open Access approach? A focus how to create the best deal for the consumer, whether the individual or the corporate user A way of thinking about how to achieve this not a prescription to be followed in only one way Approach adopted will differ depending on circumstances in time and in relation to particular national conditions

Principles for intervention: open access response? A technology-neutral framework that encourages innovative, low-cost delivery to users Maximum competition at all layers in the IP network Transparency to ensure fair trading within and between layers Everyone can connect to everyone (no dominant market position) Devolved local solutions rather than centralised ones.

So what might this mean for EASSy? Only one fibre so there’s no competition at physical and transport layers. Therefore…. Need to create a transparent level playing field in terms of investment, access and price Lowest achievable international price allowing all players to compete (and profit) nationally in the services and transport layers (cf JV oil pipelines)

Open access: practical impact on EASSy? No effective barriers on investment. Multiple investors in each country. Low $ minimum entry point ($1m?) Sell max capacity ahead Lowest possible pricing. Public funding element to allow payback over years. Same price for all. Agreed wholesale and retail Transparent pricing. No hidden advantages for some Needs to cover repairs and maintenance and repayment of loans. Need to re-adjust pricing up or down. Parallel open access agreements to cover inland regional transit for landlocked countries

Imagine a future… When bandwidth costs Africa more like US$ per mbps pm Every university student has access to the knowledge, ideas and research on the Internet Calling your son in Europe costs US$2-3 cents a minute rather than US$1 a minute SMEs flourish and Africa competes in call centre market Government offices are all connected and have low- cost VoIP calling. Free calls for citizen enquiries….etc…etc…etc… Imagine a different future….