Seacom represents big growth opportunity
September 23, 2009
By Thomas Makore
More and cheaper international bandwidth - courtesy of the Seacom undersea fibre-optic cable that runs up the east coast of Africa linking southern and east Africa, Europe and south Asia - will provide South Africa and sub-Saharan African countries with enormous opportunity for growth.
While the prize for many in South Africa will be a lowering of broadband costs, the availability of greater broadband capacity and choice in the region will, in fact, have much more far-reaching consequences. It will create a new platform for economic growth, facilitating the establishment and expansion of businesses, and opening up global markets.
In terms of pricing, expect a clear and sizable impact within nine to 12 months as preparation for video broadcast of the soccer World Cup by local and international broadcasters gains momentum. The roll-out of wired and wireless broadband by various operators to more internet subscribers will begin to tip the scales in terms of bulk pricing, while smaller players, such as wireless and fixed-line internet service providers, will begin to collectively negotiate better rates with wholesalers of broadband, who will in turn be driven by greater competition to lower prices.
Corporates, whose broadband bills are on average made up of at least 25 percent international traffic, can expect a price drop of between 10 percent and 30 percent on their total bills. For small and medium-sized enterprises and people running home offices, the 15 percent of their total business cost that is usually taken up by their internet or broadband connection may well drop to 10 percent or more, increasing their ability to stay profitable.
The question is: when will we see this uptake in broadband and decrease in cost? Issues such as the economic downturn have hindered uptake. In addition, the Seacom cable does not provide complete coverage of all regions (it covers most of the east coast of Africa) and the national backbones do not have the reach and capacity to extend the available bandwidth to all regions and remote areas.
A catalyst is required to spur the uptake of bandwidth, which will have a knock-on effect of driving down costs. The World Cup is one of the biggest events that South Africa will host and will create demand with the influx of international visitors. This will drive prices down and in the wake of the event, more local businesses and individuals will start to use this service.
Staying local but looking toward industry, the big drive by the government to attract business process outsourcing (BPO) offshoring customers may now eventually come to fruition as one of the biggest challenges - the high price of international communications in South Africa - fades. It will also open the BPO market to other countries in the region.
However, landlocked African nations that were previously forced to route their international traffic through South Africa and pay high prices, or use expensive satellite bandwidth, can now follow their own agendas and attract BPO clients of their own.
With a cheaper way to communicate, there will be healthy competition and growth. This may well slowly change South Africa's status as the economic hub of sub-Saharan Africa. The reputation of Africa as the Dark Continent may also begin to erode as low connectivity is replaced by a hi-tech capability and a positive spiral is initiated in terms of e-commerce.
Thomas Makore is the managing director of Spescom Telecommunications
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