WIOCC CEO Chris Wood bullish about Africa’s international bandwidth growth but says new cables “more than market can soak up”

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Africa’s international bandwidth markets are experiencing another growth bump with the roll-out of LTE moving ahead apace. Whereas the minimum unit to buy was an E1, it’s now an STM1. Russell Southwood spoke to Chris Wood, CEO of WIOCC about how he sees the market.

WIOCC’s Chris Wood told me that he was building out metronets in Johannesburg: ”We’re buying (dark fibre) from DFA and we’ll launch 39 POPs around that. This is exactly what we want to be doing. We’re not making money from it but driving traffic on to our core assets.”

The amount of capacity used by his consortium’s members and its customers has doubled in volume in the last 12 months and he thinks that this kind of growth will continue over the next 5 years.

“This growth is driven in the final instance by local access networks. The higher the broadband speeds, the more people will use them. The big content players have all come to the continent to build their business here: Netflix, Amazon, Facebook and Google. AT&T, Sprint and Verizon all want to bring Africa into the mainstream of their networks.”

“4G plays into that. 5G is coming. Most end-users are accessing content on mobile devices and the price of handsets has come down. High capacity demand (also) comes with Fibre-To-The-Home”.

“The difference is dramatic. In Kenya you’ve got four players doing this: Wananchi, Fon, Jamii and Liquid Telecom. Most housing estates of a certain level – professionals – are fibre connected. I have 27 mbps coming into my house and can stream TV, both locally and internationally. ” The impact of 4G and FTTH is that operators are now buying STM16s and not STM4s or STM1s.

The above might sound very uplifting but what about a smaller and more challenging market like Somalia?: ”We went live there in February 2014. Volumes have been doubling every 6 months. We’ve just sold an STM16 and there’s about 10 Gbps in service in Mogadishu and that will probably double between now and the end of the year. There are metronets around Mogadishu and all the mobile networks are 3G. People are getting online at an affordable level.”

One impact of the rise in volumes sold has been a pattern of falling prices. The most dramatic illustration of this is at wholesale level (STM16-STM64), prices in South Africa have fallen to US$5 per mbps. Sadly some of us are old enough to remember when such bandwidth used to cost thousands of dollars per mbps. It is a sign of Africa’s online growth that prices are falling and volumes growing. It’s not easy for cable operators but great news for Africa’s Internet users. Obviously prices remain higher in harder to reach countries like DRC, particularly its eastern half. I met a colleague from Goma this week who told me that mobile operators there had actually put up retail mobile internet access prices. As Sci-Fi writer William Gibson says:”The future’s already here, it’s just unevenly distributed.”

But the dramatic fall in prices – particularly in South Africa – makes Wood skeptical of the new international fibre projects recently announced:”With these low South Africa rates, you’re already below build costs. EASSy will add 2 Tbps next year (2017) for a few million dollars. (The fibre projects) from Africa One and Liquid Telecom don’t make a whole lot of sense. It’s a $200 million system that needs to recover it’s money over a 3-4 year period. I can’t see that being possible in Africa over that time.”

“You can buy an IRU on any system at very competitive rates. If they get built, cable prices will go down faster and it’s more than the market can soak up.”

In addition to these two new cables, the Angola Cables project from Angola to Brazil (with a Miami link) was confirmed at ITW, the long awaited phase two extension of ACE to South Africa is happening and there will be an upgrade on WACS.

He’s also clear that there should be a solution to the spate of international cable outages there have been: ”We all need to buy from every system. Big operators can easily swop capacity.”

And the saddest story? Eritrea: ”It’s a sad case. We have tried over the years to get them to join WIOCC. It’s the only country without international fibre. Other routes also made offers and they were not taken up. They need to take advantage of them as no-one will build to their door otherwise.”

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