Nigeria’s Suburban set to operate a Lagos-Abidjan regional terrestrial fibre link

Top Story

As the west coast of Africa prepares for cheaper international bandwidth from three possible contenders (Glo One, Main One and WACS), the race is now on to provide terrestrial fibre links to take traffic to the cheapest landing station. Currently Nigeria’s Suburban Telecom is doing good business delivering a significant chunk of the country’s outgoing traffic via Cotonou through Benin Telecom. Nitel’s poor performance and high prices have created a new market in diverting traffic to a cheaper, more efficient exit point. Suburban’s CEO Bruce Ayonote outlined his plans to link Lagos to Abidjan though a mixture of its own assets and commercial deals with incumbents along the route.

Q: When was the company started?

We started in 1999 by doing services for the Nigerian incumbent Nitel who we supplied services and equipment. We then moved to advisory services, market research and business planning for new entrants. We had the information and skills to help companies develop their investment.

We then realised that there were gaps in the infrastructure space and decided to invest in infrastructure.

Q: So what services does Suburban offer?

We’re organised into two business units. One of those units is a national ISP with an MPLS platform aimed at SME and enterprise customers. On that side we’ve invested in WiMAX assets (Alvarion Breeze Max). It’s a wholesale ISP selling down to tier 2 and tier 3 ISPs and a retail ISP delivering access to enterprise customers.

The other business unit is a tier one IP backbone aimed at carriers, ISPs and enterprise customers. It is designed as an all-IP network.

Q: So how does the business break down?

We have below 1,000 ISP customers – banks, enterprises and embassies – and it exists to connect people to our IP backbone which is the largest part of the business.

Q: I understand you’ve built a link to Benin?

We tried to acquire that national carrier Nitel three years ago because we wanted to be able to get control of its international and national fibre assets. We didn’t succeed but we now have a two-pronged strategy: buy or build.

We saw neighbouring countries as a good option to connect internationally. We negotiated with the (Beninois) Government for over 2 years to get agreement. If you say to Benin Telecom, let me get you more market, it’s interested. If you say we’ll buy your assets, it’s not interested.

The traffic over the link to Cotonou is now over 1 gig and we’re about to activate over another gig of capacity. So next week we’ll deliver another 600 meg and in January 2009 we’ll deliver another 600 meg, giving us a total of 2.2 gig at that point.

A certain amount of traffic is Nitel diversion traffic (away from its poorly run SAT3 landing station) but there is also new business we’re developing. We want proactively to go to new markets and develop them.

Q: So you’ve got plans to connect to other parts of Nigeria and other countries?

Yes, we want to build other fibre links. For example from Lagos to Port Harcourt in the South West. We’ve done capacity swaps with other carriers including MTN, Multilinks and Phase3, to take us into the north.

We’ve acquired 65% of a Ghanaian company called Fibre Co which is building a fibre link from Accra to the Togolese border. We’re partnering with Togo Telecom to close the gap. Togo Telecom wants access to SAT3 at low prices.

Q: Will you go beyond Accra?

Yes, we want to go to Abidjan and we’re talking to Orange and Airlink about the possibility of partnering with one of them.

We’re lighting up markets that are virgin. I want to be able to buy an STM1 (from Togo Telecom) whereas previously the traffic was 4 E1s. Instead of it going out through satellite and being paid in dollars elsewhere, it will go out through fibre and be paid locally.

Q: What’s the price comparison like between your domestic Nigerian routes and the route to Cotonou?

Currently Lagos-Port Harcourt is about US$3,000-3,500 per meg and Lagos to Cotonou is about US$2,000 per meg.

Q: So presumably the international leg is also cheaper?

It’s about US$2,000 from the UK to the landing station in West Africa but prices can vary from below US$1,000 up to US$3,000.

Q: Won’t the domestic backbone and international rates come into alignment with each other?

It will for the Internet but it might not for private (leased) lines.

We want to be able to provide access to Niger, Burkina Faso and other countries but there are currently gaps. We’re creating an MPLS backbone across the region. Our strategy is to penetrate as much as possible in West Africa with the right build-out and costs and depending on the gross potential.

Q: Won’t you be competing with Main One, Glo and WACS once they’re completed?

For us, we’re moving towards building a platform. This new infrastructure will improve the diversity of our networks. It will reduce prices on infrastructure, moving us more towards service business. The challenge is that global trends will affect the present state (of prices) in about 12-18 months time.

Q: What’s the investment been so far?

We’ve put in US$75 million for both regional and national backbones and working capital has been an additional US$25 million. 90% of that has been raised locally with the balance from two facilities, Exim Bank and funds out of Dubai.

Q: When will household retail broadband arrive in Nigeria?

The current major challenge is access to bandwidth. Before we entered the market, there was something like below 3% penetration. We’re now provisioning STM4s and we have one customer who wants to buy an STM16. So this is the kind of capacity we’re addressing.

There is also the access and last mile initiative by (the Nigerian regulator) NCC and the only thing stopping it is bandwidth, We had a meeting with NCC looking at existing bandwidth and we estimate the initiative will give a 6-7% spike to the market. This will lead to mass adoption but if not, natural need will make the market increase but much more slowly.