Industry’s dirty little secret - cross-country transit prices keep SAT3 international bandwidth prices high

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Countries that are landlocked or have no landing stations of their own are finding that having access to fibre does not reduce their SAT3 international bandwidth prices. At present few countries have more than one international access route at present. The result is that these countries are still paying the same or more than equivalent satellite prices and some are using satellite in preference to their fibre access. Worst of all, the stretch to get them to the SAT3 landing station is costing them several times more than for the stretch from the SAT3 landing station to Sessimbra in Portugal. So much for distance-based pricing, reports Russell Southwood.

Mauritania’s Mauritel recently announced that it had rolled out a second data link on SAT3 with a bandwidth capacity of 45Mbps. The second link was in part intended to provide redundancy capability. Mauritel’s fibre capacity now stands now at 79Mbps: a 34 Mbps link with Telefonica and this new 45Mbps link with France Telecom. What Mauritel will not talk about is what it is currently paying for SAT3 capacity, particularly the cross-country transit stretch from the Mauritanian border to Dakar. Sources close to the company would only say that this bandwidth was “expensive”.

However our investigations have uncovered a Mauritanian customer paying OUM6 million for 1 mbps annually. As an education sector customer it gets a 50% discount so the actual full price is actually OUM12 million per month. Translated in US dollars this works out at US$45,476 for months or US$3790 for 1 mbps per month.

According to data obtained in our pricing survey for African Satellite Markets, a Senegalese ISP buys one mbps per month from Sonatel for just US$1316 and that is probably the cheapest rate on the route. But if you take the amount paid by the Senegalese ISP for the Dakar-Sessimbra route from the amount charged by Mauritel (both are retail customer prices), the section of the route from Nouakchott to Dakar is costing US$2474. In other words, it costs data twice as much to get from Nouakchott to Dakar as it does from Dakar to Sessimbra. Can that make sense?

A Malian ISP in our pricing survey was paying US$6500 per mbps per month and says that fibre prices were only “a bit lower”. The Malian ISP is not a large-scale customer so it is not getting highly discounted prices. So let us assume generously that Malian incumbent Sotelma or its competitor France Telecom-owned Ikatel is offering Bamako to Sessimbra at $6,000.

This means that the overland transit portion costs $4684, almost three times the Dakar-Sessimbra portion. Any reasonable person might be asking themselves at this point why it costs more to get bandwidth from Bamako to Dakar than it does from Dakar to Europe?

Cross-country transit rates are the industry’s dirty little secret and as we will see later this is not purely an African phenomenon. The reason those who have these cross-country transit routes (in both of these cases, Sonatel) charge so highly is er…because they can. In the case of Mali, the situation is made more complicated by the fact that Sonatel is in a grudge match with the Malian incumbent Sotelma through the Malian SNO Ikatel. Mauritania’s Mauritel has no such complicating factors and the net result is that its retail broadband prices are four times higher than its controlling company in Morocco.

Both Namibia (which is a SAT3 member but has no landing station) and Lesotho’s are still using a significant proportion of satellite capacity because the cross-country transit rates make fibre international bandwidth prices more expensive than satellite. How can this be? Well although soon Telkom South Africa will face satellite competition, it has until recently not had to face competition of any kind on its monopoly access to the SAT3 cable. As a result if it gives cheaper rates to these kinds of countries it will undercut the high, uncompetitive prices it is charging its South African customers.

The only way out of this market distortion madness is for each country ultimately to have at least two or three international access routes (two fibres and access to satellite) in order to create some semblance of competition. If this was a country in the European Union, the EU would conduct a costs and pricing investigation and have the means to impose a fair price on monopoly suppliers.

But wait a minute, this kind of market distortion is already there in the European Union. Those buying international fibre onwards from Sessimbra complain that it is cheaper to get from Portugal to Goonhilly (in the UK) than it is to get from Goonhilly to London. Same problem looking for a solution. Perhaps African carriers ought to mount a joint complaint to the European Union? But maybe they ought to clean up their own act first.

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