TELKOM KENYA’S IP NETWORKS READIES ITSELF FOR THE END OF ITS MONOPOLY

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Telkom Kenya’s IP Data Networks (usually known by its brand name Jambonet) has had networks that burst their routers’ capacity to handle the rapidly growing traffic. However they have recently completed a network upgrade and are in fighting mood as they wait for the inevitable end of the international monopoly. In a competitive environment Telkom Kenya will look at different parts of its operations as profit-centred business units. With only a small number of employees it is arguable that this part of the business is in better shape than the fixed line side. However the current price structure is not balanced to be profit-making. Nevertheless competition should drive satellite prices down and offer customers more choice. Russell Southwood spoke last week to Peter Kenduiywo, Manager of IP Networks about how he sees a competitive future.

Q: What’s the extent of your data networks?

When the ISPs came into being in 1994, our data networks were very crude. The early ISPs like Formnet and Africa Online were offered things like international dial-up, UUCP and store and forward messaging. In the mid 1990s, we built the Kenstream digital data network with nodes in all the major towns.

Q: What’s the network run on?

There’s fibre in the bigger cities like Nairobi and Mombassa. There’s also copper and microwave links.

Q: What’s your customer base?

There are between 2000-2500 connections. That’s point-to-point and connections to the backbone. These include: ISPs, banks with branch networks and corporates. The market has grown enormously since the mid 1990s. Then connections would be numbered in the hundreds. We didn’t offer leased lines until 1998/99.

Q: How big will the market be in five years time?

It’s hard to say. It’s been difficult to cope with the current growth. There’s 30-40% growth per year. The number of customers remains roughly the same but their bandwidth needs are growing very rapidly.

Q: Will get into the retail space?

Data Networks sells to individuals. But we’re not currently allowed to sell the backbone directly to individuals.

Q: Who do you buy bandwidth from and at what cost?

We buy from all the usual tier providers like Teleglobe and BT. International bandwidth prices are still very high here. We buy at USD6000 mbps and sell at around USD4250 mbps.

Q: You’re selling at a loss?

We get the money back through selling Kenstream services.

Q: Why are the rates so high in Kenya?

There’s only satellite in this part of the world. They maximise on the fact that we don’t have an alternative. We have to subsidise this rate from other services. Prices were higher but have been reduced. They were dropped by half two years ago.

Q: You’ll soon be facing competition?

Competitors will be allowed to come into the market by June 2004 when Telkom Kenya loses its monopoly but it may come earlier. There will be another backbone provider.

Q: Aren’t there going to be four other providers of international bandwidth?

There may be more than one. The number of applications is four but the regulator decides. So there may be four more.

Q: You’ve currently got 100% of the market. What percentage market share will you retain in a competitive market?

We’re trying to position ourselves so that we keep 100%. (laughs) The more responsive we are to customers, the less danger we are in from the competition. The challenge is to get existing customers to stay on and to build their loyalty to our network.

Q: But you’re not going to end up with 100%?

The overall size of the market is increasing so we will obviously share customers who want to increase bandwidth. And although the number of ISPs has gone down, the number of point-to-point customers is increasing.

Q: How are you changing the attitude of your workforce?

We’ve gone a long way with it. Now we have a lot of good customer relations and we don’t have a shortage of skills. Staff are being sensitised by training in customer service, culture change activities and team building. We now have informal breakfast meetings with customer technical teams to get to know each other.

Q: Where do you fit in the Telkom Kenya structure?

IP Networks is a sub-division of Data and Value-Added Services. Jambonet is simply a brand name. IP Networks has 15 staff who work 24/7. Data and Value-Added Services has 150 staff. The biggest part of those are employed looking after Kenstream. That’s broken into two parts: Node Operations (including the network maintenance centre) and Network Access.

Q: In turnover terms, how big is IP Networks?

Well if you say USD4-5000 megs per second and that we’re 28 megs per second at the moment, that gives you some idea.

Q: What state is your network in now?

We’ve just upgraded the network. Basically we’ve changed the routing infrastructure to give greater processing capacity. We’ve stepped up the processing capacity 15 times and we now have carrier-grade equipment.

Q: So what about VOIP calling?

If we go to VOIP, we will be well placed to support it.

Q: Are you involved in the East African fibre link have?

Telkom Kenya has a team working on the project and there are Technical and Business Committees that bring together the different operators. Also the East African Digital Transmission project is still on the table.

Q: What’s the state of your data links to neighbouring countries?

To Uganda, it’s mostly microwave from Nairobi to Kampala and it’s charged by distance by Kenstream and then you pay a half circuit on the other side. There’s not a lot of traffic to Tanzania but we do it by the same arrangement.