Submarine cable connectivity in West Africa

01 March 2012 | Kavit Majithia


Until this summer, the west of coast of Africa has been severely lagging behind its eastern counterpart in terms of connectivity. With two high-profile subsea cable launches imminent, Kavit Majithia explores how these will transform Africa’s telecoms ecosystem once again.

The West African Cable System (WACS) is, according to Tata’s African subsidiary Neotel, a world record breaker.

It took a mere seven months for 12 African operators to commit to an initial $650 million capital investment for the construction of the subsea cable system – which Neotel claims is the shortest time for a consortium ever to be formed. To add a bit more perspective, similar agreements with African operators in the past could take up to several years to complete.

WACS isn’t even the only cable project due to launch on the west coast this year. The Africa Coast to Europe (ACE) system, championed by France Telecom Orange was originally designed by the company to provide landing points from France to Orange’s African subsidiaries. Popularity for the initiative among local operators was so intense that it resulted in a 17-member strong consortium.

There is a real sense of urgency then to provide affordable subsea connectivity to west African countries, with the likes of the Democratic Republic of Congo (DRC), the Republic of Congo, Namibia and Togo still reliant only on satellite links. Even so, with both these systems set to go live this summer, is the west side of the continent actually ready for such a radical burst of capacity?

WACS vs ACE

The ACE and WACS cables look set to overlap in seven countries. Despite this, Orange’s Yves Ruggeri, director of network strategy and submarine systems, believes the ACE cable, which spans from South Africa to France with 23 landing points across Africa, differs greatly from WACS in its ability to provide more access to landlocked countries.

“We wanted to avoid the monopoly situation that was established with the SAT-3 cable, which provided access to one carrier per country,” he says. “With ACE, we are allowing aggregated landing for several investors to own a landing station, including parties in a landlocked neighbouring country. Examples of this are Mali and Niger, which do not have access to sea but will have access to high-speed internet by owning a base station constructed in Ivory Coast for example.”

In spite of the fact that ACE outnumbers WACS in its number of landing points, it is in fact the latter cable which many market analysts expect will change the entire ecosystem of African telecoms.

WACS has a capacity of 5.12Tbps, and spans from South Africa to the UK across four fibre pairs with a total of 12 landing points. All three existing cables combined on the west coast – Main One, Glo-1 and SAT-3 – do not even come close to the scale and capacity of WACS.

Dobek Pater, senior analyst at consulting group Africa Analysis, believes that when the WACS cable goes live this June it will be “revolutionary”.

“Effectively, WACS will create a more competitive environment. It will allow smaller operators in the larger markets of Nigeria, Ivory Coast and Ghana to acquire capacity from WACS, rather than from the larger operators,” says Pater.

“It could be so significant that by the time ACE is launched, the 50% price reduction expected after the WACS launch could be reduced by an additional 50% – that is a mammoth reduction from current capacity prices.”

Breaking tradition

Three challenges will face the newly connected African operators: carrying the influx of traffic from these two new cables; making it accessible inland; and providing a high level of service. If they succeed, the west coast of Africa, and in particular South Africa, could soon be established as the continent’s new gateway to Europe.

But Eckart Zollner, business development manager at NewTelco SA, does not believe the region, or indeed any of its operators, are yet ready for this title. NewTelco SA was founded in partnership with New Telco Germany in 2010, and has essentially borrowed a business model from western Europe to federate traffic by providing one neutral co-location facility, carrying both voice and data traffic on one single network onwards to international territories without interconnecting to regional carriers.

An interconnection neutral network, however, has not yet proved overly popular within the domestic market. “The challenge for the region, and for us, is to propagate the benefits of our model,” says Zollner. “They all seem to have long-standing service agreements with each other, and the smaller carriers believe that interconnecting with market incumbents is the best way to reach critical mass. If you look at the present way of thinking, a carrier from Botswana for example, would connect to Telkom SA at a high price, rather than connect to a neutral network that has five or six carriers on the same network. The mindset is to rely on the same agreement it has had for years.”

NewTelco Germany owns a 33% stake in NewTelco SA, while JASCO, a South African ICT solutions company, holds the remaining 67% stake.

Zollner believes, that in spite of a slow uptake, there is now potential for the neutral connection model to grow, particularly with the advent of increasing traffic in the west coast, in addition to proven year-on-year growth in Europe for such services.

“It took about four or five years for Europe but now it is well advanced and distributed. SLAs and peering agreements clearly exist in Africa, but once traffic increases as a result of west coast connectivity, in addition to resiliency, the prices being charged by the incumbent players cannot be sustained.”

In fact, one of the main drivers for increasing connectivity on the west coast came from the South African government, and the country can be accredited with first spotting the gaping hole in connectivity in west Africa. The government can also be given credit for opting for a consortium-based model, rather than encouraging numerous regional operators to build separate competing cables. The consortium model in fact that has already been established with significant success on the east coast of Africa.

The idea of South Africa serving as a gateway for the region will only be further enhanced by the influx of connectivity into the west. However, the nation has in the past failed to attract much business with its neighbours on its west coast and currently has one only landed cable serving them, SAT-3. A lack of liberalisation in many of those neighbouring west-side countries is recognised as limiting opportunities.

Recent deregulation in many west African countries, including the DRC and Togo, could well change that situation. This was, in part, what first prompted Tata Communications’ wholly-owned subsidiary Neotel to first become involved in WACS in 2010: “WACS is essentially about building a cable to reach markets that we never had access to, or countries that have never had access to connectivity as a whole,” says Angus Hay, general manager, strategic business development at Neotel. “The philosophy of WACS is open access, and it is designed to move away from old consortiums that are private clubs of large incumbents trying to mock markets and close markets.”

East before west

Following the launch of WACS and ACE, regional operators in west Africa will be looking to close the gap between east and west.

“East Africa has been politically much more stable than west Africa,” says Zollner. “In markets like the DRC, Angola and Congo, their ICT development, subsea connectivity and technological advancements have been plagued by political instability, which is why investors, perhaps for the last 20 years, have targeted the east rather than west.”

Mike van den Bergh, CEO at Gateway Communications, does not agree, and argues that it certainly isn’t an applicable paradigm for every market in west Africa for why there has been a lack of infrastructure until now. “It has certainly taken longer than it should have and a lot of this is due to government policy, specifically regarding which companies will host the landing stations. This is more of a reason than unstable governments,” he says.

“Traditionally in these markets it has always been the landing provider that has controlled access, and as a result numerous operators are now landing on the east coast. It has led to a much more open market, which is what you would hope will happen now on the west coast. It is very unfair to say lack of growth is because of politics.”

As Pater points out, slow growth in west Africa could be a direct consequence of the limited success of the SAT-3 cable, which led to initiatives like WIOCC’s EASSy cable and the privately-owned SEACOM being set up in east Africa.

“When it all started, the east actually didn’t have anything and, while SAT-3 was in operation, the east coast was relying exclusively on satellite,” Pater says. “When EASSy and SEACOM came into the market, they followed an aggressive strategy of signing operators to 15–20 year Indefeasible Rights of Use (IRU) contracts, which certainly drove prices down and had a more revolutionary feel within Africa than when SAT-3, Glo-1 or Main One launched.”

The east has also led the way in terms of international connectivity. Two of east Africa’s most dynamic markets – Kenya and Tanzania – both aim to increase trade links and telecoms investments between Africa and the Asian subcontinent. “Trade links have been in place to Asia, in particular India, for many years, and if you move up the coast, there is a huge amount of trade now being driven by ICT infrastructure,” he says.

Similar to markets in Asia, there are also significant trading relationships in numerous sectors between Francophile countries, Anglophile countries and former Belgian colonies with the west coast of Africa. This would explain why the likes of France Telecom Orange and Cable&Wireless Worldwide have both made significant investments in ACE and WACS respectively.

“Achieving political stability has meant that the west coast of Africa is becoming an interesting market for the rest of world, particularly with the discovery of minerals and the mining sector. Nigeria also has a trading relationship with the US which can only accelerate,” adds Zollner.

Where next?

As Africa gears up for the launch of both the WACS and ACE cables, investors and market watchers alike have questioned whether the amount of capacity set to be available in the region will actually correlate to the amount of demand. And while the whole of Africa is now set to enjoy a new wave of connectivity, it is still severely lagging behind more developed markets in terms of its over the top services.

Africa Analysis notes that 2G and 3G uptake in the region has already fallen behind its estimates, and even in developed markets like Tanzania, data revenues only contribute approximately 2% of overall telecoms revenue. “For users, additional cables are always a good thing.” says Hay. “It is important to note that WACS is a much larger cable than SAT-3 so it’s not a case of adding a multiple cable, and while ACE will have an impact it really only covers south of the equator. There is no guarantee it will land further south than that.”

Hay is sure of one thing though. “There should not be another cable built, perhaps in the whole of Africa [in the short-term future]. In fact, there is a viable business case against it.”



Uncertainty within development

With a land mass roughly equating to the size of western Europe, the Democratic Republic of Congo (DRC) is the largest country in the world which still doesn’t have access to a submarine cable.

Its recent history is plagued with civil unrest, and its involvement in the Second Congo War in 1998 devastated the country, but recent developments suggest the country is now on the path to reform.

With WACS imminent landing in the DRC, Mike van den Bergh, CEO at Gateway Communications, is particularly excited at the prospect of such a large market finally being opened to the masses. “We have been taking capacity to it through neighbouring countries but this is a very expensive game to play,” he says. “WACS landing in both the DRC and Congo-Brazaville is going to be extremely transformative.”

However, implementing the base station and providing fibre links to the country is only the first stage of its development. “It is up to the regulators to provide an open access model for users to benefit from fast broadband, and also for the base stations to be managed properly for this development to have any significant impact in the country,” says Dobek Pater, senior analyst at consulting group Africa Analysis. “A direct link to international connectivity should free up the market, but the country still fears that it will be constrained by its monopoly model.”

The sheer scale of Congo poses another problem. “There is a real challenge getting the cables to the landing stations from the sea because of the vast size of the Congo River. Reaching the sites can often take a long a long time, due to the vast distances and difficult terrain. This also can mean changes, upgrades and repairs will take a very long time, with very little resiliency,” says van den Bergh.

A further challenge for the DRC is its considerably underdeveloped infrastructure, and there are fears within the market that the country lacks the capabilities to ensure its new fibre links will be utilised in the right way. The DRC has thus far largely relied on expensive satellite links, and Van Den Bergh believes additional investment is required in mobile backhaul to make sure this isn’t a false dawn for the country. “The initial challenge for the DRC has been met, but it still has a long way to go to achieve its full potential,” he adds.