Open access for EASSy agreed by all - what about Merali?

Obstacles which appeared to threaten the very future of the East African Submarine Cable System (EASSy) have been overcome at a meeting between Nepad's ICT advisers and several countries involved with EASSy but which had a different economic model for running the project.

Open Access Wins

It is hoped that EASSy will be operational in 2008. "Open access" will form the basis of operation for EASSy rather than the "consortium model" preferred by Kenya and other partners. Prime movers in getting the agreement are the South African government plus the Nepad e-Africa Commission.

 In its original guise EASSy was to be a private sector project in the main, with key investors at liberty to stipulate bandwidth retail prices. This would mean a core of companies arranging the financing and gaining the equity - hence the consortium model. The two parties objecting believed strongly that this would defeat the whole of purpose of EASSy - cheaper communication for the region and more use of ICT. 

And so open access has won the day: any company reorganisation involved with telecoms can buy in provided it can afford the agreed subscription. Enter the Special Purpose Vehicle (SPV) - a company set up specifically both to work out prices charged, and also to own, manage and operate the network. As a necessary check and balance, even the costs charged by the SPV will be regulated by an Intergovernmental Assembly (IGA).

Next Steps... 

Next step is for the Nepad e-Africa Commission to draw up procedures towards a protocol to form EASSy's basic legal framework. In fact, the Commission already has the plan in place, and it is with member governments to inspect and comment on. Signing is expected in August. One special reward for a country's total commitment to EASSy is to be named the host country for SPV. This goes to Rwanda as a gesture of thanks for her consistent and realistic desire to promote ICT within her borders.

 A sense of urgency to adopt the open access model comes from observing the present set-up. Traffic is routed via infrastructures such as satellites and servers, all installed and owned by the West. Consequent costs for the customer thus end up many times more expensive than those paid by the West.  Reinforcement of the idea adopted from the beginning that the West should be excluded from controlling EASSy and that Africa should maintain control comes from the fact that financing will be primarily from African sources. One quarter of the funding is intended to be raised from selling equity to regionally based companies, with the remainder to come from African sources of finance. Appropriately included in these ranks are the East African Development Bank although the more broadly based African Development Bank also features.

But what about Mr Merali flying his FLAG?

So far, so good regarding open access. Enter Naushad Merali. Here is a businessman with links to Kenya Data Network (KDN). KDN has been in contact with the Indian Reliance-owned company FLAG (Fibre Link Around the Globe). Mr Merali is no fool. He has in turn identified the commercial potential of mobile telephony, written a strategy aimed at making him rich from mobile, and raked in the profits. This time optic fibre is his target. He wants FLAG to link Kenya to other fibre links, potentially handing him control of most fibre optic traffic out of Kenya from 2008. 

As far as EASSy is concerned, there may well be implications as a result of revenue lost to the Merali-FLAG enterprise, and consequent repercussions for those considering investment in EASSy if their investments appear to be less fruitful than previously anticipated.  At the moment, it is believed that a preliminary survey is underway to establish a safe route for the fibre optic cable. It is also understood that KDN has paid FLAG US$110 million to start work on the project next month (August) and to enable traffic from Mombasa in September next year. If true KDN has a head start over EASSy.

Search for Investors...

Potential investors have been contacted. They range from ISPs through to Celtel and Safaricom.

 Of course, it is not 100% certain whether Kenya will generate the boom in ICT which some believe will take place, meaning that revenue may not be a great as Mr Merali would like. Another key implication is the fact that EASSy was set up partly to become "something African" - a source of pride to Africans; EASSy's price tariff, too, was to be different from charges imposed on say the West African customers of SAT3 - sometimes 24 times higher than those paid by Western Europeans. 

Mr Merali faces a challenge from a project determined to keep prices low - and one is entitled to ask how low can he retain his prices if he wants to remain in competition with EASSy but without reducing his own prices to a level where his new enterprise will no longer be financially viable.

 * EASSy will mean laying fibre optic from Port Sudan via several "landing stations" through to Mtunzini near Durban, South Africa. The cable will link with the countries' own intra-networks at these landing stations. Further links will come from the coastal countries to their land-locked neighbours - Uganda, Rwanda, Burundi, D R Congo and others. Estimated cost will be around US$300 million.


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