Optical & Fixed Networks

South Africa – The Keystone in the BRICS Cable System

With the BRICS countries seeking cooperation on areas as diverse as a BRICS development bank, green energy, ICTs, food security and biotechnology, a free flow of information between each territory is essential for the enhancement of trade...

With the BRICS countries seeking cooperation on areas as diverse as a BRICS development bank, green energy, ICTs, food security and biotechnology, a free flow of information between each territory is essential for the enhancement of trade.

To be logistically feasible, a BRICS communications system would need to be cost effective, high capacity, robust and secure – a boon for trade between the nations. Now, a new project spearheaded by two South African business entities could bring a BRICS communications system to fruition. After outlining the proposal to various industry experts – among them Alcatel Submarine Networks, Axiom and Terrabit - it became apparent that the plans were commercially and technically feasible.

The involvement of South Africa is significant, according to Andrew Mthembu, Chairman of the project’s promoters i3 Africa and Imphandze Investments: “We started looking at projects that would be of strategic importance for BRICS, that we could put forward as South Africans to earn our credibility in the bloc.”

Having joined the BRICS bloc in December 2010, South Africa has faced accusations that it is punching above its weight – however, the fact that the country is ideally positioned to spearhead the BRICS cable project dismisses these claims.

South Africa is a key communications hub in Africa - the major African cable routes all land there. This includes the soon-to-launch West African Cable System, which connects 12 countries along the west coast of Africa as well as Portugal and the UK. As Mthembu points out, all of these countries would, via this connection with South Africa, be hooked up to a BRICS cable system.

Once a cable system is integrated, BRICS operators will be in a position to access other markets by using each other as a gateway. For example, South Africa’s interconnection capabilities would allow the BRICS bloc immediate access to 21 other African countries – and the same would be true in reverse. In this way, a BRICS cable system would essentially open up communications between half of the world’s population.

There is of course still a dire need to build out terrestrial networks in many African countries, but virtually all of them are doing so to some degree. But in terms of international connections, fibre optic links are by far the most cost effective option - having a direct link between countries massively reduces the costs compared to current technologies.

Mthembu notes: “Previously, a call from Johannesburg into Angola would be routed to Pretoria and switched to Cape Town where there is an international satellite gateway. It would then be switched to Belgacom in Europe, who then switch it to satellite and finally to Angola.”

The cost of such a process is clear – satellite is far more expensive than fibre optic, and hopping between operators will incur fees from them. Therefore, a direct link will significantly lower the cost of connectivity.

So, what is the cost of implementation? There are typically two models for funding such a project. The first is the ‘carrier of carriers’ route, which is the equivalent of an equity model – an investor will see an opportunity for return on a project, provide equity, raise it and sell capacity (typically via pre-sales). As around US$1bn-US$1.5bn of capital is required, it would take a lot of time to raise this using this model.

With the second model, the project is presented so that operators interested in capacity can come forward of their own accord to acquire as much capacity as they require. They can use it for their own purposes or sell it without any restrictions on pricing. The BRICS cable system aims to use the second model, says Mthembu, as operators in these countries will likely be more amenable to it.

The system will operate on a tiered system, with all BRICS operators invited to take part. With around ten to fourteen Tier One operators expected to join the project, the funding will for the most part come from them – roughly US$80–US$100 million per operator. This will afford them not just end-to-end capacity running from Florida to Russia, but also the opportunity to participate in the operation and maintenance of the system.

The project is strategically important, enabling many of the issues that are expected to improve trade between the BRICS countries. Operators are now being asked to enter into a consortium for the implementation of the project.



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