East African Submarine Cable System ( EASSY)

What is the EASSY Project?

The EASSY project consists of the construction of around 10 000 km fiber optic submarine cable along the East African coast, linking Sudan to South Africa with landing points in these countries as well as in Djibouti, Somalia, Kenya, Tanzania, Madagascar and Mozambique.

Businessman on a Laptop, Sitting Between Deserted Railroad Tracks, Kenya

1. Strengths:

  • The EASSY Project responds to a need

TheEast African Submarine Cable System (EASSY) project offers a solution to Internet access problems in Eastern Africa.It responds to the need for an effective and affordable Internet connexion in a large region of Africa and therefore the demand for such a project is extremely high within the population.

  • The EASSY project intervenes in a sub developed market

There are few direct high-capacity Internet links between African countries. High-capacity transmission lines are mainly concentrated in the US, Europe and Asia. As a result, about 75 per cent of Internet traffic in Africa first goes through Europe or the US and is then routed back, a very costly process. For example, while Benin and Burkina Faso are neighbours, Internet traffic between them passes through France or Canada.

The International Development Research Centre (IDRC) in Canada estimates that Africa spends $400 million minimum each year on the use of international bandwidth for national or regional data. In fact, in many cases, e-mails sent between two Internet service providers in the same country are sent abroad and then rerouted back because domestic “Internet exchange points” are lacking.

Africa is currently dependent on the SAT-3 cable, and on expensive satellite links, the only option in some Eastern African countries. These satellite connections have inherent delays and do not offer competitive pricing conditions,

The slow pace of Internet development on the continent is reflected in low levels of use. Only 2.6 per cent of Africans have access to the Internet, compared with 10 per cent of Asians, 36 per cent of Europeans and 69 per cent of North Americans. When broken down by country, the level of Internet use in most of Africa is even lower, since two countries, Egypt and South Africa, account for nearly half of all users.

Low-speed transmission lines also mean that Internet users in Africa find it much faster and cheaper to download material rather than to post their own onto the Internet. This leaves Africans primarily as consumers instead of producers of Web content.

=> Eastern Africa does not have any equivalent offer for a cheap Internet connexion. Therefore, EASSY has a quasi systematic chance for success:

  • Extra connectivity would reduce Africa’s dependence on the SAT-3 cable, and on expensive satellite links.
  • EASSY would provide reliable, fast, and widespread access to international communication (including Internet) and is expected to bring the costs of international telecommunications and Internet connectivity down to competitive levels that are similar to those found in other developing countries such as, for instance, India.

2. Weaknesses

  • The dispute between government and operators stalls EASSY’s implementation.

Some African governments, including South Africa, want the consortium to be owned by a majority of African companies and to respect regulated ie low prices. They threaten EASSY’s operators to block their project if those conditions are not respected.

On the other side, the operators argue that this is an attempt to hijack an existing commercial project and make it a part of NEPAD ICT broadband Infrastructure Network, a States lead project benefiting from the UN support.

While States claim that only a State project would aim to the common good and prevent the risk of a consortium monopoly, the operators assert that their project although necessary to Eastern Africa’s development is stuck by the public sector.

According to them, governments want to claim paternity for a crucial development project, although the private sector via pressures by the World Bank seems to respect all the development criteria.

Meanwhile, consumers on Africa’s East Cost still pay up to 300$ a month for Internet access.

Moshen Khalil, Director for the ICT department of the World Bank Group underline following facts:

-the EASSY is already a truly African initiative ( most operators are African) ;

-Regulated prices were already imposed on operators as a condition to be loaned 30 millions $ by the World Bank. This was the first time the IFC has asked private companies to adopt developmental principles for financial support.

Accordingly, the States’ position undermines the EASSY project without true justification. While permissions to land and build are refused to EASSY instigators, some funding companies might retain their supports and renounce to the project.

3. Opportunities

  • Steady funding structure.

The sponsors of the project will comprise up to 28 telecommunications. These are predominantly well-established, African carriers in their home countries. There is an approximately equal mix of government-owned institutions and those which are private.

The total project cost of the EASSy cable is to be financed by the SPV (West Indian Ocean Cable Company Ltd) and Consortium Operators. It is estimated at $235 million.

  • Support from the World Bank

The International Finance Corporation, IFC (one of the World Bank branches) investment will take the form of a loan of up to US$30 million.

  • Respect of developmental principles for financial support

By conditioning its loan to the respect of a regulated price for Internet connection, the World Bank modified the financial behaviors of giant companies that could have imposed a price due to their monopoly on the market. As it is the first time for such a practice, it may have some positive effects both on EASSY’s financial value (ethic investment) and on its public image.

4. Threats

  • Stalled negotiations between States and operators would discourage investments.
  • The postponement of the EASSY’s project entails the risk of seeing the fiber optic cable technology becoming obsolete with the emergence of new technologies such as the WIMAX