Competition rocks bandwidth costs via gateways, submarine cable

1 Comment » August 8th, 2008 posted by // Categories: ICT Industry Development Project



 Wednesday, August 06, 2008

Competition rocks bandwidth costs via gateways, submarine cable
Stories by Sonny Aragba-Akpore

SOUTH Atlantic-3 (SAT-3) submarine cable originally owned by 33
countries and equipment vendors has been thrown open.

The exclusivity which each of the 33 original owners had over its
control, has consequently ended after five years.

Its management said through various working papers that it was
preparing the venture for greater competition and efficiency.

Nigerian Telecommunications Limited (NITEL) was the sole signatory to
SAT-3 in Nigeria.

When Globacom’s attempt to be a co-signatory as a result of its status
of Second Network Operator (SNO) a few years ago, was thwarted by the
exclusivity clause, the SNO promoted by Chief Mike Adenuga opted to
create its own gateway, the Glogateway.

The advent of Glogateway to the telecommunications terrain created a
viable choice for other telecommunications for voice and data

Glogateway’s entry upturned the apple cart and began what analysts
called competition in that vital area where broadband and bandwidth
connectivity were seen as the bedrock of telecommunications.

More operators like Main One Submarine cable packaged by Main Street
Technology further heightened competition.

Now Nigeria will be opened to three choices – SAT -3, Glogateway and
Main One Cable.

Head of Glogateway, Mr. Charles Odiase and Main Street Technology CEO,
Ms. Funke Opeke told The Guardian their stories. Excerpts

During the opening session of an ICT conference in Accra, Ghana, Ms.
Funke Opeke, CEO of Main Street Technologies, Nigeria spoke on a panel
addressing how to maximise competitiveness in West Africa.

She challenged participants to build regional infrastructure solutions
and liberalise policies to enhance competitiveness in the region and
thus close the gap between the 12 per cent population and abundant
natural resources in Africa and the current two per cent contribution
to the global economy. Opeke highlighted that in today’s information
age, enhanced access to information through high quality and
competitive telecommunications services was critical for any country
to participate meaningfully in the global economy. She described how
the Main One submarine cable project that was in deployment by her
company to interconnect countries on the West Coast of Africa with
each other and the rest of the world would make a significant
contribution by reducing the wholesale cost of international
telecommunications bandwidth from $4,000 – $10,000/month/E1 (two mega
bits per second of information) to an equivalent of $400 or
thereabouts when the system is in service in May 2010.

Opeke urged West African telecoms regulators to set policies that
supported the deployment of shared and regional infrastructure in
order to improve access and reduce costs of telecommunications
services to African businesses and consumers.

In addition, she challenged the large multinationals deploying these
solutions to assist West Africa in skills development via the
development of centres of excellence for various technologies in
Africa. She highlighted that investment in such areas would make
current investments in ICT sustainable and would ensure a healthy
market for these corporations over the long term while assisting
Africa in building its own indigenous ICT industry.

The Main One Cable system is a two-fibre pair submarine cable designed
to provide connectivity to countries on the West Coast of Africa from
Portugal to Cape Town. The contract for the turnkey supply of the
cable system was signed between Main Street Technologies, the
developer of the cable and Tyco Telecommunications of the United
States in April 2008. The system is planned for implementation in two
phases, with Phase 1 providing connectivity between Lagos, Accra and
Portugal, where the cable will interconnect with other cable systems
providing connectivity to more than 40 major cities across the world.

The company has been working with regulators in Nigeria and Ghana to
secure licenses for landing the cable system and Tyco has recently
completed surveys for the landing stations for the cable in both

Private investors from Nigeria and Ghana, and a few Nigerian banks
currently fund the project. In addition, the project has obtained
interest from institutional investors across U.S., Europe and Africa
to provide funds exceeding the $240 Million required for completion of
the Phase 1 project.

Odiase puts Glogateway’s story this way “You know we launched our
operation about the same time with Glo Mobile. All the issues that
have to do with international calls, roaming, inbound and outbound
roaming and all the issues that have to do with international
experience of subscribers from Nigeria and within Nigeria have to do
with Glo Gateway. Recognising first of all that we have a bouquet of
licence, we have a national carrier license that we have used over
time to make a difference in the market place. The idea really is that
as a network that has all the licenses like the national carrier
licence that enables us to roll out the fixed network, we have the
Gateway licence for international calls, the Mobile license and of
course the Online license. Since then the Glo Gateway has started
doing quite a lot; we are responsible for all the international
operations of the business, and today if arguably, the largest carrier
of voice and data in Africa and the first operator in West Africa to
launch gateway switches and direct infrastructure in UK and in the US.
The facilities enable us to aggregate international minutes, not only
coming out of Nigeria but coming from different parts of the world to
Nigeria in the first instance and also from different parts of the
world we aggregate minutes to different A to Z destinations parts of
the world as well. Which means that we are involved in hobbing related
activities. We could pick minutes from America and send to China
without having to bring it to Nigeria first because our switches are
there. Because we are connected to tier one and tier two carriers
worldwide, it gives us an advantage, first of all, and they come to
respect us as the carrier of choice in Africa. So they talk to us all
the time, any time they want to talk to any company in Africa; they
call us and say, do you have access to this network in Africa, we say
yes, and they say lets give you all our traffic going to those places
because we don’t really know most of those networks in those
countries. At least we can trust you because we have been doing
business with you. What has now happened is that at least up to 95 per
cent of PTOs in Nigeria have their termination and origination minutes
handled by the Glo Gateway. In other ways for them to have quality
international call coming into their network, they need to have Glo
gateway to help them do that. The reason being that we have so many
roaming partners. The idea behind this is to enable our customers who
are carrying our SIM cards to have that wonderful experience, no
matter where they are, to be able to first of all, receive call, two,
go on the side of SMS. For this reason, we went ahead to change our
international SMS gateway, upgraded the international gateway carrier
in a way that our subscribers can send SMS from over 700 destinations
of the world from the Glo network. We tied up with several of the
biggest networks in the world. We have products in the area of voice
roaming, we have GPRS roaming, we have international SMS, we have
international MMS that we are about to launch. We have actually tested
to over 100 destinations already on the international MMS site. But we
are just taking our time to launch it so that people understand
properly before we come to that point it’s very clear that this what
we want to achieve.”

Odiase listed some of the advantages “On international SMS, the
service allows our subscribers to receive and send SMS to over 700
networks across all continents, including CDMA. This service was
available to limited companies but has now been repackaged to cover
the entire world. Subscribers would have the opportunity to
communicate to their loved ones from all parts of the world without
having any restriction whatsoever. The target has always been the
youth market; most active telecom companies that belong to the talk
and text segment of the market.

Are you saying it is only Globacom that can cover this kind of
services you are mentioning, what about NITEL, is it not contributing
to the development of the gateway services in Nigeria

Exactly, if I may just say, NITEL in playing its role as a gateway,
because of the government participation in it and the numerous
problems that it has to face, both in the recent and distant past, the
management has not been able to manage the gateway service properly.
The infrastructure they even are maintaining on behalf of Nigeria for
instance, the SAT3, the SAT3 managed out of Nigeria is the worst
management. The situation has degenerated to a level where networks in
Nigeria are taking SAT3 connectivity from a different country. The
government did not allow Globacom to manage SAT3, only NITEL has the
exclusive right. It is either fibre cut today or there is fire in one
NITEL facility or the other, or when NEPA goes off, it takes probably
one or two hours before a generator is switched on. They don’t manage
the power situation well, so people lose a lot of talk time.

Internationally, NITEL would have been well recognised but because
one, they are not picking their bills, two, they are not maintaining
their links properly, three, there was a lot of fraud on their side, a
lot of international players do not even want to talk to them at all.
If they want to terminate on NITEL at all, they want to terminate
because they know NITEL owed them money, so even the call doesn’t get
terminated, they just throw the call at them, but then, it doesn’t get
delivered. So today, minimum 95 per cent of the PTOs rely on Glo
Gateway to carry their international calls and that gives their
customers experience of being able to make international calls because
they are riding on the backbone that Glo Gateway has put in place,”
Odiase explained.

According to him, these are major carriers in the western world
mostly. These carriers carry on the business of termination and
origination of minutes to different networks across the world. Some of
them are network operators on their own, for instance networks like
AT&T, British Telecom, France Telecom, Telecom Italy and others. Of
course there are a lot who are not operators but are big in the area
of carrier business, like IBT, Mednet and others. Now what happens is
that they have the right to interconnect with any network they want
and they also have the right to shut down any network if they don’t
feel that minutes will terminate on their network. So today if you
want to talk to India, we have connectivity to BSML, Reliance of
India, ETEL, BARTI and others. If you want to make the cheapest call
to India, China and any of these places, you have to talk to Glo
Gateway. If you do not have connection to these people, a lot of the
time, the quality of call that will come to your network, one, you may
not be able to manage it, in the sense that today, people make a lot
of internet call, they are linked on VoIP, which quality are mostly
poor, but because they do not intend to pay anybody they log on the
VoIP and terminate whatever quality of call on anybody’s network.
However, because we are managing a lot of that on the infrastructure
of Glo Gateway, people are able to originate and terminate good,
quality calls to different parts of the world. Today, CELL relies on
us to do a lot of business for them, because having made us their
telecom partners in Nigeria, they found out that a lot of areas they
used to spend a lot of resources, we could help them deal with it.
Today we have about 312 connections. When I say connections, I am
talking about roaming agreement in 145 countries worldwide. This
footprint is second to none in Africa. Now that places us in a unique
advantage that what ever new value added service we need to bring to
the market, the experience of the customer is always second to none.
For instance, the Blackberry, we are the first to launch it here. If
we had stopped at that, which is at the Glo mobile level, the
experience would have been limited. But today the Blackberry users
from Glo, has the opportunity of roaming to at least in 76 networks
and that, nobody has done half in Nigeria.

Opeke explained that similar to SAT-3, the Main One Cable would run
from Portugal to Angola with the option of extending to South Africa,
subject to regulatory requirements and approvals. It will consist of
10,500 kilometres of fibre optic cabling based on a trunk and branch
layout with landing stations in Portugal, Morocco, Senegal, Cote
D’Ivoire, Ghana, Nigeria (Lagos and Bonny), Gabon, Democratic Republic
of Congo and Angola, with interconnection in Portugal to other markets
i.e. Europe, the Americas and Asia. Phase 1 deployment is planned for
2009 from Portugal to Nigeria and Ghana, with continued deployment via
a 3,000-kilometre extension to Cape Town, South Africa targeted for
2010, in advance of the World Cup Games. The project is based on the
latest Dense Wave Division Multiplex (DWM) fibre optic technology and
will provide a design capacity of 1.28 Tbps, representing
approximately 10 times the current capacity of SAT-3.

Main Street is led by Ms. Funke Opeke, an experienced
telecommunications executive who returned to Nigeria as Chief
Technical Officer, MTN Nigeria after a twenty plus years career in the
United States. Prior to her return, she was Executive Director,
Verizon Communications Wholesale Division. Subsequent to MTN, Opeke
advised TransCorp on the acquisition of NITEL and briefly served as
interim Chief Operating Officer, post acquisition. She obtained a
first degree in Electrical Engineering from Obafemi Awolowo University
Ile-Ife Nigeria and a Master’s Degree in Electrical Engineering from
Columbia University, New York.

In addition to Opeke, Main Street is advised by other captains of
industry including Mr. Fola Adeola, founder of GTB Bank and Mr. Asue
Ighodalo, founding partner of the Law Firm of Banwo & Ighodalo.

Main Street has completed a commercial feasibility study for the
construction of the Main One Cable system and delivery of
international telecommunications services to the nine country markets
targeted. MST also completed the engineering study for the Main One
Cable route between Portugal and Cape Town in October 2007. Nigeria
will serve as the operational hub for the Main One network and MST
will operate the landing station and network control centre here. The
network will interconnect with major telecom operators and ISPs in
Lagos initially to deliver wholesale services across the country, and
later on the in Port Harcourt.

In Ghana, Main Street is in talks with the developer of a nationwide
fibre optic backbone network linking the major cities for collocation
of its landing station and the provision of backbone interconnection
services. In addition, Accra is targeted as the host landing for the
second leg of the Main One Cable going towards Angola and South

Main Street has generated significant enthusiasm for participating in
the Main One Cable project from major suppliers in the specialised
business of submarine cable systems and is currently awaiting final
responses to its Invitation to Tender. MST’s objective is to sign the
Main One Construction and Maintenance supply agreement no later than
Q2 2008 in order to achieve timely implementation.

Since the initiative was launched in 2007, MST has received funding
interest from several Nigerian financial institutions, the African
Development Bank (AfDB), and global investment companies towards the
$450 million cost of the system and the company is currently working
with financial advisers to complete the financing package. In
addition, the project has received offers of support from technology
partners such as Cisco Systems and Intel Capital who view the project
as a key enabler of technology development in the African, and
specifically Nigerian market. The project has also obtained the
endorsement of ECOWAS, the West African Telecommunications Regulatory
Authority (WATRA) and has been invited by several other West African
countries (Ghana, Sierra Leone) to land the cable on their shores.

The benefits of the proposed submarine cable system include

   * provide much more capacity (1.28 Terabits per second) than is
currently available via the existing SAT-3 cable, the Nigcomsat
satellite and other foreign satellite systems currently deployed for
such communications in Africa,

   * deliver price reductions in international capacity subscriptions
(and thus Internet access) of over 50 per cent at the onset over
current market prices, with the potential for further reductions as
the cable capacity increases,

   * provision of communications capacity on a wholesale open access,
common carrier, shared infrastructure basis to all eligible telecom
operators and Internet Services providers at uniform tariff rates
consistent with best practices in other parts of the world,

   * local content development via skills transfer of critical
networking technologies and job creation with the location of the
Network Operational Centre in Nigeria,

   * further development of Internet networking capabilities to
facilitate the transition from current switching of intra-African
traffic in Europe to newly established switching platforms in Nigeria,

   * provide a broadband networking platform with adequate capacity
to close the digital divide between Africa and other continents and
support local ICT growth.

     Odiase explained: “The idea really for us is that ultimately,
Nigeria must come to the point where they fully understand that Glo
Gateway means the best for them either when travelling or any form of
experience they need to have.

     Today we are also looking at opening Gateway switches in Hong Kong.

     It’s just the same way we are talking of the Glo1 Submarine
Cabling Project, which today, is planning to address all the capacity
issues that have to do with bandwidth, broadband access and all of
that for the whole of Africa. What I mean is that we are running a
cable under the sea from London to Lagos solely sponsored by
Globacom-a project that is at the end of the day likely to cost up to
$500 million. We are doing this to link most of the West African
coastal countries to the rest of the world with enough capacity. This
raises the question of NITEL’s capacity.

     For us, NITEL could have done well, but you find out that area
of capacity is not available today. Our banks are spreading all over
most of the West African countries to the whole of Africa but the data
they want to transmit they are not getting it at a good rate. They
also don’t want to spend too much more on communicating with their
back office and all of that. It also means that many countries are
looking for capacities to be able to manage many things in their own
economy but they are not finding those bandwidth because nobody
thought of bringing those huge investments, until Glo showed up again.
Already as we speak, we are half way done. The cable has been laid
from London up to Mauritania and before the middle of next year, that
cable would be live and completely up and running and then can be used
by everybody in Africa to carry bandwidth, carry data across any
network, which means that any form of video streaming or conferencing
that people want to achieve for any reason whatsoever, they are able
to do it without limitations.”

     He explained Glogateway’s relationship with other operators
“When you say subscribe to Glo, I’m saying on the area of gateway
services. If you look at it this way, the other GSM companies by law
are free to carry their own international traffic to any part of the
world, much as the same with the PTOs. But the cost of establishing
infrastructure is pretty high for them and they look at it and say,
why do we have to do this if we have a gateway locally in Nigeria that
can deliver this for us to different parts of the world?

     They have also looked at the footprint that we have. For
instance, if you were a subscriber of another network, you know for
instance that Glo has footprint in the area of GPRS roaming, prepaid
roaming. We did all these because we know that if you take your SIM
cards, it will cost you a lot much more to make calls. Now we are
planning some form of reduction because as a gateway, we are in all
countries and we are looking at the customers that we have and said
look, we need our people to enjoy this services rather than cutting
their arms and legs. Today, we are going ahead to launch Globacom
recharge cards in UK. So when our people go to London and run out of
credit, they just go to the shop nearby and buy a Globacom Card and
recharge immediately without any problem. All that is part of a way to
give everybody the same experience they never had from others, Odiase

     When is the recharge card launch taking effect?

     It is going to be launched this August. The UK government has
given approval. The cards are already being printed in the UK and all
of the issues are being tidied up. The staff that are going to launch
it have already gone, they are in the UK now. We are putting finishing
touches to the whole process and in August we will definitely go live.

     Those recharge cards would enable Nigerians do two things, one,
if you were roaming with your SIM card to UK, you can easily buy a
recharge card when you run out of credit and, two, is that we are also
thinking of Nigerians back home, brothers and sisters in school who
don’t have money to recharge their phones. Their relatives in UK can
buy the recharge card over there, and send the recharge number to his
relatives at home. That one is immediately able to benefit from that
cash investment. We are going to replicate this in France and USA very
soon. In fact, if you look at the history of Globacom, the people who
put us in this pedestal today are the masses. They believe in us so
much and that is why everything we are doing is only to think of them.

     We have made all our footprints available to them that
immediately you land in France or in all the places we have roaming
agreement, immediately you switch on your phone, you should be able to
automatically get all the information you require to use your phone
there. Direct you to emergency numbers and all that. And if you make a
wrong call, with a wrong code, it should be able to automatically
correct that and send the call for you.

     With 95 per cent of the PTOs hooked to you, you are likely
becoming a monopoly?

     The way the whole processing of licensing was done, we were the
second national operator. We got the license to that effect. Later,
the angle of Unified Licensing came into place. Well anybody would
want to build a gateway, on his own but some of them tried it and
found out it was not that easy, they bounced back to having us take up
their traffic, Odiase concluded


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One Response to “Competition rocks bandwidth costs via gateways, submarine cable”

  1. […] rocks bandwidth costs via gateways, submarine cable Competition rocks bandwidth costs via gateways, submarine cable Possible impact – 90% reduction in cost of international telecommunications bandwidth. Among other […]

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