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The East African Submarine System says pricing for internet and voice services should fall by at least 70 per cent.

Kenya’s third fibre optic operator, the East Africa Submarine System (EASSy), on Thursday upped the ante in the ongoing internet pricing debate by accusing its rivals of deliberately denying consumers the benefits of broadband connection through exorbitant pricing.

The company, whose fibre optic cable is expected to land at the Kenyan coast in June next year, termed Kenya’s internet market as an oligopoly that lacks competitive pressure that would yield better pricing.

Chris Wood, the chief executive of WIOCC, the largest shareholder in EASSy, said that with the landing of the fibre optic cables, the cost of internet and voice service should drop by a margin of at least 70 per cent.

“The current argument that prices will only fall by 20 per cent is baseless as it does not recognise the value of competition in the market,” Mr Wood said.

An oligopoly is a market dominated by a few players acting in concert to foster self interest. Kenyans have been vigorously debating internet pricing since two fibre optic cables landed at the coast in the past four weeks.

The debate is informed by the high expectations that the landing of the cables would offer consumers access to high speed internet and significantly reduce prices.

Since the landing of the two cables however, service providers have maintained that prices will only drop marginally citing the large number of cost items associated with it.

Spur progressMr Wood said Kenya’s internet market is a victim of collusion among service providers to increase their profitability at the expense of public good.

“Were any of the two operators to move close to global pricing, a price would ensure that would bring prices down significantly,” he said.

EASSy says only a developmental rather than commercial approach to the business of information and communication technology would spur progress in countries like Kenya that have some catching up to do in a globalizing world.

EASSy says it would offer a more flexible pricing structure than is currently available from the East African Marine System (TEAMs) and Seacom.

Mr Wood said that his company is already selling an STM1 – a measure of a bundle of bandwith capacity on fibre optic – at $1 million less than its competitors.

“Our STM1 is priced at $2.5 million. We anticipate competition will drive this rate down to $1 million per STM1 sometime next year,” said Mr Wood, with a promise of corresponding drop in consumer prices.

EASSy’s rivals termed Mr Wood’s statement as a self serving excise meant to prevent consumers from sign up to what is available in the market with the false hope that a cheaper alternative is coming.

EASSy is betting on its bank of 12 African telecommunications operators who have committed to buying capacity from its cable for sale to customers at competitive prices.

WIOCC is the investment vehicle for the EASSy cable and owns a 30 per cent stake in the project alongside major national telecommunications operators including Telkom Kenya.

The remaining 70 per cent of EASSy is shared between development agencies and global telecoms operators.

EASSy officials ruled out the possibility of unscrupulous operators taking advantage of their access monopoly to fix prices, saying all operators have committed to maintaining an open access policy as dictated by key investors such as the World Bank.

“We have committed to bringing down prices through open and fair access mode of operation,” said James Wekesa, WIOCC Chief Commercial Officer.

The $263 million EASSy hopes to meet its ready for service date of June 2010 and is currently building its fibre optic cable in readiness for laying beginning next month.

International fibre optic cables are essentially pipes that contain thin strands of fibre that are able to carry high amounts of data quickly across long distances.

They are typically laid along the sea beds that line continents, and provide cheap access to high quality television, high speed internet and clear voice services compared to the more commonly used but unreliable satellite technology used in this region.

EAASy has spent an additional $2 million to secure military support and procure war zone insurance to fend off threats from pirates in the cable’s route.

Avoid piratesIt has also been forced to implement a 400km reroute of its cable in the seas off the Horn of Africa to avoid areas targeted by pirates.

In addition, the project will feature in-built redundancy options which will provide seamless service even if a cable connection is lost.

“Redundancy is a key differentiator between our cable and the other two projects. We have multiple links to various points so that there are no single points of failure on the cable,” said Mr Wood.

First conceptualised in over five years ago, EASSy was the first fibre optic cable project planned for the East African seaboard and hopes to connect 20 African countries using a 10,000 km cable.

Political intrigues have seen its construction lag behind other projects which have since been completed such as Seacom and TEAMs. Both those cables were finalised in the last month.

Winning bidderThe potential and need for a submarine cable along the east coast of Africa became even more evident after May 2004, when South Africa was announced as the winning bidder to host the 2010 FIFA World Cup.

Positive economic growth in sub-Saharan African states between 2004 and 2007, coupled with the great drive by African governments to foster the growth and adoption of ICT in various sectors, further underscored the need for submarine connectivity to meet Africa’s growing need for affordable high-speed international bandwidth.

EASSy Attacks Rivals Over Internet Pricing