Africa: A disaster waiting to happen

Certain Chinese investors are thinking about incorporating companies to start buying out the privately financed African cables after they go under within 2 years or so.  Africa is the next disaster waiting to happen where private companies are going to experience a blood bath according to these Chinese investors who want to buy fiber facilities for pennies on the dollar.

The Chinese government has an open check-book policy towards investments in telecom infrastructure to countries with huge natural resources.  The Chinese government is speculated to be behind the financing of one of the cables going to Australia.  One of the beneficiaries of the largesse of the Chinese government is Huawei Marine which came out of no where just a few years ago be become the fastest growing submarine cable system manufacturer in the world and becoming one of the legitimate cable suppliers wriggling in to the closed club of NEC, TE Subcom and Alcatel-Lucent.

Africa is key to the ambitions of Chinese and Indian companies and in case of the private cables going under, there could be a land grab between the carriers in those countries.  However, the Chinese government is very pro-active in these situations and is most likely going to be the winner in this war which will take place in 2 years.  Having said that, Tata and Bharti are already well-entrenched in to the African telecom scene and it will be very interesting to see how this plays out.

There are now six cables either working or in the construction phase competing for business in the African continent.  Some of the cables are not in the water yet and the vultures have already started circling.  As I said in my previous posting, the era of private cables is over.  The industry needs a new business model -- asap.

More Oxygen in the Network: By Jean Devos

Dear Neil

Not sure exactly when you and I met for the first time. It must have been around 1995. The submarine cable activity was a bit low at that time and you came in my office with your amazing idea, nothing less than a global network.  Project Oxygen!! “Let’s mobilize all the existing resources and build as quickly as possible a global network accessible to everyone if and when then needed “.  Half of my brain was telling me “never, never”   but the other half “fantastic”. I decided right away, just the necessary time to get some kind of internal approval or understanding, to support this idea as much as I could. I was telling myself “A man has found his life’s work, and a task has found its man”.   I remember telling my colleagues “Neil is the new Cyrus Field.  “The courage of someone who will not listen to reason has the power to give the creative stimulus”

As we all know and despite your huge work, Neil and your convincing marketing talents, project Oxygen could not be implemented as such. Does that mean that reason and realism has prevailed over eccentricity and madness? If one looks carefully I claim that it is exactly the opposite. Building project Oxygen would have been a better choice than what we have done! Building oxygen would have been the wise choice!

 We have built a global network which works, but at least two times more costly, basically unfair to the less developed countries and designed with no long term strategy!  Too many cables here, not enough over there!  Early access for the rich, late access for the poor. Low cost for the rich, high cost for the poor.  The today network is the sum of individuals initiatives not the result of a well thought plan. It has perpetuated the model and actually increases the differences. It is only recently that some corrective efforts have emerged through the mobilization of public money. The impact of several cable breaks have play the role of wakeup call.

Project Oxygen was carrying a political vision, perfectly illustrated by the word oxygen, a vital need. The idea was to give to the new broadband network the opportunity to reshape the world.

Dear Neil, Project Oxygen was an attempt to stimulate and regulate the market. It is my opinion that the submarine cable community should create its own “self-regulatory body» so as to move slowly but really toward a more intelligent network; We need to inject more oxygen in this network!

Jean Devos

Governments of the world: Shame on you

15 years after the Internet became commercially viable, most of the governments around the world are leaving the fate of the future generations of their citizens to the whims of the carriers in their countries.  With the exception of the United States, China, Malaysia and Singapore, no other country has given a helping hand to their carriers, leave alone make it a strategic initiative at the country level to boost their infrastructure.

How many more years will it take for the governments to realize that the economic health of their country including jobs, healthcare, education, training, entertainment and prosperity lie in the state and economics of internet infrastructure in their country?  Not to mention innovation, narrowing the gap between haves and have-nots and being at the forefront of science and technology.

Is it a wise decision to leave the future of your entire country in the hands of privately owned carriers whose only objective is the welfare of their shareholders?  Why would you blame them for maximizing the prices of bandwidth?  It is not their job to worry about the future of the country.  That is your job.

Instead of helping the carriers or investing in the Internet Infrastructure of the country, the governments are all counting up the millions or billions of dollars they will make from the next auction or the next sucker who buys a license, not to mention the revenue-share thereafter.  The money the government makes today selling the licenses is a pittance compared to the huge benefits the citizens of their country will get from an abundance of cheap and reliable bandwidth changing the future of the entire country.

If anything, some countries like India have extreme regressive policies.  If you cannot help, at least get out of the way.  But of course not.  The Indian government wants to sell licenses for anything related to telecommunications services including ISPs.  If you want to transit India (in and out), it costs $10/Mbps which is the government-regulated fee.  On top of that, the carriers charge their prices making Internet Transit in India extremely expensive, only next to the African countries.  And this is a country whose entire economy got a shot in the arm providing IT services.  This is a country that now lands a dozen submarine cables.

So how bad is the situation?  It's pretty depressing and humiliating.  It costs ten times to transit less than 5 km for a cross-connect from one cable station to the other than it costs to drop traffic in the UK and serve it to the entire world!  Enough said.

What will happen if the Indian government lifted all regulations for starting an ISP and landing submarine cables?  Unlike wireless spectrum which is a finite resource, fiber provides unlimited bandwidth.  Then why restrict the number of players in the space?  And what is the rationalization for charging fees or revenue-sharing?  My recommendation is to give away the ISP licenses for free to as many companies that want them.  I guarantee you that within two years, the Internet Transit prices will drop from $25-$50 per Mbps to $1 per Mbps.  When that happens, all of the Indian companies and MNCs who host their data in Singapore and the US, will come back home creating such a tidal wave, it will be a defining moment in the history of telecommunications.  There is a demand for another few dozen cables to India if the government gets out of the way.

Now think about it.  Why would any Indian content provider worth his salt host his content anywhere in the world but in India?  Because it is expensive to host it in India.  I don't blame them.  Would you?  So who is the winner?  Singapore -- a country with a fraction of the size and population of India hosts almost all of the content being served in to India.  Shows you what good governance can do to a country.  Guess who wants to compete for that business?  No, not India.  It's Malaysia!

I don't mean to single out India.  It is the same story in every other country in the world.  Planning may have become a dirty word after the fall of the Soviet Union but if governments don't plan, who will?

Google has invested more money to the betterment of the global infrastructure industry compared to any government in the world.  What does that tell you?

Global telecommunications has now become a zero-sum game.  If someone is winning, it is at your expense and vice-versa.  Stop treating telecom as a goose that lays a golden egg every time a license needs to be sold or auctioned off.  Start thinking of telecom as a key strategic investment that will forever change the fortunes of your country.

And now that your game is up, please at least pretend to do something positive for your own country.

Malaysian Government's strategic investment in submarine cables

The Malaysian Government has a big initiative to build a cable from Malaysia to the US.  A consortium of 24 telecom companies has been created called Konsortium Rangkaian Serantau Sdn Bhd (KRS).  The main goal of the consortium is to reduce the transit costs for Internet traffic in Malaysia.

In addition to the US-Malaysia project, the Malaysian Government has also initiated a couple of regional submarine cable projects such as Cahaya Malaysia Submarine Cable and the Batam Dumai Malaka Submarine Cable.  The Malaysian Government's target is to add at least another 3 Tbps of international bandwidth capacity to the country by 2020.

According to the Government, more than 50% of Malaysia's capacity is already video-based and growing fast.  While overall traffic is projected to grow 43% per year through 2012, the video traffic is expected to grow more than 100% per year.  The three major video categories are IPTV VoD, Internet Video to TV and Internet Video to PC.

The Malaysian Government is one of the very few in the world (probably the only one other than Singapore) that is being pro-active in taking a leadership position in initiating new submarine cable projects as opposed to letting the carriers decide the fate of the country.

With billions of dollars in government backing, Malaysia wants to rival Singapore in connectivity and become the major Internet hub in Southeast Asia.

Telkom Malaysia wants to go Commando

Telkom Malaysia is talking to carriers about a new cable called Commando which will reach the US through Guam.  This is continuation of the trend of trying to create alternate paths to Japan and Singapore.  Also Malaysia wants to create an alternate hub to Singapore by providing independent routes.