Why Internet Costs In East Africa Remain Stubbornly High

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Despite a number of major undersea cables having connected to East Africa since 2009, internet costs have not fallen as expected with connectivity being out of reach especially to low income earners.

According to a 2013 ‘Freedom on the Net’ report, an average user in East Africa requires up to $35 per month to access a stable internet connection: an amount that locks out the lowest paid unskilled workers who earn on average only about $50 monthly.

Plans are in place, though, by the likes of the Communications Commission of Kenya (CCK) to boost internet penetration rates from 41.6% to 70% in Kenya.

But, in the meantime, internet access remains a luxury to a minority of East Africans, with number of factors holding back the region.

Experts speaking at the AITEC East Africa ICT Summit late last month blamed high taxes, an unwillingness among telecom operators to share infrastructure and unnecessary expenditure by both government and telecommunication firms in laying inland fibre cables as key reasons for the region’s high internet costs.

Badru Ntege, the chair of regional internet registry AfriNIC and chief executive officer of East Africa human resources firm NTF Consult in Uganda, said at the summit that telecom companies are spending too much on individually laying inland fibre cable, yet they could cut these costs if they adopt a shared-cost model.

“I think we should give more concentration on the value of having people connected to the broadband, rather than just concentrating on connectivity,” said Ntege.

“It is time we had a paradigm shift from serial thinking to parallel thinking, where we will think of how to build the fibre network and at the same time ensuring that we localise the content to attract more users.”

As early as 2003, it was evident that East Africa needed to have a direct connection to Europe and North America, as that’s where Africans view high levels of their internet content from.

Stakeholders including governments, telecom companies and the World Bank, subsequently joined forces in a project to build The Eastern Africa Submarine Cable System (EASSy).

Amid concerns the project was taking too long to complete, the Kenyan government in 2007 embarked on building The East African Marine System (TEAMS) in partnership with telecom firms such as Safaricom, Kenya Data Networks, Econet/Essar Telecom among others.

The TEAMS project, then, was completed in record time, arriving in the Kenyan port city of Mombasa in June 2009.

Ntege, therefore, says this type of approach needs to be replicated for terrestrial fibre networks in East Africa, as it could reduce the cost of laying down fibre.

Kenya’s largest mobile operator Safaricom, for example, has already started laying its own inland fibre network, a project that will see the company spend $114 million over the next three years.

The mobile network justified its decision to go it alone by saying that this will provide it with “greater control over the fibre network.”

US-based financial advisory firm Merrill Lynch, in a research note released earlier this year said, “With the high cost of inland fibre network, future price reductions may not be as high as in the past, as each company tries to recover the cost of its investments.”

Taxes also continue to cripple efforts to bring down internet costs within East Africa, according to experts speaking at the AITEC Summit last month.

There exists almost no electronic manufacturing industry in East Africa, meaning that most of the hardware and software products being used are imported.

These goods are then subject to shipment, insurance and customs charges: all of which contribute to the escalating cost of telecommunications services.

According to the East Africa Tax Guide 2012/2013 report published by auditing firm PricewaterhouseCoopers, import taxes on fibre cables and other related products ranges between 15% to 30 %.

Even though countries within East Africa, led by the region’s economic powerhouse Kenya, are in a bid to lower import and excise duties on telecommunications products and services, experts say that the taxes could be lowered further.

This in turn could allow them to lower their charges, make broadband more affordable and also enable the operators to reach critical masses that favour economies of scale.

Source:ItWebAfrica

 

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