On 4/19/05, Ken DiPietro wrote: > It appears that the cartel is starting to fall apart. This could be > excellent news for the spread of ICT and Telecommunications throughout > Africa.
I would not get your hopes up too much. The "cartel" is still fully intact. In this case NITEL, the PTT telephone company of Nigeria, is still the only "gate keeper" to SAT3 bandwidth in Nigeria. What the article states is that NITEL has a customer, and that customer is going to resell bandwidth, and is going to charge "less" for the product. Let's look beneath the surface here. This arrangement is nothing more than a simple wholesale/retail business model. NITEL wants to "sell in bulk" and have a small list of customers that pay high prices for interconnection to SAT3 infrastructure. This lowers NITEL's costs because it has fewer customers to deal with, both technically and from a credit risk perspective. It is these customers who in turn will sell to, support, and try to get paid by, the many "retail" customers in Nigeria, such as Internet cafes, schools, government agencies, hotels, etc. Each of these customers is a challenge to serve, in part because the rest of the NITEL network is such a useless mess everyone must lay their own fiber, and/or build their own wireless networks to distribute bandwidth. NITEL can't do any of this well because it is a bankrupt and dysfunctional branch of the government. NITEL's strategy is in my opinion a reasonable response to the realities of the situation. But it does not create any kind of competitive market for SAT3 bandwidth in Nigeria since all buyers of that bandwidth still have to go through NITEL, or go through somebody who goes through NITEL, etc. etc. In reality, "direct" access to SAT3 allows a technically capable party to obtain a circuit of at least DS3 in size (45mb/sec) to Portugal. In Portugal the owner of said SAT3 (sub)circuit has to then either buy bandwidth in Portugal, or more likely, buy yet another DS3 to somewhere else like London or New York, where one then buys internet bandwidth to make the end-to-end circuit useful. When dealing with a pipe like SAT3 the smallest quantity that makes any sense is no less than a DS3, so all this takes a fair amount of money and credit exposure. Also, the set up for these circuits is still a very manual process. No telecom company wants to sell, configure, and operate a DS3 for one or two months, and then tear it all down when the customer fails to pay the bill. It's a very different type of business relationship than selling pre-paid phone cards in denominations of $1 or $5. NITEL does not have enough equipment to sell 100's, much less 1000's, of DS1 sized circuits all over Nigeria to sell SAT3 bandwidth, and there is a fairly short list of potential customers that are both technically capable and credit worthy enough to operate their own connection via SAT3 through to the Internet. Note that there are other barriers to consider. For example, Nigerian currency, the Naira, is not accepted in Portugal or the US or London; so arrangements with vendors there would require not only a lot of money, but a lot of money in liquid international currencies. If the Nigerian telecom company is setup to sell telecom services to Nigerians, and is paid mostly in Naira, then this becomes a long term issue and in the startup phases of any entrepreneurial telecom company can be a very high hurdle. So NITEL is doing something that makes sense under the circumstances. What they are doing concedes the realities of their own situation, their ability to deliver, and the capacity of the majority of their potential customers. However, if you ARE a credit worthy and technically capable telecom company in Nigeria then this "news" is of little interest. You are still forced to buy SAT3 bandwidth from NITEL (or someone who is buying it from NITEL...). If you buy "Internet" bandwidth from NITEL then you do not have to make your own arrangements in Portugal, and you can pay in Naira. But, this puts you at further risk of NITEL technical failure, and you not only are dealing with a monopoly vendor for the raw circuit; you are dealing with a monopoly vendor for the Internet bandwidth as well. This is a very different situation than if you were to have an ownership position in SAT3 that gave you equal status with NITEL, and using these rights you obtained a circuit which ran through to London, or New York, or perhaps both. In those cities you could arrange for your SAT3 circuit to terminate in rack space you would rent in a collocation (exchange) facility where there would be a free and highly competitive market for all kinds of telecom services. You might simply buy Internet bandwidth in bulk, but you could also have separate sub-circuits that connected directly to certain "peers" or just to different telecom companies for fault tolerance, or optimization of their network footprint. You could buy telephone call "minutes" at very competitive prices as well. If you "own" this circuit and "own" where the circuit terminates then you effectively bring the competitive market that exists in those places back to your facility in Lagos. If you don't own this circuit; if you are simply buying services from NITEL, then you have nothing of the sort. You are simply a customer that is forced to buy from only one store. You have no leverage. The reality of SAT3 is that it cost approximately $600 million dollars and the defacto credit worthiness behind Nigeria's participation was not NITEL, but the Nigerian government and people themselves. One can make an argument that the SAT3 rights which any given country holds are not really held by the PTT in question, but are rights that belong to the people. This is only true to the degree to which the government still owns the PTT. If the PTT has been privatized then I believe the SAT3 assets in question belong to the shareholders. But, when the shareholders are the citizens of the country, then one could argue that the degree to which the assets are being managed well, and in such a way as to enhance the economy overall, is the key matter. If I sell a $20,000 Cisco router to NITEL then I am counting on NITEL to pay me (for better or worse). If I sell a $50 million dollar position in an undersea cable then I am counting on more than NITEL, I am counting on the Nigerian government and people as well. Such representations were likely part of the original SAT3 terms and conditions buried deep in the fine print somewhere. One would like to see SAT3 terminations in each country occur at a carrier neutral open exchange where "almost anyone" can rent rack space and obtain interconnections to various telecom services delivered via SAT3. Again, most companies would not be capable of carrying the full burden of through bandwidth to London, et. al., but perhaps 3-5 could, and that would be sufficient to create a wide variety of options for everyone else. But the devil is in the details. Someone still has to manage the SAT3 interface and run the technology to carve up the bandwidth and keep things running smoothly. A government can't do this, so it delegates to the only thing that makes sense at the time: the telephone company owned by the government. We now know how bad a decision this has turned out to be, but crafting the alternative is still a work in progress around the world. It would be impressive if Africa figured it out first. ------------ ***GKD is solely supported by EDC, a Non-Profit Organization*** To post a message, send it to: <[EMAIL PROTECTED]> To subscribe or unsubscribe, send a message to: <[EMAIL PROTECTED]>. In the 1st line of the message type: subscribe gkd OR type: unsubscribe gkd Archives of previous GKD messages can be found at: <http://www.edc.org/GLG/gkd/>
