What does SAT3 charge and why?

The price charged for international bandwidth in countries is entirely controlled by the SAT3 consortium member that has been granted a national monopoly. In each of the countries along the cable's route in Africa this is the incumbent telecoms operator.

Prices vary enormously. Until fairly recently, Telkom South Africa was charging US$25 000 per mega bits per second (mbps) per month (mbps is the standard unit for charging for bandwidth). West African countries, like Nigeria and Ghana, were selling at between US$10-15 000 per mbps per month. More recently prices have been falling particularly where ISP associations have negotiated better deals for their members.

The Ghana ISP association made a deal with Ghana Telecom that gave its members (under certain conditions) the right to buy at US$8 000 per mbps per month. It is now in the process of negotiating a still lower price. The ISP Association of Nigeria negotiated a similar deal where the price has gone down to US$3 500 per mbps per month. One operator admitted that the underlying price of providing the capacity was in the order of US$2 000 per mbps per month.

So why are the SAT3 consortium members charging such high prices?

The main reason is that because they had a monopoly, they could. Instead of prospective customers buying from an African entity and the money staying in Africa, they have chosen to buy satellite capacity. These revenues go out of the continent. It is a sign of how over-priced the fibre has been that many customers have chosen satellite over the fibre offered.

How can such pricing tactics make commercial sense?

Many of the consortium members lack any commercial strategy because they are government-owned. Not all SAT3 consortium members have sold their initial allocation of capacity and some are said to have sold as little as 10-15%. They have kept prices high because they wish to make the maximum short-term income. But fibre is a wasting asset as it only has a 25 year life and if you do not sell it, you lose it.

Now read: Who does SAT3 connect?.