Arguments for open vs closed access: How EASSy fares

The high price of international fibre bandwidth in Africa is largely a function of the monopoly structure that has been used to build SAT3. SAT3's membership is closed and its transactions and pricing are not transparent. Its members have sought to use its capacity as a distinct income stream rather than as a way to encourage the broader growth of their business. This is what can be described as "closed access".

Open access is not some fixed dogma, but starts from the basis of asking the question: How can we get sufficient competition at all levels so that we can ensure low prices, while at the same time making sure that there are sufficient investors willing to take the risk?

International fibre bandwidth is expensive to build and its life is time-limited, usually to 25 years. Therefore it makes practical commercial sense to organise it in such a way that the maximum use is made of whatever capacity can be provided over as longer period as possible. In order to achieve this, those building the fibre need to adopt two approaches simultaneously:

1. The pricing of the international fibre capacity must be as low as possible in the initial period, with the pay-back being spread over the full 25 year life of the cable. (This while taking into account the need to operate and maintain the cable).

2. The investors in the cable need to take the view that the existence of the lowest possible commercial international fibre prices will allow them to make their money in their core business – fixed or mobile telephony and national infrastructure – or from other businesses building services and applications that make use of their networks. In other words, the cable exists to help everyone make profits at a country level.

Having adopted this approach, those involved need to ensure the following occurs:

Users (like private companies, governments, or civil society organisations) can get more or less equal access to the international fibre capacity in their respective countries. Unlike with SAT3, the investors should not be in a position where they are effectively holding a monopoly, or hoarding capacity, or assigning themselves an exceptional price advantage.

Because the underlying assumption is that everyone is using the international fibre to make money through their other activities, it is essential that the basis of the pricing of the capacity is completely transparent. Since no-one is in the business of gaining a commercial advantage in selling the international bandwidth, there is no reason why the financial basis for the capacity offered cannot be open to transparent scrutiny: both investors and users should expect nothing less.

There should be no artificial barriers to investing in the international fibre project and it should be possible for an investor to sell on its share to another investor subject only to an agreed procedure.

At present, EASSy is demanding that potential investors have an international licence as it knows access to these have been severely limited in many countries to protect the incumbent telco. In two years time, there will be considerably more international licence holders but they will have missed the opportunity to invest in the EASSy project because of this artificial barrier.

EASSy is saying that there has to be a limit to the number of investors. This has left a number of potential investors on the sidelines. Although it would probably deny it, EASSy appears to have prioritised getting traditional telco investors, precisely the kind of companies that are unwilling to cede their protected privileges to newcomers. Only five of the 27 Consortium members announced at the end of January 2006 were private companies.

In order for landlocked countries or countries without landing stations to get access to the EASSy fibre, there has to be clear agreements in place that allow companies in these countries to connect to the fibre on the same basis as those with coastal landing stations. There cannot be "gatekeepers" in the system who keep prices artificially high as there currently is with SAT3.

Furthermore, each country needs at least two competitive providers of both inter-regional and international capacity or the alternative is the rather unpalatable prospect of price control.

There are siren voices that are saying that the EASSy project needs to be built as quickly as possible and that tackling these issues is too time-consuming and complicated. Unfortunately Africa has only once chance to get it right and if it gets it wrong it will live with the consequences for the next 25 years.