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Knocked out of orbit

By Gemma Ware
Posted on Tuesday, 20 April 2010 10:51

As new fibre-optic cables plug Africa into high-speed international connectivity, Mike Van Den Bergh, Chief Executive of Gateway Communications’ Carrier and Wholesale Services, tells The Africa Report that Africa’s satellite operators will have to navigate a new horizon.

The Africa Report: How much is your business divided between satellite and fibre-optics?

Mike Van Den Bergh: At the moment we’re probably doing about 95% satellite and 5% fibre or terrestrial. The percentage on fibre has probably doubled in the last couple of years. That’s going to shift a lot more in the next three to four years, and I think there we would see the swing being more towards the 60/40 type of range, maybe even towards 50/50 in the five-year horizon.

What impact will the cables have?

The backhaul connectivity from the various landing stations is still, in most countries, particularly poor. That’s why I think satellite is certainly not going to see its imminent demise any time soon, although its role is going to change.

If we have a look at what is happening with fibre connectivity around Africa, we have a look at the various submarine cables. On the east coast, for the first time, we’ve had a couple of cables there – Seacom and EASSy. On the west coast, in addition to SAT3, we’ve got WACS, ACE, MainOne and Glo from West Africa up.

But the reality is that having delivered that capacity to a particular landing station doesn’t immediately make that entire country connected. That’s why we still see satellite playing a very significant role in extending backhaul connectivity in-country, in terms of last-mile, quick deployment. I think there’s going to be a much stronger growth of hybrid solutions, however we choose to define them.

So, the landings will be done by cable and satellite will take up the last mile?

Certainly that’s one version of hybrid [solutions] – whether it’s last mile or some form of domestic backbone connectivity where the fibre doesn’t exist.

But the other area where we’re already seeing this extensively is on the east coast, as the submarine cables start to land (and I think we’re going to see more and more of that on the west coast as well), where clients are looking at fibre as still having some significant risk from a single point of failure.

We’ve seen some rather horrific examples particularly in West Africa over the last year where a landing station has been out of action for up to six weeks at a time. We’re definitely seeing satellites also playing an even stronger role in providing restoration type services, improving overall resilience, so that if there is an outage on fibre that at least some level of restored service can be provided using satellite.

A megabit can cost $4,000-6,000 on satellite and around $100 on fibre. Is that still the price differential?

It is really much ‘how long is a piece of string’. It’s a little dangerous to make broad sweeping statements on what the price of a megabit is, but there’s no question that satellite connectivity in general will be materially more than fibre.

What we are seeing though is perhaps the deployment of more new technologies. There’s always going to be a premium in overall margin terms for good, innovative and the latest technology solutions.

Long-term contracts will be coming up for renewal. You have large capacity on some of these satellites. Are you in a good position to renegotiate those contracts?

I think the reality is that pricing is continuing to decline, margins are continuing to decline – it’s what’s happening everywhere in the telecom industry.

Overall, particularly in Africa (and that’s why Africa is being seen as still one of the last growth markets), you are still seeing that overall growth is keeping pace. We are still seeing an uptick in demand. You’re starting to see very large demand for very large amounts of capacity and it goes back to that hybrid-type solution as well, where the more the telcoms are committing to submarine, fibre-based solutions, the more their risk is increasing in terms of what happens if there’s an outage and the impact on their subscriber base.

As more of that fibre goes in, then more of that restoration will take place on alternative fibre systems rather than on satellite, and again that will probably be in the next three to five years. You’ll see another shift in satellite demand and pricing.

The other thing there’s probably still 70% of the African continent in terms of landmass that for the foreseeable future is only going to be accessible by satellite. You are seeing that it’s being redeployed into new growth areas for the operators and for the multinationals who need to continue to have connectivity.

It still means prices are coming down, but they’re not coming down half as fast as people were expecting because the demand is still there.

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