The emergence of Seacom has proved to be a catalyst for the development of the telecommunications and IT sectors within the East African region, spurring other operators to get their systems ready, says Seacom president Brian Herlihy.
Seacom surprised the ICT industry almost three years ago when it suddenly announced it was beginning the marine survey to plot out the route that its 11 000km, 1.28Tb cable would take.
Until then, the industry had been watching the slow development of the East African Submarine Cable System (Eassy) as it got caught up, and then freed itself, from political interference and positioning between its numerous shareholders.
Now the cable is all but a reality and, Seacom says, it is on track for the system to be operational by the end of June. This will be the first system that will land in SA that will not be controlled by Telkom. It will be landed and managed by Neotel, which will on-sell capacity.
Challenging times
There were other issues that Seacom had to overcome in its early days. The company had to conquer scepticism that a private equity funded enterprise, as opposed to the carrier-owned-type model, would be able to build what is essentially a daunting engineering project. It also had to prove it would be able to bring down prices to deliver cost relief to the bandwidth-starved region, be around in the long-term (more than 10 years), and overcome the various regulatory and government protocols that exist within the region.
"What we realised early on is that we had to keep our heads down and build it," Herlihy says. "Our credibility was at stake and so we had to prove that we could deliver. Now that we are doing that, others are saying they can build business cases on the back of our system."
He notes that because of Seacom`s aggressive pricing strategy and the fact that it will be operational, the cost of international connectivity will start tumbling.
"As economists, looking at the pricing models we had to work out whether we would prefer to have fewer customers being charged higher prices, or many customers at a lower rate," Herlihy says. "Prices are now already coming down and are set to become a fraction of what they once were."
The right price?
He says Seacom`s pricing model takes into account all the costs that may be encountered along such a system.
"Seacom made the conscious decision to bundle in all the costs into our capital investment," he says.
Prices are now already coming down and are set to become a fraction of what they once were.
Brian Herlihy, president, Seacom
This was done to meet the demands of the Kigali Protocol, an agreement that was developed under the auspices of the New Economic Partnership for Africa`s Development. Nepad envisaged open access for all companies that needed it and non-discriminatory pricing, meaning all customers were charged the same.
"The problem was that the Kigali Protocol never articulated how these principles were supposed to be achieved and we went to great lengths to do so," Herlihy says.
Rivals and pride
Apart from Eassy, Seacom is also facing other potential rivals, most notably the West African Cable System that is being put together with some major Southern African telcos. These include Telkom, MTN, Vodacom, Broadband Infraco and Neotel on the other side of the continent.
"Anyone who needs African connectivity needs to have connection on the West and East Coasts. One cannot just have packets going in a linear line along one cable; that defeats the whole point of IP [Internet Protocol]," Herlihy says.
Questions raised about the private equity backing that has funded Seacom intrigue Herlihy. He says overseas private equity is used mainly for long-term infrastructure investments and there is no sign that any of the investors, which include Venfin, Shanduka and Convergence Partners, have any inclination to sell.
"It is not that they are just here for the long haul, but I think they are very proud of the project."
Herlihy says Seacom`s government relations have definitely improved over the past few months.
"Governments now have a far better understanding of our business than before and are warming to it."
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