Crunch time looms for Eassy

By Paul Vecchiatto, ITWeb Cape Town correspondent

Cape Town, 19 Sept 2006

The next three months will be make or break for the East African Submarine Cable System (Eassy), as governments and existing backers seek to convince external investors that it is worth funding, says telecommunications newsletter The Balancing Act.

According to the newsletter`s editor, Russell Southwood, despite the agreement signed in Kigali, in August, there are still simmering disagreements from three major sources.

These are the refusal of the Kenyan government to sign the protocol and look to find backing for its alternative plan; the news that SA`s Telkom keeps threatening to pull out; and lastly, that countries will be putting up funds themselves rather than getting donor money to do so.

The Eassy project is a cornerstone of the New Partnership for Africa`s Development (Nepad) that is aimed at transforming the continent into a credible factor in the global information society.

The major objective of Eassy is to connect the east African coast with an undersea fibre cable that will be a rival to the Atlantic cable, named SAT3. This new connection is also considered vital to SA`s plans to host the 2010 Soccer World Cup, which will require far more bandwidth, especially for broadcasting, than is available.

Seven countries - Tanzania, Uganda, Rwanda, Lesotho, Malawi, Madagascar and SA have signed the Eassy protocol. The lack of signature from other governments (with the exception of Kenya) is explained by those who organised at the meeting as being due to non-availability of the relevant ministers.

Southwood writes that Telkom SA keeps threatening to pull out its contribution and in doing so has created a fairly public linkage between the South African government`s treatment of SAT3 and its willingness to invest in Eassy.

SAT3 about turn

"Back in July, the Department of Communications was gung-ho to declare the SAT3 landing station 'an essential national facility`. More recently, a government minister said it may not be necessary to do this as Eassy would provide competition for SAT3," he says.

The newsletter goes on to say that if SA has signed the protocol it would be hard to endure the loss of face of not having Telkom participate. "The [SA] government still has enough clout and shareholding to push it to do so. But in those quid pro quo moments that make these kinds of things happen it looks like the South African government has agreed to take its eye off the SAT3 ball. If this is the case, it may yet come to regret it," it says.

Southwood states Telkom`s argument for a reasonable return on investment has some merit. "Both of these sets of parties are arguing privately that the protocol puts in place a range of conditions that raises the bar so high for private participation as to make it impossible or unlikely," he says.

The Balancing Act newsletter says the Eassy protocol clearly sets out that the return on investment from the cable will be regulated. The inter-governmental agreement is supposed to set this figure, although no specific discussions have taken place yet.

"Without a figure, it`s hard to see how an external investor could decide whether to become involved," Southwood comments.