A further significant drop in broadband prices in the East African region is expected following the launch of the Lower Indian Ocean Network (LION2) submarine cable in East Africa.
The cable, which went live last week, is expected to stiffen competition in the provision of broadband services in the region, which is already serviced by three undersea cables including Teams, Seacom and EASSY (East Africa Submarine Cable System).
Cheaper broadband services are expected to improve East Africa's telecom sector as more countries move to implement e-governance, e-learning and e-health programs, which have been hindered by the region's insufficient broadband infrastructure and capacity. Africa's voice market is still growing but the growth curve is beginning to flatten, forcing operators and service providers to compete more aggressively in the data market.
LION2 is operated by Telkom Kenya, a subsidiary of France Telecom Group. The cable will provide alternative connectivity from Kenya to Asia and Europe. LION2 extends from Mayotte, an island off the Indian Ocean coast, to Nyali in Mombasa, Kenya, and links the East African region to Madagascar, Mayotte and Reunion Islands.
In addition to improving Telkom Kenya services, the cable also provides an opportunity for increased international traffic through Kenya, Africa's third-largest telecom market after Nigeria and South Africa.
Telkom Kenya CEO Mickhael Ghossein said in a statement last week that "the company spent €57 million in laying the 2,700-km cable." The cable is an extension of the initial Lower Indian Ocean Network cable that connects Madagascar to the rest of the world.
The laying of the LION2 cable began in the fourth quarter of 2010, with key stakeholders including France Telecom (Orange), Telkom Kenya, Orange Madagascar and Mauritius Telecom. Currently, the cable has a maximum capacity of 1.28T bps, but this can be increased without additional submarine works as the cable uses wavelength division multiplexing (WDM) technology.
Stiff competition in Africa's broadband market sparked by undersea cables has already forced down telecommunication prices, with mobile-phone service providers and ISPs (Internet service providers) significantly reducing Internet service prices. As the cable companies bring down wholesale broadband pricing for mobile operators and ISPs, operators and service providers in turn have continued lowering prices to their own end users. In many cases, as in the case of Telkom Kenya, mobile operators and ISPs are investors in the cable systems.
"We expect so much fighting for customers among cable operators, which definitely translates into cheaper bandwidth and connectivity prices," said Amos Kalunga, telecom analyst at the Computer Society of Zambia.
In Zambia for example, 10MB of MTN broadband now costs as low as $1, and the cost is expected to decline further as competition in the broadband market heightens. MTN is an investor in EASSY and the West Africa Cable System (WACS).
AfriConnect Zambia, an ISP owned by U.K.'s Vodacom Business Africa, has promised to reduce broadband prices following the launch of its first-ever 4G WiMAX network in Zambia, and plans to increase its African data market share to 5 percent by 2016.
Vodacom Business Africa has a presence in 14 African countries including Zambia, Mozambique, Tanzania and the Democratic Republic of Congo, and recently launched a direct fiber link to South Africa to enhance Internet connectivity.
African governments have been pushing for further reductions in connectivity prices to allow more people to access the Internet.
Governments in the region hope to use the new broadband capacity to transform their economies even as land-based infrastructure is being laid to bring capacity in from the coast.