ISPs gear up for the big domain
The much-anticipated arrival of the East African Marine System (TEAMS) next year has sparked off a flurry of consolidation as the Information and Communication Technology (ICT) sector gears up for the mass market.
No one wants to be left out as industry players predict a huge price reduction in bandwidth costs, which will expand the market locally.
From traditional internet service providers (ISPs), telecommunication firms, handset-makers and, the latest entrants, content providers, this is driving a realignment in the market.
Everyone is sprucing up strategy in readiness for the fibre optic cable which has been long in coming, having started way back May 2005. It is at that time that the Communication Commission of Kenya (CCK) issued a number of internet backbone and gateway operator licenses.
Among the first to be licensed in that category were the current fixed line operators Kenya Data Networks (KDN), UUNet, and Jamii Telecom. Later on, the two mobile operators Safaricom and Celtel Kenya joined the fray.
Of the main infrastructure players, has KDN become the first to construct a termination point at the Kenyan coast where the TEAMs cable is expected to land late next year.
The landing of the undersea cable, through our network, shall be able to provide telecommunications advances affordably now enjoyed by most countries in the developed world, said KDN Managing Director Kai Wulff during the unveiling of the Sh7 billion worth of construction.
He, too, predicted a significant price reduction for bandwidth.
Wananchi Group, formerly Wananchi Online, becomes the second ISP after AccessKenya to gamble with consolidation through silent acquisitions. The group is now a combination of at least five ICT companies Wananchi Online, Mitsumi Net, SimbaNet (both in Kenya and Tanzania) and Trunking Systems.
The fifth was Lion Cable Television Network Ltd acquired by Wananchi Online last week through a Gazette Notice signed by acting Finance minister John Michuki.
The groups fund manager, Africa Technology Media and Telecom Fund, is worth $100 million with its target countries being East Africa, Malawi, Burundi and Tanzania.
Its focus is media, telecommunication and technology. It is little surprise then that the company is already testing an innovative product it intends to roll out soon called Triple Play. It consists of broadband (a cable model), Television (a digital decorder) and voice (a fixed line).
We are betting on the future once the bandwidth lands in the country, says Wananchi Group chief operating officer, Suhayl Esmailjee.
At the moment, Wananchi will use its $12 million Worlwide Interoperability for Microwave Access (WiMAX) to access the internet using wireless technology pending the TEAMs cable. Over the years, exorbitant operational costs of ISPs have forced them to consolidate to the current 72, as at last year, from a high of 90. However, it is believed that fewer than half are operational and the top 10 account for about 60 per cent of the market. This also meant that there was no product for the mass market.
A CCK study in 2006 revealed that internet penetration remained low and way behind other communication services like mobile despite liberalisation efforts.
Yet internet is crucial to the development of the ICT sector and to national socio-economic development. There is general lack of information on the internet service penetration, its impact and factors that influence its development and diffusion, it stated.
Interestingly, former CCK DirectorGeneral Eng. Micheal Waweru admitted that internet operators faced huge financial constraints due to the high cost of bandwidth internationally.
According to an equity research report by Renaissance Capital released in May 2008, the countrys largest ISPs include Access Kenya, Interconnect, Kenyaweb, NairobiNet, Swift Global and Wananchi Online.
Serious convergence is taking place and the internet is the protocol to carry out the convergence and the next evolution from ISPs is from the content service, said Mr Esmailjee.
He shrugs off Safaricom and Celtels roll-out of mobile internet as a compliment rather than competition. Initially, it is a head-on competition but come next year it will be a compliment to our service. We are the big screen at home and the GSM operators are the small screen on the move, he said.
According to the Renaissance report, the Kenyan government will own a 40 per cent stake of the TEAMS cable while Etisalat will own a further 15 per cent. Other operators having a shareholding in the system include Safaricom, Wananchi Telecom, Kenya Data Network (KDN), Econet, Celtel, Flashcom, Jamii Telecoms, Access Kenya, and Gilat Satcom.
In addition, two other international gateways are planned: the Sea Cable System (SEACOM) from South Africa to India and France via Mombasa and the East African Submarine Cable System (EASSy) which are both slated to be operational in 2010, it says.