[AfrICANN-discuss] West African consumer broadband prices continue to tumble as OTI Telecom lowers its retail offer

[Eric M.K Osiakwan]

West African consumer broadband prices continue to tumble as  
operators try to find the price point that will attract a wider  
public beyond the relatively small numbers of corporate customers.  
The most recent company to slash its broadband prices to create a  
retail offer is Benin’s ISP OTI Telecom. It is the latest francophone  
country to introduce this kind of offer but undoubtedly others will  
follow. However, the challenge remains the high cost of international  
bandwidth on SAT3 for most countries on the cable. Russell Southwood  
looks at what’s happening to broadband prices in the sub-region.

Benin’s leading ISP OTI Telecom surprised the market last week by  
lowering its broadband prices for retail customers to FCFA 25,000 (US 
$57.95) a month without tax. Equivalent prices for 512 Kbps are  
FCFA80,000 (US$185.43) and for 1,024 Kbps FCFA200,000 (US$463.58).

But according to Blaise Adetonah-Donhouede, the DG of OTI Telecom,  
the price that would really crack open the retail market would be  
more like somewhere between FCFA9,000-12,000 (US$20.86-27.81). At  
this level, for example parents who are paying for their children to  
do research in a cyber-café on a per hour basis will begin to see the  
financial advantage.

The fall in retail prices has been matched by new offers for  
professional and corporate users: a 512 Kbps connection without tax  
for FCFA100,000 (US$231.79) and a 1,024 Kbps connection without tax  
for FCFA220,000 (US$509.93). Cyber-cafes also benefit but with a  
slightly higher price on the lower capacity connection: 512 Kbps for  
FCFA130,000 (US$301.25) and 1,024 Kbps for FCFA220,000 (US$509.93).  
However, the cyber-cafes get a free ADSL modem-router, a maintenance  
pack, a guaranteed maximum 12-hour call-out, personalised technical  
support and two IP addresses with 512 Kbps connection and four with  
the 1,024 Kbps connection.

By comparison with DSL broadband offers in South Africa, what you see  
is what you get in Benin. An equivalent residential 512 Kbps  
connection from Telkom South Africa costs US$129.51 a month which at  
first sight seems cheaper than OTI Telecom’s price. But OTI Telecom  
imposes no restrictions on download amounts. But in South African  
there are potentially three additional amounts that will be added to  
the bill at the end of the month. Firstly, the access charges paid  
for a 512 Kbps connection add a further US$43.17. Secondly, the  
connection is “shaped” which means that it’s impossible to use VoIP  
so you can pay an additional US$22.33 for an unshaped connection.  
Thirdly, in order to have unlimited downloads you pay an extra US 
$64.01. All of which gives a whole new meaning to “slice-and-dice”  
pricing.

But Adetonah-Donhouede of OTI Telecom says that such a pricing  
structure just wouldn’t work in Benin because his customers would  
spend a great deal of time contesting their the detail of their bills  
if they had multiple payment options. It’s already reached the  
situation where customers ask for money off if the connection is down  
for more than 24 hours!

A comparison with prices in the West African sub-region put OTI  
Telecom and Benin in a good position. In Senegal for example Orange  
offers a 512 Kbps ADSL connection for FCFA19,900 (US$46.12) without  
tax a month. In Côte d’Ivoire Aviso offers the same connection on a  
similar basis FCFA40,000 (US$92.71). In price terms, these are both  
at the low end of the range for Burkina Faso’s Onatel offers a 512  
Kbps residential connection for FCFA40,000 (US$138.84).

In Togo and Ghana, residential connections are still limited to 256  
Kbps. Togo Telecom’s “Helim” residential connection for this capacity  
costs FCFA70,000 (US$162.25) and Ghana Telecom’s “Broadband4U”  
connection costs US$92.30.

The impetus for lower broadband prices is driven by two key factors:  
the level of competition in the market and the price of international  
connectivity. The exception to the first driver has been Orange in  
Senegal which has been the continent’s only de-facto monopoly that  
acts in a price-progressive way. However, it will face competition  
this autumn from Sudatel-owned Expresso.

OTI Telecom has 15 POPs and a very high level of access to Benin  
Telecom’s network which has enabled it to secure 60% of the 2,000 DSL  
subscribers in the country. But it secured this position when Benin  
Telecom was cash-strapped and in chaos at the end of the last  
Government. Its D-G can easily see that Benin Telecom will re-exert  
control over its delivery of DSL and OTI Telecom will become a  
“virtual operator”. If a single entity controls the supply chain for  
DSL broadband and there is no wireless alternative at a low price,  
then the fall in prices is unlikely to continue.

The second pressure preventing lower broadband prices in West Africa  
is the continuing high cost of wholesale SAT3 connectivity. This  
varies between US1,300-15,000 per mbps per month depending on the  
country involved. The lower the prices, the higher the volumes sold  
and the greater the pressure on the existing SAT3 cable. And Nigeria,  
which should be the sub-regions largest market is to some large  
extent still “choked off” by the continuing chaos (both financial and  
maintenance) at Nitel.

By Q2, 2009, Seacom and TEAMS will be offering wholesale connectivity  
on the east coast between US$500-1,000. The Glo One cable may start  
operating Q3, 2009 and will undoubtedly offer cheaper prices to a  
number of countries and two other pipeline projects are in the wings.  
Once they are in place, there can few further excuses for not  
offering significantly cheaper consumer broadband price at or below  
the price point Adetonah-Donhouede of OTI Telecom suggests.

If you need to know more about African broadband prices and retail  
broadband users, Balancing Act last month published:

African Broadband, Triple Play and Converged Markets
For a detailed contents: http://www.balancingact-africa.com/ 
bbtriple.html
Cost: African price (GBP250/US$500); Rest of the world (GBP400/US 
$800); and Universities and NGOs (GBP125/US$250)

nb: sorry for crossposting

Eric M.K Osiakwan
ICT Integrator
Internet Research
www.internetresearch.com.gh
emko at internetresearch.com.gh
42 Ring Road Central, Accra-North
Tel: +233.21.258800 ext 2031
Fax: +233.21.258811
Cell: +233.24.4386792



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