Cheap internet still a pipe dream

The telecoms market has in the recent past seen call rates drop drastically in a fierce price war, in what has given users a sigh of relief.

However, one of the world’s most important resources capable of spurring economic growth - the internet, remains a pipe-dream for many Kenyans.

In what might be seen as a conspiracy by players, more than a year after the going live of the first undersea fibre optic cable, things look quiet as users continue to pay heavily.

The over-hyped expectations of the drop in bandwidth prices in Kenya with the going live of Seacom, the East African Marines System (Teams) and EASSy undersea fibre optic cables are now somewhat more “grounded”.

In an interview with Nation last week, Telkom Kenya’s chief executive officer Mr Mickael Ghossein blames persistent cable vandalism for the high costs.

“If this cable cuts menace ceases, we plan for a coup in the data segment. Let them fight for voice, what I know is that voice is dead, data is the thing, and we have the muscle in this,” said Mr Ghossein.

He says that in other countries, cable theft is considered economic sabotage.

“These cuts have become a major problem for the country’s networks, incurring huge losses in downtime and repairs,” he said.

“The reputation of our brands are at stake if we don’t work as an industry to stamp-out the mess. Telkom loses more than Sh2 billion a year in cable vandalism costs,” said Mr Ghossein.

The irony is that a few years ago a megabyte of bandwidth was selling at between Sh320,000 ($4,000) and Sh480,000 ($6,000) a month, but currently for wholesale arrangements the price has been reduced to about Sh32,000 ($400), more than 10 times less.

Although Internet Service Providers (ISPs) currently buy the same capacity at $400, many have not come out openly to reduce end-user tariffs, while those who have done so say it is still costly for many.

The most affected are individual internet consumers and small-and-medium enterprises, who cannot afford $400 per month, the current price for a dedicated one megabyte link per month.

Operators have been accused of behaving like a cartel to fleece Kenyans though they always counter that they need to recoup their investments first. Providers say meaningful price reductions will take some time to be realised.

For mobile phone operators, it is still costly to use modems, as the speeds are terrible and costs still high for the mass market.

At Sh1,000, a week, this is still way high for low end users.

As the voice market nears maturity, mobile phone operators are angling themselves for a fight in the data segment.

This time round it is not in voice calls, but the loose-hanging fruit - the data segment.

Mr Ghossein says he plans to move beyond the wholesale and radically change the way Kenyans access internet and data services at home and in their offices by leveraging the infrastructure it has.

Safaricom, too, wants to dominate this market as profit margins in the voice market come under increasing competitive pressures and regulatory scrutiny. The firm has been on an acquisition spree.

Outgoing chief executive officer, Mr Michael Joseph during the firm’s 2nd AGM last week said that data is their big bet, and M-Pesa, the company’s mobile money transfer platform will help it bridge the gap of revenue lost in voice.

“This is where we are going to make our money. We are in a position to fight this war but we must keep in mind shareholders’ interest,” he said.

Zain Kenya, which initiated a price war in the mobile voice segment, made its intentions of making inroads into the lucrative data business by courting former Popote Wireless managing director Eric Ndwiga Muthi to its marketing team.