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UNCLAS SECTION 01 OF 03 NAIROBI 000992 
 
STATE FOR ECPS/EEB/CIP/BA Timothy C. Finton 
 
STATE PASS FCC for Robert Tanner 
 
COMMERCE FOR DOC/ITA/OTEC Andrew Bennett 
 
SIPDIS 
 
E.O. 12958:  N/A 
TAGS: ECPS ETRD ETTC ECON EINT PGOV EFIN EINV KE
SUBJECT:  KENYA'S NEW BROADBAND INFRASTRUCTURE PROMISES GROWTH 
 
REFS: (A) STATE 27310  (B) 07 NAIROBI 4202 
      (C) 07 NAIROBI 3262  (D) 07 NAIROBI 1770 
      (E) 07 NAIROBI 565 
 
¶1.  Summary:  Kenya will revolutionize its telecom industry when it 
initiates its first fiber optic internet connection on June 27. 
This broadband connection will vastly improve the quality of 
internet access to Kenya and contiguous landlocked countries.  With 
increased internet capacity, the fiber will improve local bandwidth 
quality and potentially decrease communication costs, as it 
complements the existing and widely used satellite communication 
networks.  The increased bandwidth capabilities will improve the 
competitiveness of existing businesses, create growth in new 
industries such as knowledge-based businesses and business process 
outsourcing, and significantly increase access to information for 
end-users, schools, and universities.  The Government of Kenya (GOK) 
expects foreign investment in the sector to hit $10 billion in 2009. 
 Septel will report how this connection and other broadband 
initiatives will affect rural and underserved areas.  End Summary. 
 
-------------------- 
Kenya Gets Connected 
-------------------- 
 
¶2.  Kenya will significantly increase its internet capacity with the 
arrival of a submarine fiber optic cable on June 27.  The cable is a 
$700 million private equity venture (three-quarters African owned; 
the balance held by international investors including from the U.S.) 
by SEACOM.  It is expected to boost bandwidth and communication 
between the eastern and southern regions of Africa and the rest of 
the world.  The fiber optic cable, the first of three that will 
arrive in Kenya, will connect to an open access landing station in 
Mombasa and provide a Point of Presence (POP) to POP solution to 
Europe and Asia.  Customers will be able to connect directly to the 
SEACOM network at the landing station in Mombasa, POP in Nairobi or 
through a third-party internet provider.  The SEACOM fiber network 
-- that includes a backhaul infrastructure from Mombasa to Nairobi 
-- will provide internet capacity of 1.28 terabits per second data 
transmission, an over 1000% increase in the current average 
connection to an internet service provider in Kenya.  In 
anticipation of the fiber link, the GOK and various private sector 
entities have installed national fiber infrastructure networks to 
connect to the SEACOM network.  The GOK has completed all but 100 km 
of a 5000 km national fiber system to bring the improved 
communication capacity to Kenyans.  The government's national fiber 
infrastructure extends the international link from Mombasa to 
Nairobi, Thika, and Nakuru, and it has linked 31 government 
ministries to provide high speed data connectivity. 
 
¶3.  Currently, the Indian Ocean's eastern Africa seabed is the only 
one in the world without an undersea fiber optic cable.  The Kenyan 
coastal shoreline has the capacity to receive 10 cables, and the GOK 
plans to maximize this capacity to become a regional communications 
hub. Landlocked countries such as Rwanda, Burundi, Southern Sudan, 
Ethiopia and Uganda are among those that stand to benefit from the 
East African routed cables.  In Kenya, the average end-user pays 
$4400-5300 for stated 1 Mbps throughput and receives 512 kbps - 700 
Kbps throughput.  Most service providers sell on a shared/contention 
basis, not dedicated bandwidth, resulting in oversubscription, low 
quality, and unreliable bandwidth.  With the introduction of fiber 
optic infrastructure, prices should decline to $100 - $200 per 1 
Mbps per month.  While this is vast improvement over current prices, 
it still exceeds an international average of $3.33 per 1 Mbps. 
Current internet infrastructure relies on satellite communication 
with inherent challenges such as cost, bandwidth limitation, and 
latency, all of which severely limit businesses, end-users, 
government agencies, and universities.  A megabyte of 
satellite-delivered bandwidth costs ranges from $5,000-7,000 in 
Kenya today, and the systems are predominantly unreliable. 
 
----------------------------- 
Other Regional Fiber Projects 
----------------------------- 
 
 
NAIROBI 00000992  002 OF 003 
 
 
¶4.  In addition to SEACOM, two regional fiber projects will shortly 
link East Africa to the internet via broadband: The East African 
Marine Systems (TEAMS) project and The Eastern Africa Submarine 
Cable System (EASSy).  TEAMS, spearheaded by the GOK, is a $110 
million government-initiated special purpose vehicle created to 
develop a fiber-optic undersea cable connecting the East African 
region through Kenya to the fiber-optic communications backbone in 
the United Arab Emirates (UAE). It will extend 4,500 kilometers and 
will have an initial capacity of 120 GB upgradeable to 1.2 terabits. 
 Kenyan local mobile operators are the majority private 
shareholders; Dubai Telecom operator Etisalat has a 15% stake in the 
project. 
 
¶5.  The Eastern Africa Submarine Cable System project, EASSy, a $200 
million project, is set to lay a 9,900 km fiber optic cable linking 
countries on the Southern, Eastern and Northern African coastlines 
to the internet. It is an initiative sponsored by 25 
telecommunications operators, mostly African.  The EASSy project, 
delayed by a year, is expected to land in 2010.  It will provide the 
last link to completely encircle Africa with high-capacity fiber 
optic telecommunications networks. 
 
---------------------------- 
Benefits of Broadband Access 
---------------------------- 
 
¶6.  According to SEACOM, their fiber optic link will decrease prices 
for broadband communication to resellers by 80% compared to 
satellite connectivity, improve reliability, and increase demand for 
broadband.  This will enable Kenya to effectively compete in the 
knowledge and information society.  Other benefits of a reliable 
broadband connection to Kenya include: 
 
-- Higher quality international communication at lower cost, lower 
latency, and higher speed. 
 
-- Increased access to information for the average Kenyan, including 
better access to universities and secondary schools. 
 
-- Increased competitiveness of existing businesses by significantly 
decreasing communication costs. 
 
-- Creation of new industries (knowledge based industries, business 
process outsourcing, call centers, quality assurance testing, 
distance learning, etc.) 
 
-- Increased economic growth through job creation, increased private 
and public sector investment. 
 
-- Increased tax revenue that can be used to invest in 
infrastructure (roads, water, etc.) 
 
------------------------------------- 
Kenya Creates an Enabling Environment 
------------------------------------- 
 
¶7.  Kenya has a cohesive policy and the legal and regulatory 
framework that will enable it to leverage the benefits of its new 
broadband capabilities.  In 2008, Kenya adopted a National ICT 
Policy and enacted the Kenya Communications Amendment Act.  The GOK 
is continuing to develop regulations that will provide an enabling 
environment for leveraging the new broadband capacity and improving 
the ICT sector.  The overall ICT Strategy is led by inter-sectoral 
task groups (drawn from public, private and civil society sectors) 
working under the oversight of an ICT National Steering Committee. 
The Kenya Communications Act provides a unified licensing framework. 
 The 2008 Kenya ICT (Amendment) Act, assented to on December 30, 
2009, recognizes e-transactions and introduces broadcasting and 
content regulation.  Despite this framework, Kenya does not have the 
following enabling legislation necessary for fully accessing the 
benefits of the new broadband access:  Public-Private Partnerships 
(PPP), information access legislation and electronic transaction 
laws like e-TX legislation, and IPR laws.  The Kenya ICT Sector 
Master Plan (2008-2012) places a heavy emphasis on the Public 
 
NAIROBI 00000992  003 OF 003 
 
 
Private Partnership (PPP) model as a means to achieving the stated 
goals with a projected budget of $812.5 million over the five-year 
period. 
 
¶8.  Business Process Outsourcing (BPO) is one of Kenya's Vision 2030 
flagship projects and is expected to create 7,500 direct jobs by the 
year 2012.  To support this vision, the GOK plans to amend the 
Export Processing Zones Act to include BPOs -- exempting them from 
value added tax, income tax during the first 10 years of existence, 
and withholding tax on dividends and other payments made to 
non-residents.  Outsourcing firms providing data support, support 
and back-office operations, and call centers will benefit from new 
tax break plan. 
 
---------------------------- 
Opportunities and Challenges 
---------------------------- 
 
¶9.  With the arrival of broadband connectivity, Kenya -- blessed 
with a convenient time zone (GMT +3) and a large pool of qualified 
workers -- is positioning itself to be a leading destination for 
call centers, BPO, software development and other related services 
in the knowledge sector.  In March 2009, the GOK received a KSH 837 
million (about $11 million) loan from the Republic of Korea to 
expand its existing Technology Development Center, and the TEAMS 
project is expected to attract up to $10 billion worth of 
investments in the special economic zones in the next three years. 
Connection to the fiber optic marine cable will provide high speed 
affordable internet access that will likely increase competitiveness 
of Kenyan businesses and their ability to export their goods and 
services.  Access to information will increase for the average 
Kenyan providing educational opportunities for students in 
universities and secondary schools.  Higher quality broadband 
connection will also allow internet resellers - such as cyber cafes 
- to provide better access to information for the average Kenyan, 
thereby increasing opportunities for expanding their knowledge and 
skills.  For example, Kenyans in remote regions will be able to earn 
on-line degrees without incurring air or bus fares. 
 
¶10.  The Kenya Transparency and Communications Infrastructure 
Project (supported by a $114 million World Bank IDA loan through the 
Ministry of Information and Communications) will provide 
E-government applications starting with e-procurement and Land 
Information Systems; creating e-government services access points 
called digital 
villages; bandwidth expansion and broadband network support for 
Universities and Colleges; support for Business Process Outsourcing 
(ICT sector) and support the newly created Kenya ICT board. 
Internet Service Providers (ISPs) are expected to benefit from this 
lucrative data market. 
 
¶11.  Lack of experienced and qualified personnel in the ICT sector 
to manage an increasing number of networks and systems is a 
significant challenge.  Demand for end-user, technical and 
management training and expatriate workers is expected to intensify 
in the coming months as Kenya attempts to take advantage of the 
broadband connectivity.  Personal Computers (PCs) and internet 
equipment are required to tap into the inland fiber optic cable. 
For resellers and end-users, the "last mile" -- connectivity from 
the national fiber network to the end-user -- remains a challenge. 
Kenya telecom providers are expected to supply equipment to 
end-users as well as provide "last-mile" connectivity through 
complementary technologies such as 3G; ADSL, WiMax and Wifi however, 
this last-mile connection will limit the speed, reliability and 
quality of the internet access.  By contrast, businesses and 
government agencies that are able to connect directly to the 
national fiber network will be able to take full advantage of the 
broadband internet capacity. 
 
RANNEBERGER