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DE RUEHDR #0585/01 2470448
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R 040448Z SEP 09
FM AMEMBASSY DAR ES SALAAM
TO RUEHC/SECSTATE WASHDC 8830
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHNR/AMEMBASSY NAIROBI 1363
RUEHKM/AMEMBASSY KAMPALA 3491
RUEHLGB/AMEMBASSY KIGALI 1417
RUEHJB/AMEMBASSY BUJUMBURA 2955
RUEHBJ/AMEMBASSY BEIJING 0359
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 04 DAR ES SALAAM 000585 
 
SENSITIVE 
SIPDIS 
 
AF/E FOR JTREADWELL 
COMMERCE FOR BECKY ERKUL 
STATE PASS USAID, USTR, USTDA 
 
E.O. 12958:  N/A 
TAGS: ECON ECPS EINT ETTC PGOV TZ
SUBJECT: STIFLED POTENTIAL: FIBER-OPTIC CABLE LANDS IN 
TANZANIA 
 
¶1. (SBU) SUMMARY AND COMMENT: The landing of the Seacom 
undersea fiber-optic cable presents Tanzania with significant 
opportunities for making voice traffic and data connections 
less expensive and more reliable.  With proper management, 
this cable could be transformative for Tanzania across the 
development landscape.  However, current trends point toward 
near-monopolistic control of this critical resource by 
telecoms parastatal TTCL, likely choking off the potential 
benefit of the cable (and others to follow).  Despite years of 
notice, GOT preparations - both regulatory and for 
infrastructure - have been inadequate.  In addition to proper 
regulation, significant investments in data infrastructure are 
needed at a national level before the benefits of the cable 
can be fully realized, both for private investors and the 
Tanzanian people.  The current situation points to an 
increasing divide between Dar es Salaam and the rest of the 
country and is a further example of Tanzania lagging behind 
its neighbors in planning for economic development.  END 
SUMMARY AND COMMENT. 
 
Background 
---------- 
¶2. (U) Prior to the arrival of the Seacom cable on July 23, 
the east coast of Africa was the longest populated coastline 
on earth without access to a fiber-optic cable.  The vast 
majority of international communications in Tanzania flow out 
via satellite.  Without access to a terrestrial network, 
providers have been paying USD 3000-6000 a month for a one 
megabit satellite connection.  Compare this to about USD 50 
per month for the same capacity on a terrestrial network in 
most of the developed world. 
 
¶3. (U) Seacom, a private consortium, marketed itself by 
claiming its broadband prices would be 80 percent lower than 
those being charged in the region, and that its business model 
of open investment into its landing stations would achieve 
"open access" pricing without complicated regulatory and 
policy frameworks. 
 
¶4. (U) Seacom is the first of three fiber-optic cables landing 
in East Africa. With access to a high capacity fiber-optic 
cable, providers expect current prices to halve, and drop even 
further with the landings of the subsequent cables. The East 
African Marine System (TEAMS) cable, spearheaded by the Kenyan 
Government in partnership with UAE's Etisalat, has landed in 
Mombasa, but is not yet live. The East African Submarine Cable 
System, or EASSy, an initiative of the World Bank and the 
African Development Bank, is planned for completion in June 
¶2010. 
 
No Magic Bullet 
--------------- 
¶5. (SBU) Bringing the Seacom cable to Dar es Salaam was only 
the first step. Now, Tanzania faces the challenge of 
distributing this capacity around the country.  The only 
provider currently wired into the Seacom Silver Sands beach 
landing site is the ailing telecoms parastatal TTCL (Tanzania 
Telecommunication Company Ltd.), which extends the fiber 
capacity into its Dar es Salaam station.  Seacom will permit 
other providers to connect, but at a prohibitively steep 
price; Seacom requires a reported minimum payment of USD 4-5 
million to secure a 20-year lease for direct access to the 
cable, with an additional USD 56,000 annually for maintenance. 
(Note: Seacom refuses to publicly confirm these prices and 
requires each lessee to sign a non-disclosure agreement, but 
multiple operators, including TTCL, have confirmed the figures 
to us.  End Note)  Though ISPs have been anticipating the 
landing of the Seacom cable for years now, and many have the 
wherewithal to build their own terrestrial networks, progress 
has been slow because of bureaucratic, regulatory and policy 
hurdles. 
 
¶6. (U) In addition, many ISPs had little faith the cable would 
be completed on schedule, and therefore signed long term 
contracts with satellite providers and invested in satellite 
equipment.  Prices likely won't drop until the satellite 
contracts expire and operators can recoup those costs.  There 
are also technological and business re-engineering steps 
needed to adjust from a satellite to a fiber model.  A month 
 
DAR ES SAL 00000585  002 OF 004 
 
 
after the cable went live, and after years of expectation, 
only three, relatively small, private companies - Satcom, Raha 
and Simbanet - had leased fiber capacity from TTCL.  Currently 
one Zanzibar ISP (Zanlink) is connected, and one national 
cellco, Zain. 
 
¶7. (U) As a silver lining for consumers, ISPs agree that while 
prices will likely remain near current levels in the short to 
medium term due to infrastructure costs, quality of service 
will improve drastically, because of the faster and more 
reliable connectivity provided by the fiber. 
 
Monopoly Control 
---------------- 
¶8. (SBU) The GOT owns the largest existing terrestrial fiber- 
optic network (extending to Morogoro, Tanga, Arusha and 
Mwanza), built by parastatal power company TANESCO, the 
Tanzania-Zambia Railway Authority (TAZARA), Tanzania Railway 
Corporation (TRC), TTCL and Songosongo Gas Supply (SONGAS). 
In June, the head of ICT for the Ministry of Communication, 
Science, and Technology stated the government would "regulate" 
the Seacom cable in order to "make sure that prices go down." 
However operators report TTCL is charging USD 130,000 per year 
for STM-1 access to their connecting infrastructure (compared 
with USD 4800 per year in Kenya, or USD 7-10,000 per month for 
a T1 connection (compared with USD 1500 in the US).  TTCL's 
CEO and senior management team declined to confirm their rates 
to Econoff, saying only that their prices will be 
"affordable," in order to encourage users to leverage existing 
infrastructure rather than building redundant networks.  End 
user prices, about USD 100 per month for a basic connection 
with a 2GB download limit, have not yet dropped significantly. 
 
¶9. (SBU) Reportedly, the Ministry of Communications rebuffed 
an offer by a consortium of private and non-profit players 
involved in EASSy to build a fiber optic backbone and provide 
the GOT with free access.  The Ministry made a public 
statement to the effect that while it was nice of the private 
sector to want to get involved, the government had things 
under control.  (However, the Deputy Permanent Secretary in 
the Ministry of Communications, Patrick Makungu, recently told 
Econoff that GOT "has no agenda against full private sector 
participation.") There is one limited private alternative, the 
cable TV incumbent CTV, which laid its own fiber LAN network 
in 1999.  CTV service now extends to Morogoro, Dodoma, Mbeya 
and Tanga.  CTV charges other providers USD 42000 per year for 
STM-1 capacity.  The opportunity for this business was an 
unexpected stroke of luck; CTV had no plans to be a carrier, 
but filled a gap when it became clear Tanesco and TTCL were 
slow to supply the market demand for fiber infrastructure. 
 
¶10. (SBU) Control of the fiber infrastructure was granted to 
TTCL by presidential order.  Yet TTCL has been slow to make 
investments in expanding the national fiber infrastructure. 
In 2007, TTCL contracted China International 
Telecommunications Company (CITCC) to build a national ICT 
backbone.  (NOTE: USTDA and the World Bank have estimated that 
the CITCC offer (about USD 170 million) was inflated by about 
20 percent.  According to a number of sources, the 20 percent 
cost overrun seems to have been part of the project design, to 
accommodate certain rent-seeking activities by GOT officials. 
The Chinese government itself is financing this project with a 
concessionary loan to the GOT. END NOTE.)  The GOT recently 
announced that the 10,000 km National Backbone Infrastructure 
Project will enable fiber-optic technology to reach all 
regions by June 2010 and all districts by the end of 2011. 
However, this projection is wildly optimistic, since CITCC has 
barely broken ground. 
 
¶11. (SBU) Private companies that want to build infrastructure 
face significant challenges in securing right-of-way licenses. 
According to ISP sources, Zantel, an ISP majority-owned by 
UAE's Etisalat, reportedly received a permit from TANROADS, 
only to have it revoked by the Ministry of Communications as 
"contrary to the national telecom policy." 
 
¶12. (U) The CEO of the Tanzania Investment Center (TIC), 
Emmanuel Ole Naiko, said at a recent regional infrastructure 
conference that he "believes the private sector should be 
 
DAR ES SAL 00000585  003 OF 004 
 
 
encouraged to take part" in building infrastructure.  The 
Director General of the Tanzanian Communications Regulatory 
Authority (TCRA), John Nkomo, emphasized that the resounding 
success of the Tanzanian mobile sector was due to competition. 
He highlighted the problem of right-of-way permission in 
delaying the development of crucial IT infrastructure.  Both 
Nkomo and Ole Naiko, who has been quoted in the press recently 
sounding the alarm against creeping GOT "re-nationalizations," 
publicly urged the Ministry of Communications representative 
at the conference to take up the issue of right-of-way permits 
with the Permanent Secretary and the Minister.  For its part, 
TTCL asserts that handing out permits to private operators 
would result in "chaos," and would need a high level of 
coordination at the local and national levels. 
 
The Future 
---------- 
¶13. (U) TTCL management is in flux during this critical stage. 
SaskTel, a Canadian telecommunications company that had 
managed TTCL since 2007, ended its management agreement in 
June after a dispute with the government.  At a time when a 
coherent broadband strategy is crucial, the consequences of 
this shake-up are further hindering progress.  Private ISPs 
complain TTCL is unreasonable to work with and that simple 
decisions are constantly delayed.  Interim TTCL CEO Said Amir 
Said was quoted in a local daily on August 10 as saying that 
TTCL has hired a consultancy firm to draw up a new business 
plan and that the company is seeking loans from two Chinese 
banks and a local bank to finance its operations and purchase 
Chinese equipment. 
 
¶14. (U) Competition between cable operators should be a key 
factor in pushing costs down and driving broadband 
penetration, especially with the arrival of the new undersea 
cables.  Connection to TEAMS will have to wait until the 
national backbone reaches the Kenyan border at Namanga and 
Horohoro.  Because of its World Bank funding, the EASSy cable 
may come with greater requirements for universal access. 
However, unless the other cables extend further inland than 
Seacom, the GOT will likely assume a similar level of control. 
A private ISP owner told Econoff that while Seacom is "like a 
dream" because the cable itself is a private venture with no 
government influence, the uncertainty created by TTCL's slow 
decision-making and action in connecting providers is "killing 
the industry."  He was grateful that TTCL was "just 
incompetent and slow" and didn't seem to be competing for 
profit. 
 
¶15. (U) Given the current landscape, many providers will 
likely avoid TTCL's unreliability and high prices by setting 
up their own point-to-point relay systems using microwave and 
wireless technologies. Tanzania's cell phone industry is 
highly competitive, and mobile carriers will play an important 
role in selling capacity to customers using their 3G networks. 
3.5G networks are already in service, though with limited 
geographic coverage, and sufficient bandwidth (30 MHz of 
spectrum each) has been allocated for Wimax, which can handle 
larger amounts of data.  Though not as fast as fiber, these 
wireless connections will have the advantage of avoiding 
right-of-way licenses and of relatively safety from vandalism 
or damage. 
 
¶16. (SBU) Controlling third party access to the Seacom fiber 
while selling data services to customers is a significant 
conflict of interest for TTCL.  Due to TTCL's bloated 
bureaucracy and slowness to adapt, private ISPs would prefer 
TTCL limit itself to being a wholesale "carrier of carriers." 
Telecom regulator Nkomo candidly stated that "TTCL cannot 
compete" with private providers and that its "service is 
terrible." 
 
¶17. (SBU) Funding is available to support the spread of the 
internet in Tanzania.  The World Bank has committed USD 100m 
through its Regional Communications Infrastructure Program for 
last-mile initiatives, e-government and capacity-building. 
However, even some Bank officials are skeptical of the GOT's 
anti-competitive approach to internet access.  A recent Bank 
report noted a correlation between increased broadband 
penetration and GDP growth; Tanzania appears unlikely to take 
 
DAR ES SAL 00000585  004 OF 004 
 
 
advantage. 
 
¶18. (SBU) Tanzania's East African Community partners were much 
better prepared for the arrival of the broadband cables; 
Kenya, Uganda, and Rwanda are leaving Tanzania far behind by 
building numerous publicly and privately funded 
terrestrial fiber networks at national and municipal levels. 
Several industry sources say that Rwanda's President Kagame is 
pressuring Kikwete to hurry up the building of 
Tanzania's backbone so that his tiny landlocked country can 
gain access.  At the recent infrastructure conference, TIC's 
Ole Naiko stated: "I hope the government and private sector 
will increase investment so surrounding landlocked countries 
can connect." 
 
ANDRE