Define “artificial”?

Did you divide the cost of a cable by the “available” capacity or by the anticipated uptake?

Example:

If an A320 costs 6000 USD per flight hour “wet” and has 120 seats, the cost per passenger seat is 50 USD

If an A380 costs 20 000 USD per flight hour “wet” and has 800 seats, the cost per passenger seat is 25 USD

So do we say that a Tour Operator can only sell a seat for USD 25 plus a small (and again .. What is small) margin?

What if you only fly at 10% load on your first flight … Isn’t your cost per passenger now 250 USD …

Kai

Von: kictanet-bounces+kai.wulff=kdn.co.ke@lists.kictanet.or.ke [mailto:kictanet-bounces+kai.wulff=kdn.co.ke@lists.kictanet.or.ke] Im Auftrag von Eric M.K Osiakwan
Gesendet: Sunday, November 29, 2009 22:27
An: kai.wulff@kdn.co.ke
Cc: KICTAnet ICT Policy Discussions
Betreff: Re: [kictanet] NCA Board member gives its price target as an E1 for US$100-500

Kai,

I would observe the sabath by writing my last email on this subject.

I was at the said workshop and indeed have worked on the subject extensively prior to the announcement by the regulator and in the new story, "supply bandwidth" is the term, otherwise i wont make an apple and oranges analysis. At least you should credit my non-distortionist approach to this subject.

The situation we are dealing with is the artificial high price of bandwidth to the continent which has held back the industry, those prices MUST come into the realm of reality and then the forces of demand and supply would make usage and local content the catalyst. Offcourse, education, electrification etc are all in the value chain.

Eric here

On 29 Nov 2009, at 19:00, kai wulff wrote:

Eric,

Please read carefully what I wrote.

I have no problem with meaningful regulation .. This regulation should focus on promoting usage ..

Your example of the Central Bank does not fit here .. The rate set by a Central bank would in our case be the cost for which an Operator (Bank) can buy capacity (borrows money). The Central Banks don’t regulate the retail end ..

I mentioned before, the main tools to drive down Broadband prices would be usage and local content.

More usage can be created by education, electrification and other factors.

Rgds

Kai

Von: kictanet-bounces+kai.wulff=kdn.co.ke@lists.kictanet.or.ke [mailto:kictanet-bounces+kai.wulff=kdn.co.ke@lists.kictanet.or.ke] Im Auftrag von Eric M.K Osiakwan
Gesendet: Sunday, November 29, 2009 21:34
An: kai.wulff@kdn.co.ke
Cc: KICTAnet ICT Policy Discussions
Betreff: Re: [kictanet] NCA Board member gives its price target as an E1 for US$100-500

Kai,

The Central Bank as the regulator of the financial sector in every economy sets prime rates and other industry indicators based on their calculation of the market forces as they interplay with demand and supply. i dont see why you sense danger with the regulator of the coms industry setting "prime rate" based on the commoditized calculation.....

You generate a lot of weight in your submission below on the private sector factors as a basis to slap the need for regulatory intervention in a market situation that has held the industry back for a very longtime. Am a private sector spice like you but if there is any lesson for us to learn from the current global financial crisis, it is that, we need regulatory interventions in the market theatre as markets have mood and are by that extension in perfect.

My comment is, all the factors you have enumerated are great but they dont negate the need for regulatory intervention to bring artificially high prices down for the masses to have access, a market expansion mechanism.

Eric here

On 29 Nov 2009, at 17:59, kai wulff wrote:

Eric,

This is exactly the type of statement that is dangerous. It is a little bit like deflation …

Because everybody expect cheaper prices nobody moves .. And because of this, uptake is below the potential, usage of the cable is sub optimal and prices don’t come down … Result: People will wait longer ..

I still don’t understand why we are so set on the E1 price (actually we should talk about 2M duplex and not old school) for a BPO .. Quality is what matters ..

With a good quality compression you can push more than 256 calls at any given time. So in an 8 hour shift you could have 122880 call minutes with 256 agents .. Assume 70% load, this makes 86016 minutes. Surely, you will have to terminate them into a network. Assume 0.02USD per minute.

So my question: What is your staff cost? Let’s argue 700KSH per day and person? Electricity? KSH 20 per day and person? Rent KSH 50 per day and person (assuming you work 2 shifts, 7 days a week).

Add software, overheads …..

So now, what is the cost of communication?

Currently an E1 in Kenya costs 1200 USD (not using the free offer) list price. So we said 2 shifts, 30 days, 70% load ..

5160960 call minutes a month

That makes 0,0174 KSH per minute (took a rate of 75 to the USD) for the submarine portion!

We add KSH 2 for termination = 2,0174 KSH communications per minute

Salaries: 1,45 KSH per minute (and this includes the idle ones or KSH 2,08 per minute at 70%

You see the contribution of the pure Submarine portion .. It is NEXT TO NOTHING.

Any comments?

Kai

Von: kictanet-bounces+kai.wulff=kdn.co.ke@lists.kictanet.or.ke [mailto:kictanet-bounces+kai.wulff=kdn.co.ke@lists.kictanet.or.ke] Im Auftrag von Eric M.K Osiakwan
Gesendet: Sunday, November 29, 2009 20:35
An: kai.wulff@kdn.co.ke
Cc: KICTAnet ICT Policy Discussions
Betreff: [kictanet] NCA Board member gives its price target as an E1 for US$100-500

A two day workshop called “Fiber Optic Undersea (Submarine) cable”, in collaboration with West Africa Telecommunications Regulators Assembly (WATRA), the German Technical Group (GTZ) and also the National Communications Authority (NCA) at the La Palm Royal Hotel.

The workshop offered WATRA members the guidance regarding the regulation of access to new undersea cables and also come up with adoptable guidelines for issuance of undersea cable licenses and landing rights agreement. This would ensure the transparency in deployment and pricing of undersea cables.

A Member of the Board of Directors of NCA, Solomon Quandzie has observed that the availability of international bandwidth, coupled with NCA’s plans for licensing additional terrestrial fiber optic cables systems, and also wireless broadband access (through things like WiMAX) operators would finally set the deployment of broadband networks throughout the country and further lay the foundation for rapid economic growth in the ICT sector.

He said, application of Business Process Outsourcing (BPOs) and Government’s decentralization program would enhance various e-government packages which would increase the social-economic development of the citizenry in a manner never witnessed in this country over the past several years.

Quandzie said that the NCA is committed to opening up the market base of the telecommunication industry by offering an additional fiber optic cable operator (WACS), which would add more capacity to the existing one, all within a 24 month period.

According to Quandzie, the current SAT 3 cable systems provides an estimated three gigabytes capacity of international bandwidth to the country at approx systems to become operational, adding that “They will be adding respectively, for a total of 1,920 gigabytes or 640 fold increase to the current capacity of international bandwidth in the country”.

Quandzie said that NCA expectation of a supply bandwidth a price goal of $100-500 per E1 should be possible within the very near future which would provide the necessary framework for the attainment of such an outcome.

He concluded that with the right regulatory framework established, reliable and affordable broadband networks, coupled with low cost of available international bandwidth can be provided through undersea fiber optic cables.
(Source: The Ghanaian Chronicle)