The government of Cameroon has initiated a strategic evaluation of the countrys VSAT segment. This study highlights an intriguing opportunity to understand the impact of the rapid introduction of fiber to the African continent via new subsea cables as well as the construction of national information communications technology (ICT) backbones. The increasing availability of terrestrial fiber fundamentally redefines the marketplace for satellite-based communications services. In particular the West African VSAT market has been negatively impacted as many customers have switched over to newly available fiber connections via the SAT-3 subsea cable.
Prior to the cut-over of the SAT-3 cable in 2001, which connects nine West African nations to Europe and Asia, most West African countries lacked access to international fiber. As this connectivity became available, there was a striking migration of customers from satellite access technologies to fiber services. This transition forced satellite operators and VSAT service providers to adapt to a significantly different landscape. Yet at the same time, the Cameroon experience underscores the strategic value of satellite connectivity, and the need to liberalize the VSAT sector to ensure the development of a robust ICT sector. Hence, the government has initiated the process of sizing and segmenting the VSAT market to determine the optimal structure and number of local satellite access providers.
An underlying element of the Cameroon VSAT initiative focuses on the need to provide redundancy for international communications, while ensuring the broad development of ICT services such as mobile backhaul services, rural connectivity, and corporate networks. The week-long outage in 2007 along the SAT-3 cable certainly emphasized the need for backup infrastructure. However, policy-makers throughout the region increasingly realize that satellites provide far more benefit than alternative access. The satellite business model has, in fact, evolved beyond point-to-multipoint services (e.g., broadcasting and international corporate networks) to meet critical society benefits for rural connectivity, disaster planning and recovery, and back-end support for broadband wireless.
For these applications and others, satellites are competitive and superior they support the development of ICT infrastructure and the information economy. While there has been a dramatic decline in VSAT services where fiber has been installed, there is a new realization among governments, operators, and consumers that a diversified ICT network using a combination of infrastructures optimizes a mix of applications. Such provides opportunities for emerging hybrid services, and ensures continuity of use during disasters and network failures.
Within the African context, the Cameroon experience provides a fascinating case that illustrates the relationship, competitive and complementary, between satellite operators and terrestrial service providers. Cameroon, with 18.5M and a GDP per capital of just over US$1,000, is characteristic of other emerging African markets. This is a partially liberalized telecommunications sector.
Monopoly, government-owned operator, CAMTEL, provides fixed local and long distance services. The marketplace for fixed and mobile terrestrial wireless services, as well as most other ICT segments, is open to competition, and this has resulted in tremendous growth of subscribers and access.
According to the International Telecommunication Union (ITU), the VSAT segment remains partially open to competition. With an eye of convergence services, the government is also in the process of privatizing CAMTEL, with mobile operators as potential bidders. CAMTEL also controls access to Cameroons sole landing point to SAT-3 and additionally maintains the satellite access infrastructure with three teleports, VSAT hubs, and they work with Intelsat and Inmarsat to offer satellite transmission solutions for voice, data and image.
The introduction of competition into the Cameroon telecommunications market produced dramatic, positive impact on teledensity. In some ways, this parallels similar growth in other emerging worldwide markets following the introduction of competitive mobile licenses. The explosive growth of its mobile sector corresponds to relatively stagnant growth in fixed line.
Based on 2007 ITU data over the last five years, cellular services grew more than 45 percent annually and represent approximately 96 percent of all telephone subscribers. At the close of 2007, in the region of 80,000 fixed lines were in use, versus 4.5M cellular subscribers. The relatively small size of the broadband market, with some 25,000 subscribers in 2007, illustrates the substantial opportunity for new ICT business models and applications. The industry hope is that the governments VSAT strategy will justify the potential for satellites to provide widespread rural services, two-way, Internet access, as well as support deployments of broadband wireless access.
The evolution of fiber in Cameroon also offers important lessons for future development of a robust ICT environment. Prior to the cutover of the SAT-3 subsea cable in 2001, Cameroon effectively lacked access to international fiber. Cameroon connectivity to SAT-3 occurred in 2002, and an intercity link between the countrys two principal cities, Yaoundé and Douala, was implemented in 2005. Initially, a few larger customers such as the electricity company AES Sonel took advantage of fiber connectivity. However, large scale migration was slow due to the lack of last mile infrastructure. In essence, an underdeveloped terrestrial network prevented customers from accessing newly lit global fiber.
According to David Hartshorn, Secretary General of the Global VSAT Forum (GVF), the impact on satellite services when fiber is first introduced into the market is huge and follows a similar process. Theres an initial market disruption followed by the reallocation of satellite resources to segments where satellite capabilities surpass, or support, terrestrial ICT services.
Based on the accounts of GVF members around the world, There is a pattern triggered when fiber first appears on the scene in a developing country. Before the fiber is deployed, and in the absence of links to support strong demand for point-to-point communications, satellite is often the default option. In other words, in markets that lack fiber connectivity, local VSAT operators provide thick-route links between cities. As terrestrial operators light up fiber-optic cable along those links, satellite providers are unable to compete on price, latency, and throughput. While satellite continues to have an important role as backup, VSAT terminals are often removed from the customer premises.
According to VSAT providers in Cameroon, the country experienced a similar process. The true transformation didnt occur until 2006 when substantial last mile solutions were implemented. The effect of global fiber on satellite demand became obvious. Brian Ayres, Director General of Avilyos, S.A., a leading Cameroon-based networking company with significant VSAT expertise, said, During this period, Avilyos managed a network of some 40 C-band VSATs for MTN. Commencing in late 2005, MTN Network Solutions activated DOCSIS wireless local loop systems in the eight major cities of Cameroon. From late 2007 until mid-2008, they installed WiMAX networks in all major cities of Cameroon. Now, 90 percent of the VSATs that Avilyos managed for MTN have been migrated to the terrestrial network.
Mr. Ayres points out, however, that while access to the SAT-3 cable represented a major milestone in the development of Cameroons ICT, the market has not fully digested the complex role that satellite plays on market competition, hybrid services, and infrastructure security. As customers migrated to subsea fiber, they did not address the key issue of backup connectivity, and as a result, Avilyos experience a surge of activity in November 2007 when a major fault occurred along the SAT-3 line which cut off internet access for several days.
In their excitement [to migrate to subsea fiber] they overlooked two important points, said Ayres. First, the service would be managed by the traditional operator, which frequently has the speed and efficiency of a dinosaur. Second, the service would be subject to failures just as any other service. Thus, the end users with deep pockets have the potential to experience the possible advantages of low latency broadband, but are frequently disappointed with the quality of service, which is often inferior to that provided through satellite services.
To adapt to this new market environment, companies such as Avilyos will increasingly look to service traditional markets such as television broadcast, distribution, and newsgathering. They will then become the prime services to be provided by satellite as well as all services to remote areas indeed, to any point on the planet. These market segments are where satellites continue to offer cost-effective service.
In addition, satellites ensure that multinational services provide a single point of interaction and payment. This is particularly valuable for redundancy and for support of international corporate networks. According to Mr. Ayres, The simplicity of the satellite model should not be overlooked: if, for example, a corporate head office wishes to maintain links to all of its branches in Africa, this can be done with one link via satellite directly to all of the branches. In the fiber model, it is far more complex.
David Hartshorn agrees, citing that while fiber is cost effective for point-to-point links, satellite is the optimal solution for geographically distributed applications and point-to-multipoint services. As Cameroons market matures, operators should look at how satellites and VSATs are integrated into more advanced economies such as Europe and the United States, Look no further a field than the U.S. market where, despite the abundant availability of fiber, the single largest installed base of VSATs of any nation in the world is alive and well!
More relevant to Africa, Mr. Hartshorn explains the evolution of VSAT services in emerging markets such as Brazil, Mexico, and Peru. In Brazil, VSAT operators have migrated from point-to-point links for traffic between major cities such as Sao Paulo and Rio to providing wide-area-network enterprise services, often to rural areas. As an example, in Brazil, the GESAC project has been cited as major success in delivering communications to the have-nots in rural Brazil, and the project is currently being expanded into follow-on phases. Weve seen this trend emerging elsewhere in the region FITEL in Peru, Compartel in Colombia, Enciclomedia in Mexico, UNOPAR in Brasil as well as in every other major region of the world.
As the government of Cameroon moves forward with its strategic needs assessment of the countrys VSAT market, there is a growing international consensus that satellites play a pivotal role in the development and maintenance of a robust ICT sector. Of course, terrestrial fiber and wireless infrastructure plays a similarly valuable role, yet understanding the relationship and reliance between technologies is critical to maximizing the economic and social benefits of information technology.
As new subsea fiber goes live in East Africa along the EASSy and SEACOM cables, local VSAT providers will likely experience a swift rebalancing between terres-trial and satellite-based services. As the African fiber network expands and becomes fully integrated in the ICT backbone, the local satellite industry must prepare itself for change and articulate areas of advantage over fiber solutions. As we have seen in other parts of the world where fiber has been introduced, the demand for satellite continues to grow, but from different sources. As the government of Cameroon reviews its VSAT market, the country should keep its eye on the full potential of satellite solutions to provide distributed communications, rural services, and complement the countrys terrestrial fiber and wireless networks.
About the author
Jay is an independent aerospace and telecommunications consulting stationed in Tel Aviv, Israel, and currently works with Futron Corporation in support of its regional activities. An economist by training, Jay has had the opportunity to work in exciting emerging markets in Africa, Asia, and Latin America. Over the course of his 15 career, Jay has worked with leading telecommunications providers, Indian outsourcers, and regulators throughout African continent. For comments and questions, please feel free to contact him at email@example.com.
The SAT-3 landing points:
- Sesimbra, Portugal
- Chipiona, Spain (though this landing is considered to be part of the Telefonica domestic network)
- Altavista, Gran Canaria, Spain and in Africa
- Dakar, Senegal
- Abidjan, Côte dIvoire
- Accra, Ghana
- Cotonou, Benin
- Lagos, Nigeria
- Douala, Cameroon
- Libreville, Gabon
- Cacuaco, Angola
- Melkbosstrand, South Africa meeting undersea cable SAFE