Kenya is yet to realize the possibility of affordable Internet despite having gone live on fibre broadband Internet since 2009.
“Prices of bandwidth through the fibre have gone down by as much as 90 percent. If a player invested US$25 million in the 25-year cable asset then normal accounting return on investment, depreciation and net-book-value ought to apply and prices should come down immediately,” said Gakuru.
AccessKenya’s public relations officer Kevin Keya says the condition results from reduced economies of scale and a high risk for the ISPs caused by the existence of fixed Internet connectivity. This implies few connections for guaranteed bandwidth within the corporate cycles.
AccessKenya statistics indicate the company spent an estimated $10 million to set up their Wimax network while the cost of laying the TEAMS fiber-optic cable, stretching up to 8,000 miles, was estimated to range from $100 million to $200 million.
The high figures show that by lowering Internet charges to consumers, it could be detrimental to Internet service providers; they would be forced to charge high Internet prices to the consumers to recover their initial investments, administrative and maintenance costs.
“Distribution channels can help reduce the price. The cable companies distribute the Internet to ISPs which in turn make it available to the consumers but the shorter the chain the lower the infrastructure costs and the time used,” said Keya.
Confirming the high cost, Nikolai Barnwell of 88mph and a resident accelerator at Startup Garage Nairobi, said that getting a decent price for a dedicated line of +50 megabits for the 20 startups at Startup Garage Nairobi and to support developer events proved costly. Even if the cost is split among 20 startups, they would have to pay over four to five times the current rent.
Safaricom offers 100 mbps at 38,211 Euros inclusive of VAT while AccessKenya at 28,000 Euros per month for the same. Simbanet 9,400 Euros per month per 100 mbps. This means that the average Kenyan startup can barely afford 1mbps internet for a month.
Barnwell added that,” Kenyan prices are ridiculously high, if the relative cost were the same in the US, 1mbps would cost 37,000 Euro per year.”
“Therefore, a reliable and stable connection needed for developers is not within reach. This unfortunately hurts competitiveness for the developing community. So the effect of the underwater cable is yet to have a significant impact on this part of the startups ecosystem,” Barnwell concluded.