WACS: the last financially feasible undersea cable for SA?

WACS (West Africa Cable System) is set to go live in South Africa in the second quarter of this year (2012) – further boosting South Africa’s international bandwidth capacity.

This will be the fourth submarine cable in South Africa, joining SAT-3/SAFE, Seacom and EASSy.

Many industry players have predicted a glut of international capacity with declining bandwidth prices and slim margin. This has now happened.

Cable systems like EASSy and Seacom are currently only using a small fraction of their total design capacity, and the same will be true for WACS.

While WACS has a design capacity of 5.12Tbps, the system operates on an upgrade policy, which initially allows only a limited percentage of the total cable capacity to be made available. There will hence be a controlled increase in supply over a period of a few years.

This raises the question: is there a viable business model for more undersea cables like SAex and ACE to be launched in South Africa?

eFive Telecoms CEO Rosalind Thomas, the company behind the R3 billion SAex project, seems to think so. According to Thomas, finance discussions for the planned 10,000-kilometre cable “are well advanced”.

Suveer Ramdhani, head of product strategy at Seacom, however, sheds doubt on the financial viability of new cable systems after the launch of WACS.

“The only model that could feasibly exist [after the launch of WACS] is ‘infrastructure +’ and would depend on the appetite of the established, vertically-integrated operators for additional diversity,” argues Ramdhani.

“Rapid developments in DWDM technology mean that most cable systems are only operating at a small fraction of their latest technical capability. Combine this with the fact that future growth is constrained by the lack of national infrastructure and we can conclude that supply is already ahead of demand.”