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THE IMPACT OF THE OPTIC FIBRE CABLE ON PROVISION OF
INTERNET SERVICES
CAROL WANYEKI
HD333-334-033-1689/2009
A Research Proposal Submitted to the Department of Strategic Human Resource
Development in the School Of Business, in Partial Fulfilment for the Degree of
Executive Masters of Business Administration of Jomo Kenyatta University of
Agriculture and Technology
May 2010
i
DECLARATION
This proposal is my original work and has not been presented for a degree in any
other university.
Name: Carol Wanyeki Sign:……………….. Date: ………………
This proposal has been submitted for examination with my approval as University
supervisor
Name: Gregory Odotte Sign:………………… Date: ……………………….
Name: Willy Muturi Sign:………………… Date: ……………………….
ii
ABSTRACT
The launch of the (TEAMS) and Seacom Optic Fibre Cable (OFC) in 2009 marked
the dawn of a new age in information. The arrival was supposed to bring down
internet connection fees by 90% and at the same time increase the speed by more than
600%, improve reliable and reduce down times and improve clarity under VOIP. This
has not practically happened as projected leaving businesses and individuals alike still
paying highly for connectivity, having poor reception, and dealing with unreliable
connections.
The study therefore seeks to find out the reasons behind this through the following
objectives; to assess whether the fibre optic cable has driven down costs of internet
connectivity to projected levels; to establish whether the fibre optic cable has
improved reliability of internet connectivity; to determine whether the fibre optic
cable has improved speed of data services and; to determine whether the fibre optic
cable has led to clarity improvements on VOIP services.
The target population of this study will be all the 87 employees of Telkom Kenya Ltd
in the company’s Orange Office. A sample of 30% (26) will be selected using
stratified random sampling. Data will be collected from the selected sample using
structured questionnaire. After collection, all questionnaires from the respondents will
be verified and checked for reliability. The data will then be coded and entered into
SPSS (Software Package for Social Sciences) which will generate percentages, means
and proportions. Qualitative data from open questions will be analyzed using content
analysis and presented through narratives. The presentation of findings from
quantitative data will be by use of tables, pie charts and bar charts.
iii
TABLE OF CONTENTS
DECLARATION ........................................................................................................................ i
ABSTRACT ............................................................................................................................... ii
TABLE OF CONTENTS .......................................................................................................... iii
LIST OF TABLES ..................................................................................................................... v
LIST OF FIGURES .................................................................................................................. vi
ACRONYMS ........................................................................................................................... vii
CHAPTER 1 .............................................................................................................................. 1
INTRODUCTION ..................................................................................................................... 1
1.1 Background ...................................................................................................................... 1
1.2 Statement of the Problem ................................................................................................. 4
1.3 Objectives ........................................................................................................................ 6
1.3.1 General Objective ..................................................................................................... 6
1.3.2 Specific Objectives ................................................................................................... 6
1.4 Research Questions .......................................................................................................... 6
1.5 Justification of the Study ................................................................................................. 6
1.5.1 Government............................................................................................................... 7
1.5.2 Internet Service Providers ......................................................................................... 7
1.5.3 Individuals, Businesses and other organizations ....................................................... 7
1.6 Scope of the study ............................................................................................................ 8
CHAPTER 2 .............................................................................................................................. 9
LITERATURE REVIEW .......................................................................................................... 9
2.1 Introduction ...................................................................................................................... 9
2.2 Conceptual Framework .................................................................................................... 9
2.2 Empirical Review........................................................................................................... 10
2.2.1 Fibre Optic Cable and Its Effect on Costs of Data Services ................................... 10
2.2.2 Reliability of internet connectivity ......................................................................... 13
iv
2.2.3 Speed of Internet Connections ................................................................................ 15
2.2.4 Clarity of Internet VOIP ......................................................................................... 16
2.3 Critique of Relevant Literature ...................................................................................... 19
2.4 Summary ........................................................................................................................ 20
2.5 Research Gaps ................................................................................................................ 21
CHAPTER 3 ............................................................................................................................ 23
METHODOLOGY .................................................................................................................. 23
3.1 Research Design............................................................................................................. 23
3.2 Population ...................................................................................................................... 23
3.3 Sample and Sampling Technique ................................................................................... 23
3.4 Research Instrument....................................................................................................... 24
3.5 Data Collection Procedure ............................................................................................. 25
3.6 Piloting of Instrument .................................................................................................... 25
3.7 Data Processing and Analysis ........................................................................................ 25
REFERENCES ........................................................................................................................ 27
http://www.computerworld.co.ke/articles/2009/12/02/kenya-gives-ISP’s-four-months-reduce-
service-charges ......................................................................................................................... 27
APPENDICES ......................................................................................................................... 29
Appendix I: Questionnaire ................................................................................................... 29
Appendix II: Budget ............................................................................................................ 33
Appendix III: Workplan ....................................................................................................... 34
v
LIST OF TABLES
Table 3.1: Target Population .................................................................................... 23
Table 3.2: Sample Size ............................................................................................ 24
vi
LIST OF FIGURES
Figure 2.1: Conceptual Framework ............................................................................ 9
vii
ACRONYMS
ARCC - African Regional Centre for Computing
CCK - Communications Commission of Kenya
GDP - Gross Domestic product
IP - Internet Protocol
ISDN - Integrated Service Digital Network
ISP - Internet Service Provider
IT - Information technology
LDC - Least Developed Countries
MD - Managing Director
NGO - Non-Governmental Organization
OFC - Optic Fibre Cable
SPSS - Software Package for Social Sciences
TEAMS - The East African Marine Systems
UAE - United Arab Emirates
UN - United Nations
USA - United States of America
1
CHAPTER 1
INTRODUCTION
1.1 Background
The Internet was introduced in Kenya in 1993 on a non-commercial basis by a group
of individuals. Access was achieved through Gopher service, which was text-based.
Connectivity was possible through either international leased lines or X.25
connection. The African Regional Centre for Computing (ARCC), a non-
governmental organization in Nairobi, became the first provider of web-based internet
services and used the Mosaic browser. The connection to the global internet backbone
was via an analogue leased line. The first commercial ISP, Form-net, began operating
in 1995. Soon competition increased with the entry of other ISP’s. All the ISP’s were
leasing analogue or digital data lines from Kenya to the USA to access the internet
backbone. With the number of ISP’s increasing, the bandwidth became overwhelmed
and there was pressure on the telecommunication providers to provide internet access
backbone in the country.
The internet has proved to be an excellent means of communication between
computers of various designs. More and more uses for the internet aside from e-mail
communication and file transfer have been developed. The networking capabilities
provided by the World Wide Web, the development of more user-friendly browsers
and the proliferation of speedier search engines, has made the internet go beyond its
initial purpose for military and university research use into the hands of businesses,
students and ordinary consumers in their households. The internet has grown in use
and has become the most important communication tool since the last decade.
2
The internet has created the information revolution and is exercising enormous
influence in the commercial, educational and social sectors of any economy of the
world. In education, the internet has become the preferred technology to improve
instruction, increase access and raise productivity. College and university instructors
can now post their syllabi and course readings to the World Wide Web. Library
holdings can be digitized and made available both on- and off-campus. Administrative
processes can be speeded up and simplified. In commerce and industry, internet
connectivity is facilitating business transactions all over the world without physical
contact with the buyer or the need for a business intermediary. Electronic commerce
is changing the role of traditional marketing channels in moving goods and services
from the provider or producer to ultimate consumer. In manufacturing, the internet
provides voluminous information from different fields of interests. Suppliers are now
using the internet to identify and select reliable as well as cheaper sources of raw
materials. The Internet enables users to access Web sites of universities, libraries,
governments, research centres and other organizations to avail themselves of a wide
range of information, research materials, conference proceedings, job opportunities
and tourist sources of information, while in finance the Internet has brought a
tremendous change in the way the sector operates. Online banking for example
enables a customer to check his or her bank statements, and remit and transfer funds
from home.
Despite the growth in Internet use in Kenya, the main users are multinational
corporations, banks, international organisations and NGOs, and big companies which
constitute more than 50 percent of all subscribers. In general, banks seem to provide
the lead in Internet connectivity. The skewed use of the Internet is attributed to the
3
relatively high cost of the service, internet security, slow speed and low reliability.
Other emerging users of the Internet in Kenya include tourism, finance, banking,
manufacturing; agriculture, international business (import and export), print media,
political parties, civil society; radio stations and some government ministries and
recently social networking and dating.
Though Internet facilities are fairly widely spread in the country, there is remarkable
concentration in urban centres with institutions far remote from cities experiencing
difficulties in getting connection. There is also a tendency among organisations with
Internet connectivity to confine its use to particular groups of staff to reduce costs.
Ironically, some institutions including universities still rely ostensibly on traditional
means of communications such as faxes and telephone, instead of taking advantage of
the cheaper Internet. Wider Internet connectivity can enhance Kenya’s economic
growth. Wider access to the Internet will mean more people spending more time on
the Internet, many organisations using the Internet to do business and creation of
many jobs related to the technology. As the Internet continues to expand tremendous
potential exists for its use. In the Kenya, Internet and other IT products and services
account for 25 percent of GDP growth and IT jobs are high paying (Nelson, 2001).
Internet connectivity is challenged by various factors among them the high costs of
connectivity to the consumer. This has been due to the high costs of infrastructure and
the over reliance on copper cabling which has less speed and high data loss. The OFC
has been touted as the solution to this challenge and the entry of OFC into Kenya in
2009 was seen as the dawn of a new era in internet connectivity. In partnership with
other African countries, the Kenyan government is involved in a number of projects to
4
construct several broadband fibre optic undersea cables to form a ring around Africa
and link the continent to Europe and Asia. The TEAMS, SEACOM and Eastern
African Submarine Cable System (Eassy) are the three OFC’s that have been initiated
with some already operational. These will link Kenyan coast with South Africa and
provide landing stations in countries along the coast of Asia. This would enhance
communication within Kenya and the rest of Africa and other countries outside the
continent (CCK, 2008).
These undersea fibre optic cable systems will connect East coast of Africa to South
Africa and other global networks in India, the Middle East and Europe. In particular,
SEACOM will connect South Africa, Mozambique, Madagascar, Tanzania and Kenya
to India and Italy, where other international cables currently exist. TEAMS cable will
connect Kenya to United Arab Emirates and India and Eassy will Connect Kenya To
Asia and other European Countries such as Spain and Portugal. All these
developments were expected to provide affordable bandwidth that would encourage
volume discounts and large bandwidth growth, which Africa badly needs. However,
these developments have not arrived with the promised benefits to the dismay of
many internet users and businesses.
1.2 Statement of the Problem
The launch of the first optic fibre cable (OFC) in June 2009 “The East Africa Marine
System” (TEAMS) marked the beginning of a new faster, more reliable and efficient
way of communicating for the East African region. Since then, Seacom OFC also
came in and is also in use in the Kenyan market. Expected by end of 2010 is the
EASSY OFC. The internet was one of the major finds of humankind in the recent
5
past. It has eased a lot of work and made new connections between people far across
the globe.
For decades however, it has remained somewhat of a hassle to work online because of
its slow speeds and high costs to people in the Kenyan market. Things have now
rapidly changed, with the introduction of fibre optic cables. Clients can work online at
speeds that they had never thought possible; one can now download content within
minutes if not seconds, and have conversations online as if the participants are in the
same room.
This arrival of OFC has caused the prices of internet connectivity to tumble by about
60%, the speed to increase by considerable levels and there is talk of the service being
more reliable and standard. Even then, the expected outcome of the arrival of the
submarine cables was to revolutionize the internet era in the country but still the
changes have been little and quiet. Expectations were high on issues such as pricing,
reliability, speed and clarity improving after arrival of the cable. There have been
mixed views of the effect the cables have had on the internet services. The costs to
some extent remain high, downtimes are not gone, speed is not in many cases as was
projected and clarity of internet calls is still below expectations.
This situation calls for an investigation as to whether there has been any improvement
in internet service provision after arrival of the submarine cables.
6
1.3 Objectives
1.3.1 General Objective
The main objective of this study will be to establish the impact of the submarine fibre
optic cable on internet provision in Kenya.
1.3.2 Specific Objectives
1) To assess whether the fibre optic cable has driven down costs of internet
connectivity to projected levels.
2) To establish whether the fibre optic cable has improved reliability of internet
connectivity.
3) To determine whether the fibre optic cable has improved speed of data
services.
4) To determine whether the fibre optic cable has led to clarity improvements on
VOIP services.
1.4 Research Questions
The study will be guided by the following research questions;
1) Has the arrival of the fibre optic cable brought any improvements on pricing
of internet services?
2) Has internet reliability improved after the arrival of the fibre optic cable?
3) How has the commissioning of the fibre optic cable affected speed of internet
connection
4) Has the fibre optic cable had any effect on voice clarity under VOIP services?
1.5 Justification of the Study
This study was necessitated by the fact that many individuals and businesses expected
dawn of a new era in internet access after entry of OFC’s. However this happened but
7
the extent of the reduction was not satisfactory according to many ICT industry
stakeholders. The study therefore seeks to establish why the costs are still high. The
findings of this study will be beneficial to the following;
1.5.1 Government
The Kenyan government (through the ministry of information and communications
and through CCK which is the Information regulator) will be able to use the findings
from this study to come up with policies that will enable the industry deal with the
challenges of data services provision and hence lead to growth of the ICT industry
which will in turn lead to economic growth. The government can also use the findings
of this study to identify gaps existing in laws and regulations that govern the running
of ICT sector and come up with regulations that will streamline the ICT industry. ICT
development and bridging of the digital divide is touted as the route to accomplishing
MDGs and economic advancement.
1.5.2 Internet Service Providers
The number of ISP’s getting into this industry is growing year by year. The benefits
that ISP’s will reap from this study are two fold. First, there will be knowledge and
technology transfer between local institutions and those from the developed world on
the best practice, and how common challenges have been addressed. Secondly, the
new entrants will be at an advantage since they will have known the challenges on
internet provision before hand and will be more prepared to deal with the challenges.
They will not have to re-invent the wheel. They will also learn of what is expected
from them by the government, businesses and the general public.
1.5.3 Individuals, Businesses and other organizations
As already mentioned, there are other players in the industry namely individuals,
businesses and other organizations such as NGOs, Schools, colleges and universities.
8
This group will benefit from the study by learning about the reasons that have
hindered the lowering of internet tariffs and hence they can plan on how to cater for
their internet requirements at minimal costs. The findings from this study will also
give this group insight on how to contribute to the debate of internet connectivity and
pricing which can fuel reforms in the industry
1.6 Scope of the study
The study will focus on the effect of the fibre optic cable on internet provision with a
focus on Telkom Kenya Limited as the subject of study. The arrival of the OFC has
affected internet provision in many ISP’s and the effect that Telkom has observed
may be different from those of other ISP’s. This study will be a case study of Telkom
Kenya Ltd. The study will be carried out by soliciting views and perceptions of the
employees of Telkom Kenya through questionnaire survey and will be carried out in a
period of 3 months. The population of the study will be the 87 employees of Telkom
Kenya Orange House Head office in data section.
9
CHAPTER 2
LITERATURE REVIEW
2.1 Introduction
This chapter is devoted to reviewing literature relevant to the current study. It
provides a critical look at the work that has been done by other researchers which are
related to this study. Relevant literature are presented and discussed under different
sub-sections as outlined below. The section gives a theoretical review of literature on
internet connectivity and pricing. The section also outlines a conceptual framework
and a critique of the literature. The section closes with a summary and the research
gaps which this study is expected to fill.
2.2 Conceptual Framework
Figure 2.1 below depicts the conceptual framework that will guide the study. The
study conceptualizes that arrival of fibre optic has an effect on cost, clarity, reliability
and speed of internet and hence should improve internet provision.
Figure 2.1: Conceptual Framework
Independent variable Dependent variables
Cost
Fibre Optic
cable Speed
Clarity
Reliability
10
2.2 Empirical Review
Even though East Africa's information and communications technology (ICT)
connectivity has shown spectacular growth due to the advent of mobile telephony and
internet (Banerjee and Ros, 2004), it continues to lag behind the rest of the world.
African regulatory authorities are struggling to find ways to fully liberalize their ICT
sectors, and are frequently held back by governments that continue to protect their
(partially) state owned operators through legislative and policy regimes unfavourable
to the introduction of pro-competitive policies by regulatory authorities (Horwitz and
Currie, 2007).
2.2.1 Fibre Optic Cable and Its Effect on Costs of Data Services
Fiber-optic communication is a method of transmitting information from one place to
another by sending pulses of light through an optical fiber. Broadband networks,
enabling high-speed and always-on Internet connections, are coming to be seen by
many to be critical for economic growth and development, both at the national and
global level (www.marketwatch.com). The increase in available bandwidth is set to
bring about a variety of new applications and services that will radically transform the
way we lead our daily lives. However, building and supplying adequate infrastructure
is only the first step. In fact, in many regions, the rate at which users are adopting
broadband technologies has been disappointing, despite their wide availability.
Governments and industry have now begun addressing the demand side of the
broadband challenge, by looking at ways in which the take-up of broadband services
can be accelerated.
11
The cost of Internet service provision for LDCs users is particularly high. Personal
computer costs are unaffordable to the great majority of LDC inhabitants, charges
paid to telecommunication companies may account for about one half of the total end-
user cost and Internet access fee charged by the ISP’s is generally more expensive in
LDCs than in developed countries (DFID, 2001). There are many factors influencing
the price of international internet access. First, the differences in the technology
employed to connect countries result in differences in the amount of available
bandwidth in certain areas and its cost.
There are currently three main communication technologies, which have varying
capacity on different international routes. These are satellites, terrestrial fibres and
submarine cables. Land-based optical fibres give access to a much larger pool of
capacity than submarine cables and, more generally, advances in fibre optics have
outpaced increases in satellite transmission. Countries connected to the outside world
via satellite links alone, therefore, will probably face considerable constraints,
particularly in view of the fact that total satellite fleet capacity is expected to reach a
meagre 400Gbit/s in 2010, compared to the estimated 20Tbit/s of submarine fibre
cables and the even greater terrestrial network capabilities.
The government of Kenya made some substantial investments to make the fibre cable
reach Kenya. The high costs of internet connectivity in Kenya were suspected to be
brought by over reliance on satellite connections, which are more expensive and offer
significantly lower economies of scale compared with cable networks. The fibre optic
technology delivers many unrivalled advantages, some of which are listed below:
Enormous potential bandwidth; Small size and weight; Immunity to interference and
12
cross talk; Signal security; Low transmission loss, and; System reliability and ease of
maintenance. Combined, these factors are expected to reduce maintenance time and
costs.
With the two OFC’s already in Kenya and a third one expected to arrive soon, this
effectively means that Kenya is now part of the global information superhighway and
will be able to compete on a more level platform with more established economies.
According to the Tanzanian President during the commissioning of one of the OFC
cables, “The arrival of this cable signals the beginning of a new era in the
telecommunications sector, history has been made. Eastern Africa has been the only
region in the world not connected through an undersea fibre optic cable and has had to
rely on the more expensive satellites whose charges have been as high as Sh540, 000
($7,000) per megabyte.” Last year telecom analysts predicted an upsurge in ICT
products fuelled by the mass market rollout of residential internet in 2010. The costs
were also predicted to fall to at least a tenth of the current prices (Daily Nation, 2010).
The launch of the government-backed East African Marine System (Teams) comes as
providers faced a backlash over slow connection speeds and high prices. Internet
providers have now increased speeds and lowered costs since the Seacom cable went
live in August 2009. But users say services still remain too expensive for most
ordinary Kenyans. Almost seven months after the first high-speed cable made
landfall, the highest residential internet speed offered by Kenya's largest ISP remains
capped at one megabit per second (Mbps). That speed is available only at night and at
weekends, for an annual cost of $1,440 (£860). The average Kenyan annual wage is
about $800, the UN estimates.
13
2.2.2 Reliability of internet connectivity
The much-talked about digital divide has left a yawning gap between the Eastern
African countries and the rest of the world. A lot has been done by national telecoms
companies, mostly former lethargic government-owned entities. They have kept us
connected to the world using satellite links. Arrival of fibre optic cable was projected
to pull down internet costs. But one dilemma still remains at what makes the ISP’s fail
to reduce prices six months after the arrival of the OFC (The Guardian, 2008). Some
businesses, individuals and even government are prevented from working effectively
due to the current prices of internet connectivity which still remain high on world
standards. Still many schools, colleges, hospitals and Non-governmental
organizations cannot afford the internet due to its high prices. Many factors have
contributed to the inability of the ISP’s to rollout internet services at cheaper prices
countrywide. Some of these include: challenges on last mile connectivity as there is
no infrastructure to deliver the services in non urban areas;
Many players in the telecoms industry feel that Kenya needs major and costly
investment to build a modern telecoms infrastructure. A lot of companies have made
significant investments in international and local infrastructure to deliver the new
bandwidth but still they have not reached the economies of scale. The prices
according to Mr. Johnathan Somen MD Access Kenya had to go through the stages to
build up the infrastructure and the content. Dr. Bitange Ndemo, Kenya’s Permanent
Secretary in Ministry of Information and Communication seem to disagree with that
view since he remarked that “in Africa the argument is always that there are fewer
customers so there is a need to charge a high premium,". Dr. Ndemo called on ISP’s
14
with investments in the OFC’s to lower their prices to attract new customers (I-
Network, 2009).
The government has from time to time accused ISP’s of colluding against reduction of
internet connectivity prices. Collusion to fix internet connectivity prices coupled with
lack of willingness to reduce charges by ISP’s in the region has forced the Kenyan
government to slap a four-month deadline to cut down the charges or face an official
price cap. The Kenyan government's directive was the first of its kind and is likely to
influence other countries in the region to impose similar directives in order to make
the internet cheaper and more accessible.
African governments require connectivity prices reduced in order to allow more
people to have access to the internet. Additionally, many governments in Africa want
to start implementing or offering some of their services online through the e-
governance and e-learning programs to promote citizens' participation in the running
of their countries' affairs. ISP’s claim that they have not been able to reduce the cost
of internet connectivity because they are still buying capacity at higher cost and
satellite capacity still being used was acquired at higher costs (Daily Nation, 2010).
The service providers say they want to supply additional bandwidth instead of
reduced costs, a strategy to recoup the cost of having bought more capacity than the
market required.
Other problem contributing to the higher cost of internet connectivity in the region is
the cross connection fees. Shareholders in the East Africa Marine System (Teams)
cable are individually negotiating and paying for onward connectivity to Europe with
15
the owners of the international communications networks. Onward connectivity to
Europe from UAE is costly because of cross-connect fees and the recurring costs of
leasing bandwidth to destinations in Europe and Asia. This has not translated into
cheaper internet costs for end users in the region.
On the other hand, service providers claim they can only be able to reduce internet
connection charges in 2011 when their contracts with satellite providers expire and
they begin to fully use the bandwidth from the cables (I-Network, 2009). The ISP’s
therefore are tied to costly contracts which they cannot break. This makes them
unable to reduce connectivity prices as yet.
2.2.3 Speed of Internet Connections
Adomi (2006) posits that, within the context of Information and Communication
Infrastructure policy making, evidence shows that only a few countries in Africa have
embarked in the ICT policy formulation process that countries like South Africa,
Ghana, Guinea-Bissau and Mali have embarked on for the development of a sector-
related policy and national policy on communication for development. This scenario
had led to the promulgation of the information perception constraint theory of
Developing Countries. This theory assumes that policy makers in the less developed
countries generally and Africa, in particular, do not have a positive functional
perception of how information in policy analysis and formulation as their counterparts
in the advanced nations.
A stable electricity system is an indispensable infrastructure in the proper functioning
of information transfer. In spite of this awareness, African countries have been
characterized of poor provision of electricity (Ahyanelue, 2006). Successful
16
automation and use of ICT depends on a reliable power supply, but electric power
supply in Africa is epileptic (Ifidon, 1999). Although in some African countries like
Kenya, the telecommunications administration has put into service a digital
microwave system to service the eastern and south-eastern parts of the country using
solar technology as its power supply. Malawi, Zambia, and Tanzania also began
constructing microwave links and satellite earth stations some years ago to ensure
efficient and reliable telecommunication services (Anyarelue, 2006).
A number of factors affect broadband pricing strategies, depending on the needs of
the market. These include the competitive structure of the market, the degree of
regulatory intervention (especially with regard to Local Loop Unbundling or LLU),
the existing infrastructure of incumbents (including prior investments in ISDN
technology), competing technologies (e.g., cable TV) and indirect competitive
pressure from neighboring countries.
2.2.4 Clarity of Internet VOIP
Currently internet services provision varies across the different ISP’s. Some providers
offer connections which have high clarity while others offer substandard services on
clarity. The charges include international access and the license fee (Business Daily,
2009). The internet pricing depends on whether the service is for dial-up unlimited,
leased line, Web hosting, telephone usage charged per hour, computer and modem
levy or annual internet account. The charges also vary depending on whether the
service is e-mail access, leased line IP connection, dedicated line and dialup full
internet. Generally the costs include VAT chargeable currently at 16 percent. In
addition to these costs, there is the telephone line installation charge.
17
It is not only in Kenya that broadband penetration has failed to exhibit growth rates
that were expected or hoped for. Broadband penetration has varied significantly in
different parts of the developed world, and growth has also occurred at varying rates
(Day Group, 2009). Figures compiled by the OECD revealed that South Korea was
the top of the broadband charts in June 2009, with a diffusion rate of 53.9 per cent,
with Canada (46.2 per cent), the USA (33.2 per cent) and Japan (10.9 per cent)
trailing in its wake ( The Economist, 2009).
Understanding what drives adoption of new communications technologies is crucial to
their establishment. Some media scholars have noted, however, that this
understanding is quite crude (Atkin, 2002). The long established diffusion model has
been invoked to offer an explanation of the adoption of innovations, but this has
proven to be limited in relation to broadband internet because of the diversity of
variables involved (Han, 2003). Other models have combined a range of
technological, economic, social and psychological factors as multivariate predictors of
the uptake and use of new technologies (Agarwal and Goodhardt, 1997; Lin, 2002;
Stanek and Mokhtarian, 1998).
The spread of competition through liberalization, innovation and convergence has
led broadband providers to respond with differentiated strategies based on technology
and speed of connection. Pricing strategy has major implications for the development
of markets in terms of subscriber growth, online behaviour, market transparency and
choice of provider. The emergence of the Republic of Korea as the leading economy
in terms of broadband penetration has been attributed in large part to competitive
pricing strategies by operators. There are different categories of factors considered in
pricing of internet.
18
Packages based on time may not represent broadband in its truest sense, since
broadband is typically defined as an “always-on” connection. However, time-limited
packages have limited appeal for consumers and have been largely supplanted by flat-
rate pricing as a key tool of the government's strategy to promote broadband. Volume-
based pricing charge customers on the basis of the data downloaded and have
typically been adopted in countries with high costs of international internet
connectivity. Examples include Kenya, South Africa, Australia, New Zealand and
Iceland. Where the marginal costs of added bandwidth are non-negligible, volume-
based pricing helps ensure that revenues match the cost of services. In Australia,
international internet connectivity has traditionally accounted for over half the cost of
providing broadband access (ITU, 2002). The drawbacks of volume-tiered strategies
include greater complexity in pricing, more opaque prices and sometimes, even higher
prices (OECD, 2004).
Operators are also adopting strategies focusing on customer relationships, rather than
the narrow relationship of speed and price. Ultimately, however, the pricing strategies
followed by different players and the prices they offer depend on the market structure.
The intensity of competition depends in part, however, on the services offered by
cable companies. In those countries where cable companies offer telephony, the
OECD (2004) finds that cable companies generally also offer dial-up services and
have been reluctant to respond with cable modem services at a competitive speed (128
kbps) and price, for fear of cannibalizing their own subscriber base. In Kenya, most
ISP’s ate still on satellite links and few ISP’s are connected to the OFC and hence can
explain why the costs are still high
19
2.3 Critique of Relevant Literature
The literature reviewed in this study focuses on fibre optic cable and internet
connectivity in Kenya and compares with the rest of the world. The literature reveals
that Kenya’s information and communications technology (ICT) connectivity has
shown spectacular growth due to the advent of mobile telephony and internet, but it
continues to lag behind the rest of the world. The biggest challenge to internet
connectivity is speed, costs and reliability although there were other factors which
were revealed in the literature such as power, regulations, laws and the culture of the
ISP’s.
Fiber-optic communication has been touted in the reviewed literature as the solution
to the Kenyan problem of costly, slow and unreliable internet connectivity. The cost
of internet service provision for LDC users is particularly high. Personal computer
costs are unaffordable to the great majority of LDC inhabitants, charges paid to
telecommunication companies may account for about one half of the total end-user
cost and internet access fee charged by the ISP’s is generally more expensive in LDCs
than in developed countries. The costs an ISP bears are divided between local costs
(e.g. salaries, accommodation and equipment), and international costs, composed of
the international leased circuit (by cable or satellite) and global connectivity.
The literature reviewed also indicated that there are many factors influencing the
provision ofnternet access. First, the differences in the technology employed to
connect countries result in differences in the amount of available bandwidth in certain
areas and its cost. Submarine cables are the superior method and when used are
20
generally cheaper in maintenance and recurrent costs but they require higher initial
capital outlays.
Fiber optic technology can deliver many tens of Gbps to the end user. Although the
fibre optic technology delivers the lowest cost-per-bit, it requires time consuming
procedures and large investments for a wide-scale deployment. The arrival of OFC
was touted as the dawn of a new era as postulated in the literature but this is seen as a
mileage by government, businesses and individuals alike. There also lacks more local
studies on the subject and hence most of the literature is from developed countries that
have very different conditions with Kenya. The local content on the subject is usually
from daily newspapers and local journals which are sometimes poorly researched and
sometimes giving misleading information.
2.4 Summary
In this section, literature which is relevant to this study was reviewed which provided
a basis for the research. The literature focussed on the developments which have taken
place in Kenya and also around the world concerning the ICT industry and chiefly on
internet connectivity and the submarine OFC’s. The literature reviewed gave an
insight on the expectations from an OFC linked internet connection as compared to
the satellite linked one.
The study also reviewed literature on the reasons that make internet to remain
inaccessible even after arrival of OFC. The factors which were revealed from the
literature were the slow process of incorporating the OFC into the ISP’s system,
collusion by the local ISP’s, cross-connection fees and the recurring costs of leasing
21
bandwidth to destinations in Europe and Asia and long-term contacts that the ISP’s
have entered into. Other issues which featured from the literature included inadequate
policy and energy/electricity problem
Finally the study reviewed literature on the factors that affect internet pricing. Pricing
in the reviewed literature was found to be affected by competitive structure of the
market, the degree of regulatory intervention, the existing infrastructure of
incumbents, competing technologies and indirect competitive pressure from
neighboring countries.
2.5 Research Gaps
Many studies have been done on the area of internet connection links and internet
provision. Many studies reviewed usually gave a comparison between developed
countries and developing countries which give few solutions to developing countries
since they are far much ahead in terms of infrastructure, policy and capital. Many
studies also have looked into the digital divide that disconnects the LDCs from the
developed world.
The OFC was first developed in the 1970s, fiber-optic communication systems have
revolutionized the telecommunications industry and have played a major role in the
advent of the Information Age but it is made entry to Kenya in 2009. Manu studies
have also been carried out on the various factors that hinder information revolution in
LDCs but have usually focussed on political climate, regulation, infrastructure and
skills and knowledge.
22
The cost of internet service provision for LDC users has also been studied but such
studies have not specifically focussed on Kenya. Such studies have been carried out in
Nigeria, South Africa and West African countries. With the arrival of the OFC, this
study is important in that no study has been carried out on pricing of internet after the
arrival of OFC in September 2009. Most of the local content available on this subject
is usually from newspapers and local journals which is sometimes unreliable due to
how facts are distorted in reporting on the issues.
23
CHAPTER 3
METHODOLOGY
3.1 Research Design
This study will use a case study design. The importance of a case study was
emphasized by Kothari (2005) who acknowledged that a case study was a powerful
form of qualitative analysis that involves a careful and complete observation of a
social unit. An in-depth and comprehensive inquiry is required which makes this
design appropriate. This design is also considered appropriate since only Telkom
Kenya will be the subject of the study.
3.2 Population
The target population of this study will be all the employees of Telkom Kenya Ltd in
the company’s Orange Office. The target population will be all the employees in the
data section who are 87 in number. Employees in the data section were chosen as the
target population since they are the ones who are conversant with the technical issues
of internet connectivity and will give objective information.
Table 3.1: Target Population
Section Population
Business VPN 24
Leased line 32
Hosted internet 31
Total 87
3.3 Sample and Sampling Technique
Since the target population embraces a number of distinct categories, the frame will
be organized by these categories into separate "strata." Stratified random sampling
24
will be used. In order to obtain a non-biased data, the strata will be characterized by
the department one belongs to. A sample of 30% (26 in total) will be taken from each
department. The two main reasons for using a stratified sampling technique is to
ensure that each department or level is adequately represented in the sample.
Table 3.2: Sample Size
Section Population Sample (30%)
Business VPN 24 7
Leased line 32 10
Hosted internet 31 9
Total 87 26
3.4 Research Instrument
The primary data, which is the actual data collected for the first time to address the
problem at hand, will be collected from the selected sample using structured
questionnaire. Kothari (2004) observes that a questionnaire is good for research
studies as they enable a researcher to collect more information which is not directly
observable. Based on the above facts, the researcher feels that a questionnaire will be
suitable as a research instrument for this study. The questionnaire will contain both
open and closed-ended questions. The importance of this method is that with the
closed questions the research can restrict the responses and the in the open questions,
the respondents will be totally free to express their views. The questionnaire is
provided in appendix I.
25
3.5 Data Collection Procedure
The developed questionnaire will be administered to the selected subjects in the
Orange House at their places of work. The questionnaire will be hand delivered or
sent through e-mail, as necessary, to the respondents. Confidentiality will be assured
to all respondents and they will be required to fill the questionnaire within a period of
less than two weeks. The respondents will be requested to submit the duly filled
questionnaire via the researcher’s E-mail address or to inform the researcher on the
date to physically go for them.
3.6 Piloting of Instrument
Piloting is a try out of the research instrument to find out whether they are valid and
reliable to the study. According to Kothari (2005) piloting of research instruments
helps in eliminating misunderstandings, ambiguities in the items and the less
important items in the research instruments. The clarity of questions, appropriateness,
relevance and comprehension is checked through piloting study. The researcher will
pilot the questionnaire 5 respondents from the data section. The piloting sample will
be required to give a critique of the questionnaire on the content, format, expressions
and importance of the questions. The feedback from the piloting study will enable the
researcher to make the necessary adjustments on the questionnaire. The piloting
sample will be omitted from the main study.
3.7 Data Processing and Analysis
All questionnaires from the respondents will be verified and checked for reliability.
The data will then be coded and entered into SPSS (Software Package for Social
26
Sciences) which will generate percentages, means and proportions. Qualitative data
from open questions will be analyzed using content analysis and presented through
narratives. The presentation of findings from quantitative data will be by use of tables,
pie charts and bar charts.
27
REFERENCES
Afullo, T. (2000). Globalization information and Africa: the telecommunications
infrastructure for cyber space. Library Management.
Akst, D. & Jensen, M. (2001). Africa goes online.
http://digitaldividenetwork.org/content/stories/index.cfm?key=158.
Anyarelue, F.U. (2006), Information and Communication Technology (ICT) in
Department Libraries in Government and Private Sectors, NLA, Delta State
Chapter AGM, Warri, .
Banerjee, A., Ros, A.J. (2004). Patterns in global fixed and mobile
telecommunications development: a cluster analysis. Telecommunications Policy.
Business daily, (March 22, 2010). How to stop predatory tendencies by internet
service providers.
Chen, W., Wellman, B. (2003). Charting and Bridging Digital Divides: Comparing
Socio-economic, Gender, Life Stage, and Rural-urban Internet Access and Use in
Eight Countries, NetLab Centre for Urban and Community Studies, University of
Toronto, Toronto.
Daily Nation, (March, 2010). Fibre optic cables set to boost trade in Kenya.
DFID (2001). Internet Costs Study: The Costs of Internet Access in Developing
Countries. Overview Report, DFID, London.
Eccles, D. (2006), "Information access, efficiency and quality", www.engerian.com.
Goulden, B. (2005). Collaboration in ICT regulation in the Southern Africa
development community: a regional approach to capacity building. Centre on
Regulation and Competition Working Paper Series No. 98, Manchester.
Horwitz, R.B., Currie, W. (2007). Another instance where privatization trumped
liberalization: the politics of telecommunications reform in East and Southern
Africa – a ten-year retrospective. Telecommunications Policy.
http://in.reuters.com/article/rbssTechMediaTelecomNews/idINLDE62G11J20100317
http://www.computerworld.co.ke/articles/2009/12/02/kenya-gives-ISP’s-four-months-
reduce-service-charges
http://www.marketwatch.com/story/kenya-seeks-transformation-with-new-internet-
links-2009-09-25
I-Network, (2009). No cheap Internet in a long time despite fibre landing.
28
Jensen, M. (2002). Information and Communication Technologies (ICTs) in Africa, a
Status Report presented to UN ICT Third Task Force Meeting, United Nations
Headquarters, New York, NY.
Maitland, C.F., Van Gorp, A.F. (2008). Beyond Harmonization: ICT Policy Making
in Supranational Regional Economic Communities, The Information Society,
Toronto.
Moshiro, S. (2005). Licensing in the Era of Liberalization and Convergence,
International Telecommunications Union, Istanbul.
Mutula, S. (2004). IT diffusion in sub-Saharan Africa: implication for development
and managing digital libraries. New Library World.
Perry, S. (2008). E-governance in Africa goes backwards. ITweb, Johannesburg.
Rena, R. (2006). Factors affecting technology usage: information technology and
development in Africa – the case of Eritrea. www/fao.org/waicent.
The Gurdian (2008). Internet: Last piece of fibre-optic jigsaw falls into place as cable
links east Africa to grid.
http://www.guardian.co.uk/technology/2008/aug/18/east.africa.internet. Accessed
May, 2009)
Van Gorp, A.F. (2008). Increasing regulatory capacity: the role of the region in
shaping national ICT policy in Southern Africa. unpublished PhD thesis,
Pennsylvania State University, University Park, PA.
Van Gorp, A.F., Maitland, C.F. (2008). Comparative research on regional regulators'
associations: a theory-driven path for progress. Telecommunications Policy.
29
APPENDICES
Appendix I: Questionnaire
SECTION A: GENERAL INFORMATION (Kindly [√] tick as appropriate)
1. What is your gender?
Male [ ]
Female [ ]
2. What is your age?
Below 30 [ ]
31-40 [ ]
41-50 [ ]
Above 51 [ ]
3. How long have you been working at Telkom?
Less than 5 years [ ]
6-10 years [ ]
11-15 years [ ]
16-20 [ ]
Over 20 years [ ]
4. What is your highest level of education?
Secondary [ ]
Diploma [ ]
Undergraduate degree [ ]
Post graduate [ ]
SECTION B: COST OF INTERNET
1. Did the arrival of fibre optic cable lower the internet connection fees as expected
levels?
Yes [ ]
No [ ]
2. In your opinion, do you think that fibre optic cable is a revolution that will redefine
internet connectivity in Kenya or it was just overrated?
Yes [ ]
30
No [ ]
3. Was it realistic for sources to project that internet connectivity charges would drop
by 90% with the entry of fibre optic cable?
Yes [ ]
No [ ]
4. In your opinion, has the ICT industry done enough to check the high costs of
internet connectivity?
Yes [ ]
No [ ]
SECTION C: RELIABILITY OF INTERNET
1. Internet reliability was expected to improve after entry of fibre optic cable. What do
you think has improved?
Yes [ ]
No [ ]
2. Please indicate the extent to which you agree with the following statements
5 - Strongly agree 4 - Mildly agree 3 - Neutral
2 - Mildly disagree 1 - Strongly disagree
Statement 1 2 3 4 5
The internet has become more reliable after entry of fibre optic cable
There are fewer downtimes now than before arrival of fibre optic
cable
Connection failures are less
Pricing strategy is aimed at maintaining existing customer base
Customer satisfaction is better due to fewer down times
The company is having fewer complaints from customers about weak
signals
SECTION D: SPEED
1. Do you agree that speed of internet has approved with arrival of OFC?
31
Yes [ ]
No [ ]
2. Are you able to send data that could not be sent before the arrival of OFC using
your connection?
Yes [ ]
No [ ]
4. Please indicate the extent to which you agree with the following statements
5 - Strongly agree 4 - Mildly agree 3 - Neutral
2 - Mildly disagree 1 - Strongly disagree
Statement 1 2 3 4 5
Market competitiveness has improved due to improved prices
Business under VOiP has improved
Relaying of high volume documents have increased after arrival of
OFC
Downloads have improved considerably
Failure rate in downloading has been reduced drastically
Data sending failure has been lessened considerably
SECTION E: CLARITY
1. Has voice clarity improved after arrival of OFC?
Yes [ ]
No [ ]
4. Please indicate the extent to which you agree with the following statements
5 - Strongly agree 4 - Mildly agree 3 - Neutral
2 - Mildly disagree 1 - Strongly disagree
Statement 1 2 3 4 5
Business on call conferencing has improved since the arrival of OFC
Business on call conferencing has been improved by arrival of fibre
cable
Voice clarity has considerably improved after fibre optic connection
32
Voice loss and call breakdown has lessened after OFC connection
Customer complaints about voice problems have drastically reduced
The company now uses voice and video conferencing more than
before OFC connection
33
Appendix II: Budget
ITEMS AMOUNT (Kshs.)
Typing Expenses 2500
Printing 5000
Binding 1100
Internet Access 500
Transport 2000
Research Assistant 6000
Stationery 2000
Photocopying 1500
Total 20600
34
Appendix III: Workplan
ACTIVITY Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10
Preparation of the title
Submission to the lecturer for
approval
Preparation of chapter 1
Research on Literature Review
Drafting of Chapter 3
Reseach Project defense
Preparation of data collection
instrument
Distribution of instruments
Data analysis
Submission of project
Submission of corrected
copies and letter to correction
Deadline for handing in final
project
35
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