Vol. 5 Num 672 Thu. April 20, 2006  
Front Page

Submarine Cable
BTTB declining low-cost expansion offer
Bangladesh set to miss opportunity of nearly doubling its revenue

Bangladesh is set to miss a rare opportunity of nearly doubling its revenue by participating in a very low-cost expansion of the international submarine cable it is now being connected with, highly placed sources said.

The country has already failed to reap any benefit of being connected to the information superhighway by having the first-ever submarine cable from October last as it could not to set up the domestic interface for this system as per schedule. The system is likely to be launched this month.

Sources in the international consortium for the SEA-ME-WE-4 cable system told The Daily Star that Bangladesh Telegraph and Telephone Board (BTTB) is declining an offer to participate in the expansion scheme being undertaken by three of the 16 members of the consortium. All members except Bangladesh are already earning huge amounts of revenue from the cable from October last year.

The BTTB that has invested $35 million in the submarine cable project and has been allocated 7,49,925 Minimum Investment Unit (MIU) kilometres of this system. It can increase this allocation to 1,391,718 MIU km by paying only $4.4 million. It will take 30 months to complete the expansion.

The MIU km is calculated on the basis of cost and return on investment per km of the cable. This capacity has value in the cable market where cable capacity owners sell and lease or trade in capacity for financial gains. The MIU km is internationally sold at between $50 and $60 each.

The BTTB however took a hasty decision on this matter and is declining the offer to participate in the expansion, official sources said.

The BTTB chairman is now attending a meeting of the consortium members in New Delhi in which the decision on the cable expansion is being finalised.

A top BTTB official said the offer is being declined because the present bandwidth allocation in the submarine cable is good enough. The cable system will give the country a data transfer capacity of 10 gigabyte per second, which will be 68 times the present capacity. This capacity is considered as adequate for the next 10 years while the cable has a life of 15 years. Bangladesh is not in a position to spend any additional money for this project, he added.

Besides, only three of the 16 consortium members -- Bharti, Singtel and VSNL-- are involved with the expansion. Except Saudi Telecom, the others are also not considering the proposal for expansion, the BTTB official said.

But another BTTB official termed these arguments a whitewash. “It is true that for Bangladesh's own use, it has more capacity than it needs. But by participating in the upgrade, Bangladesh could have owned valuable capacity in international cable with large market value,” he said.

The BTTB will bear a minimum operating cost of $13.69 million per year for the cable system. The expansion could have eased its burden through additional revenue, the official added.

Industry insiders pointed out that for an investment of only $4.4 million, the return is so enormous that an European telecommunications company had offered the BTTB the fund as loan, saying that BTTB should go for it as it can have return on this investment almost instantly. But the BTTB had declined.

“Firstly, the per MIU km cost of BTTB will drastically fall if it participates in the expansion,” said one industry insider.

“BTTB does not need to use it for local purpose, it can sell or lease out the expanded kilometres to international communication companies. It is a hot deal. Bharti, Singtel and VSNL are expanding the cable for small amounts of money to lower their business cost and eat up any international cable business prospect for Bangladesh,”

He went on, “Besides, in this consortium of 16 members, only Bangladesh does not have any other cable system connecting the information superhighway. All others have more than one cable system. So, if others decline this expansion offer, it does not justify Bangladesh's refusal.”

It is the same kind of stubbornness of Bangladesh that deprived it of getting connected with another submarine cable almost free of cost in the early nineties, another industry insider mentioned.

The cost of expansion would be low because the basic cable system is already in place. Consequently, Singtel, Bharti and VSNL, which now have 8,60,438 MIU Km each, will increase their capacity to 1,391,718 MIU Km each.

The current cable system was commissioned in October 2005, where Bangladesh's capital investment was $ 35 million paid to the Cable Consortium. In addition, Landing Station in Cox's Bazar Cost $4.8 million, other capital cost and interest expenses were $5.2 million and some other cost amounted to $2 million, raising the total cost to $47 million.

Soon after the main trunk line was commissioned, Bharti, Singtel and VSNL forwarded a resolution to the consortium proposing an expansion of the cable system. As per rules adopted by the consortium, if members wish to upgrade the system, they can do so as long as others do not have to make any fresh investment and others are given some additional capacity without extra cost.

As per rules of the consortium, the BTTB was also offered to participate in the upgrade. But the BTTB made an internal report saying it need not participate because it has more capacity than it can use.

The BTTB's non-participation is practically serving the purposes of Singtel, Bharti and VSNL who, by not having much stakeholders in the expansion, will have monopoly in the cable market in which smaller consortium members like the BTTB will have no power to sell their capacity in the open market, said an official.