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
 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: ……………………….

i
 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.

ii
 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

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 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

iv
 LIST OF TABLES
Table 3.1: Target Population .................................................................................... 23

Table 3.2: Sample Size ............................................................................................ 24

v
 LIST OF FIGURES

Figure 2.1: Conceptual Framework ............................................................................ 9

vi
 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

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 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.

1
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
2
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

3
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

4
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.

5
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
6
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.
7
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.

8
 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

Cost

Reliability

Fibre Optic
cable Speed

Clarity

Independent variable Dependent variables

9
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.

10
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
11
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.

12
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

13
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
14
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

15
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.

16
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.
17
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

18
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

19
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
20
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.

21
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.

22
 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

23
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.

24
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
25
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.

26
 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.
27
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.
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28
 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 [ ]
29
 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?

30
 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

31
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

32
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

33
 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

34
35