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Box 1.11: Key lessons: Seacom, Africa Chapter 1
• The role for regulators in this case was limited. There would need to be a case for
regulatory intervention, which is currently unclear, particularly as the cable has brought
about significant economic benefits and is available on an open access basis. In addition,
coordinating regulatory efforts across a range of countries can be complex to implement.
Regulators would need to undertake a comprehensive regulatory analysis and consider
whether there is a case for intervention.

• Funding was not made in isolation but rather in collaboration with some high-profile
global investors, which reduced the risk. In this instance, however, there was no
investment by operators that could benefit from the infrastructure directly. This may be a
contributing factor to the early losses.

• Investors should be fully aware of the demand characteristics behind their investments.
Investment in large infrastructure projects carries high risk due to the high amounts
required. For example, the infrastructure may be made available too soon, and there may
not be enough demand to make the project commercially feasible in the short term. A
reason for Seacom’s poor financial performance is that the demand for data is not high
enough.

• High prices for terrestrial broadband, lack of broadband penetration and low usage of
high bandwidth services and applications are some reasons why the demand for data is
not high enough. Regulators and governments can take actions to improve broadband
take-up and the availability of broadband services to improve the market attractiveness
for investors.

The financial performance of Seacom indicates the provide redundancy for existing cables, which
high level of risk that large infrastructure projects have suffered from several breaks. In April 2015,
involve. Over time, it is likely that terrestrial for example, Internet users in Vietnam faced
connectivity prices will decrease, and the demand connectivity issues on the Asia-America Gateway
for Seacom’s service is likely to increase. But its cable that were expected to last three weeks .
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future earnings potential remains uncertain.
Facebook saw these infrastructure problems as
Case study: Facebook Asia–Pacific Gateway a hindrance to its users. With Southeast Asia
becoming one of its fastest-growing markets,
Facebook wanted to shore up the underlying
This case study demonstrates an example of an
established corporate organization investing in infrastructure in the region. Facebook’s
a relatively new market in the expectation of motivation, therefore, was similar to that of
generating downstream revenues. The Asia–Pacific Google and other software companies in wanting
Gateway (APG) is a 10 000 km undersea cable to support infrastructure in its high-growth
project designed to improve Internet speeds markets. Facebook saw the APG as a chance to
for citizens and businesses in Asia. The fibre- improve its users’ experience in India, Indonesia,
optic cable will run directly from Malaysia to Malaysia, the Philippines, Hong Kong China
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Korea (Rep. of) and Japan, with links branching and Singapore . So in 2012, Facebook joined
off to other countries. It is designed to provide a consortium of investors supporting the APG
higher transmission speeds and reduce the roll-out, a move that boosted prospects for the
current dependence on Singapore as the main project, which had been struggling with funding
regional gateway for Internet traffic. APG also issues for three years. In addition to Facebook,
is expected to minimize the number of Internet the consortium included China Mobile, China
traffic hops, reducing latency and improving Telecom, China Unicom, Chunghwa Telecom, KT
the user experience. Meanwhile, APG also will Corp, LG Uplus, NTT Communications, StarHub,

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