The Kenya Pipeline Corporation (KPC) is developing a diversified pricing model for its recently launched fibre-optic cable (FOC) business, to entice smaller off-takers who have largely been excluded from the crucial infrastructure.
The new model will allow tier 2 and tier 3 internet service providers (ISPs), which are smaller off takers serving sub-national or even local regions, to pay lower rates for access to the internet fibre cable compared to tier 1 providers like Safaricom, Airtel, and others.
This is expected to encourage more uptake of the service by smaller providers, specifically tier 3 ISPs, which have generally shied away from the service since its launch in April 2022, consequently reducing the cost of internet for end-consumers.
“What we are working on in the background, but we cannot yet articulate in detail is a diversified payment model for the different categories of clients,” said Zilper Abong’o, KPC’s general manager for strategy and compliance.
KPC currently charges a flat rate of $22 (Sh2,832 at current exchange rates) per kilometre per fibre core, and a one-off charge of $200 (Sh25,746) per site, as well as a maintenance fee of five percent of the total lease rate.
Since its launch over two years ago, the company has onboarded some of the top ISPs in the country as its clients, including Safaricom, Airtel, Wananchi Group (Zuku), and Telkom, among others, but had not, until Monday, onboarded any tier 3 suppliers.
On Monday, Syokimau-based Syokinet became the first tier 3 provider to be onboarded into the KPC’s FOC network, reducing its costs which is set to trickle down to end-consumers in terms of cheaper connection fees.
Syokinet will access an internet speed of up to 1.6 terabytes per second on the FOC, which will connect thousands of last-mile customers between Nairobi and Mombasa in areas served by the cable.
“The diversity that we will bring to the market is what is going to challenge the current pricing for internet services, and also the delivery of internet services,” said Ian Kasyoki, managing director of Syokinet.
Third-tier providers currently buy internet connections from larger ISPs and act as redistributors, but this, according to Mr Kasyoki, makes the cost significantly more expensive for end-users.
In addition to selling to smaller internet suppliers, KPC is seeking to expand the reach of its FOC to Uganda, Rwanda, South Sudan, and Northern Tanzania, where its pipeline network currently reaches, KPC managing director Joe Sang said.
KPC ventured into the internet supply business in 2015, and officially launched the fibre-optic cable in April 2022, initially running from the port of Mombasa through Nairobi to Kisumu and Eldoret cities.
The move was part of the company’s aggressive push to diversify its revenue streams, which have also included constructing a drinking water treatment plant.
