Economic Impacts of Submarine

Fiber Optic Cables and Broadband

Connectivity in Tanzania
Working Paper 0214363.202.6

November 2020

Prepared by
Alan C. O’Connor
Benjamin Anderson
Muriuki Mureithi
Judy Nyaguthii
Alice Olive Brower
Sara E. Lawrence
Sponsored by
RTI International
3040 E. Cornwallis Road
Research Triangle Park, NC, USA
Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in Tanzania | Page 1
Economic Impacts of Submarine Fiber Optic
Cables and Broadband Connectivity in Tanzania
HOW DO SUBSEA CABLES GENERATE ECONOMIC IMPACT?
Subsea cables are the global backbone of the Internet, connecting people, businesses, and economies around the world.
They connect us to the cloud, deliver streaming video, and increase efficiency and productivity for business. Subsea cables’
importance is all the more apparent during the Covid19 pandemic when many of us have switched to working from home,
remote learning, and online gaming and entertainment.

We studied the economic impacts from subsea cables that arrived in Tanzania (e.g., SEACOM, EASSy) to understand how
they changed the economy.

Consumers
Subsea
Internet speed Economic Impacts
cables arrive
increases

Existing consumers enjoy

better speeds, increasing
Price per data their consumption of $
digital content, products,
unit decreases and services.

$ New firms and

startups emerge to
18.7%
serve consumers Subsea cables led to a 18.7%
and businesses increase in employment
Some consumers decide within 200 meters of fiber
to subscribe to services infrastructure
for the first time

Business

Less than 25%

Less than 25% of Tanzanians
are internet users
Increased internet speed,
quality and reliability
makes doing business Growth in Less than 25% of Tanzanians are internet users.
easier productivity, We found the beginnings of economic impacts
efficiency, and from cable landings in fiber-connected areas
revenue for firms like Dar es Salaam. However, the impacts are

$ New business
opportunities
not large enough or broad-based enough to
be reflected in national employment or GDP
per capita data. Thus, we take the findings to
Increased be a signal that there is a significant amount of
More businesses use the
Network is data traffic cloud and e-commerce economic impact potential should broadband
built out competition for the first time penetration accelerate and internet usage
grow.*

* To deepen our understanding of our economic analysis results, we interviewed Tanzanian telecommunications experts. They described that there is an affordability chal­lenge for many people. Affordability
appears to be adversely affected by taxes on mobile wireless services as well as a particularly expensive national fiber backbone. Higher costs are passed on to consumers, making prices higher, inhibiting
uptake, slowing network expansion, and therefore mitigating the economic impact potential.

Download the full report at rti.org/subsea-cables-africa

Alan C. O’Connor, Senior Director, Center for Applied Economics & Strategy | oconnor@rti.org, +1.919.541.8841
Recommended Citation: O’Connor, A.C., B. Anderson, M. Mureithi, J. Nyaguthii, A.O. Brower, and S.E. Lawrence. 2020, November. Economic Impacts of Submarine Fiber
Optic Cables and Broadband Connectivity in Tanzania. Working Paper 0214363.202.6. Research Triangle Park, NC, USA: RTI International. © RTI International, 2020
Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in Tanzania | Page 2
Table of Contents

SECTION PAGE

1. OVERVIEW 3

2. TANZANIA COUNTRY PROFILE  4

3. ANALYSIS APPROACH  6
3.1 Econometric Analyses  6
3.1.1 Difference-in-Differences (DID) 6
3.1.2 Synthetic Control (SC) 7
3.2 Thematic Analysis of Interviews with Key Stakeholders  9

4. ECONOMIC IMPACTS OF SUBSEA CABLE LANDINGS 9


5. STAKEHOLDER PERSPECTIVES ON CONNECTIVITY 10
5.1 Market Structure and Competition, and Network Expansion  10
5.2 Uptake Proposition: Affordability, Quality of Service, and Content  11
5.3 Public Policy Priorities  12
5.4 Economic Development  13

6. CONCLUSIONS14

Recommended Citation: O’Connor, A.C., B. Anderson, M. Mureithi, J. Nyaguthii, A.O. Brower, and S.E. Lawrence. 2020,
November. Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in Tanzania. Working Paper
0214363.202.6. Research Triangle Park, NC, USA: RTI International.

Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in Tanzania | Page 3
1. Overview
This study explores the economic impact of the international We found the beginnings of economic impacts from cable
data connectivity delivered by submarine fiber optic cables landings in fiber-connected areas like Dar es Salaam. In these
(“subsea cables”) on Tanzania. Subsea cables are the global areas, people who live within 200 meters of the fiber infra-
backbone of the internet, connecting people, businesses, and structure are 18.7% more likely to be employed than people
economies around the world (Figure 1).1,2 who live in the same areas but who are farther away from
fiber.
The importance of connectivity to economic growth is
well-established—and further underscored by our collective The impacts are not large enough or broad-based enough
experience during the COVID-19 pandemic—but rigorous to be reflected in national employment or GDP per capita
studies have not been conducted for many countries.3,4,5 data. Thus, we take the findings to be a signal that there is
This study is one in a series our team prepared about how a significant amount of economic impact potential should
improvements in international data connectivity have gener- broadband penetration accelerate and internet usage grow.
ated economic growth for countries in Africa.6
To deepen our understanding of our economic analysis
For Tanzania, we focus on two recent cable landings, SEACOM results, we interviewed Tanzanian telecommunications
and EASSy. Figure 1 describes the role that subsea cables experts. They described that there is an affordability chal-
play in internet access. Subsea cables connect the domestic lenge for many people. Affordability appears to be adversely
terrestrial fiber network to cloud services and data resources affected by taxes on mobile wireless services as well as a
around the world. The more robust the connection between particularly expensive national fiber backbone. Higher costs
the user and the data resource, the faster, better, and more are passed on to consumers, making prices higher, inhibiting
productive is their user experience. uptake, slowing network expansion, and therefore mitigating
the economic impact potential.
Home to 58 million people, Tanzania is the largest country
in East Africa. It also has some of the lowest rates of internet This paper reviews our analysis findings, including experts’
connectivity and broadband penetration in the region. Less assessments of the challenges with and consequences of
than 25% of the population are internet users, and only about Tanzania’s expensive middle-mile paradigm.
60% are covered by a 3G signal.

Table 1. K
 ey Takeaways: The Economic Impact of Subsea Cables on Tanzania

INDICATOR TIME PERIOD OUTCOME

18.7% increase in the likelihood of being employed, if one lives within

Employment 2009—2014
200 meters of fiber infrastructure, but only in select areas

Source: Authors’ estimates.

1 C lark, K. 2019. Submarine Telecoms Industry Report, 7th Edition. Submarine Telecoms Forum.
2 Brake, D. 2019. Submarine Cables: Critical Infrastructure for Global Communications. Information and Technology Foundation.
3 Hjort, J, Poulsen, J. 2019. The Arrival of Fast Internet and Employment in Africa. American Economic Review, 109(3): 1032-1079.
4 Minges, M. 2015. Exploring the Relationship between Broadband and Economic Growth. WDR 2016 Background Paper; World Bank, Washington, DC.
5 Khalil, M., Dongier, P., & Zhen-Wei Qiang, C. 2009. Information and Communications for Development: Extending Reach and Increasing Impact. World Bank.
6 Other countries included in this series are the Democratic Republic of Congo, Kenya, Mozambique, Nigeria, and South Africa.
7 O’Connor, A. C., B. Anderson, M. Mureithi, J. Nyaguthii, A. Brower, and S. E. Lawrence. 2020, May. Economic Impacts of Submarine Fiber Optic Cables and
Broadband Connectivity in Kenya. Working Paper 0214363.202.4. Research Triangle Park, NC, USA: RTI International.

Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in Tanzania | Page 4
 Figure 1. R
 ole of Subsea Cables in Internet Connectivity

ROLE OF SUBSEA CABLES IN CONNECTIVITY

Infrastructure investments and policy

decisions affect the extent to which
countries are able to benefit from
Once international bandwidth lands
connectivity.
from the sea, data moves through
terrestrial networks and points of
Subsea cables are part of a presence to reach a firm or household.
Mobile network
complex internet delivery system. Fixed line to the
firm or household

Points of presence
Landing station

International bandwidth
via submarine cable

Terrestrial Fiber

2. Tanzania Country Profile

Tanzania is the largest country in East Africa by both popu- In truth, much of the economy is informal. The IMF Regional
lation and land area. Most of its 58 million people live along Outlook Report for Sub-Saharan Africa estimates that the size
the Indian Ocean coastline and in the northern regions of the of the informal economy in Tanzania equaled over 50% of the
country. Although the population is predominantly rural, one official GDP between 2010 and 2014.10 Growth rates for the
third of all Tanzanians live in urban areas. The urban popula- informal economy are not known with great certainty, but
tion has grown by at least 5% annually for the past 15 years.8 Tanzania’s average formal growth rate over the last decade
The country’s official languages are Swahili and English, with was over 6% per year.11
the latter used for commerce, administration, and higher
Most Tanzanians with formal employment rely upon monthly
education.
wages and cash earnings to support their households. About
Tanzania’s economy is directly or indirectly tied to agricul- 59% of wage-earners made less than TZS 500,000 (USD 216)
ture and mining. Key commodities include coffee, cotton, per month, 23% between TZS 500,001 and 900,000 (USD 390),
diamond, gold, iron, and tobacco.9 In nominal terms, and 18% more than TZS 900,000 (USD 390).12
Tanzania’s gross domestic product (GDP)—the most common
Another way to look at Tanzania’s GDP is to take into consid-
measure of the value of all goods and services produced by
eration purchasing power parity (PPP). PPP accounts for
a country—was $63.2 billion in 2019, or about $1,122 per
differing price levels for comparable expenditure categories
capita (nominal terms).
8 World Bank Group. 2019 World Development Indicators. See https://databank.worldbank.org/source/world-development-indicators.
9 National Bureau of Statistics. 2019. National Account Statistics: Popular Version 2018. Dar Es Salaam: National Bureau of Statistics.
10 International Monetary Fund. 2017. Regional Economic Outlook: Sub-Saharan Africa, Restarting the Growth Engine. Washington D.C.: International Monetary Fund.
11 World Bank Group. 2019 World Development Indicators. See https://databank.worldbank.org/source/world-development-indicators.
12 National Bureau of Statistics. 2018. Formal Sector Employment and Earnings Survey, 2016. Dar Es Salaam: National Bureau of Statistics.

Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in Tanzania | Page 5
 Table 2. K
 ey Indicators for Tanzania’s Population and Economy

INDICATOR VALUE YEAR

Population 58.0 million people 2019a

Literacy Rate 78% of population aged 15+ 2015b
Primary education completing rate 65% of population aged 25+ 2012b
Poverty rate 49% of population below WB poverty line of 1.90 USD PPP/day 2011b
GDP, nominal USD • Total 63.2 billion
2019a
• Per capita 1,122
GDP, nominal TZS • Total 149.7 trillion
2019a
• Per capita 2,581,429
GDP, purchasing power parity • Total 151 billion (2011 USD PPP)
2017a
• Per capita 2,701 (2011 USD PPP)
GDP growth rate 5.4 2018b
Unemployment 1.9% of labor force 2018b
Sources: aPenn World Table and bThe World Bank.

between countries. By applying PPP one can assess, both Cable System (EASSy), and Seychelles East Africa System
between countries and over time, real year-on-year changes (SEAS). SEAS is a 1,930km point-to-point submarine cable
and economic trends based on actual living standards. connecting Seychelles to Tanzania. Unlike the other undersea
Through the lens of PPP, Tanzania’s economy is the equiv- cables, SEAS is intended to connect Seychelles to interna-
alent of $151 billion (2011 USD) with a per capita GDP of tional bandwidth through EASSy and not to bring capacity to
$2701. Later, we will use the PPP method of quantifying the Tanzania. See also Figure 2.
economy to generate our results, enabling impacts to be
The Tanzanian government hopes to extend its National ICT
interpreted directly as improvements in living standards
Broadband Backbone (NICTBB) to its landlocked neighboring
relative to different points in the past.
countries. The backbone currently distributes capacity from
Tanzania is connected to three active submarine cables which the submarine fiber cables Dar es Salaam to over 30 points of
land in Dar es Salaam: SEACOM, Eastern African Submarine presence throughout the country’s districts (Figure 3).

Table 3. Subsea
 Cables Landing in Tanzania

CABLE DESIGN CAPACITY (TBPS) LOCAL LANDING STATION(S) READY FOR SERVICE YEAR

East Africa Submarine Cable System (EASSy) 11.8 Dar es Salaam 2010
SEACOM/TATA TGN-Eurasia 4.2 Dar es Salaam 2009
Seychelles to East Africa System (SEAS) 0.32 Dar es Salaam 2012
2Africa (announced) 180 Dar es Salaam 2023
Source: Telegeography’s Submarine Cable Map and STF Analytics’ Submarine Cable Almanac.

Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in Tanzania | Page 6
3. Analysis Approach
Figure 2. S
 ubsea Cables in Africa

We analyzed the economic impacts of subsea cables by

pairing rigorous economic analysis approaches with inter-
views with experts in Tanzanian internet connectivity. In so
doing, not only were we able to understand what the impacts
have been of past improvements in connectivity, but also
identified the implications of—and barriers and facilitators
to—improvements in connectivity going forward. This
section offers a high-level description of our approach.13

Note that because terrestrial fiber and wireless networks

connect users to subsea cables’ landing stations, we include
them in the analysis. However, we emphasize that the
impacts quantified are for the international connectivity
associated with subsea cables and not domestic connectiv-
ity. Increasingly, nationally hosted internet exchanges, local
content delivery networks, and data centers are bringing data
resources stored abroad on shore. For many emerging econo-
mies like Tanzania, international connectivity remains critical.
Source: Song, S. 2020. African Undersea Cables (2023).
3.1 ECONOMETRIC ANALYSES See https://www.manypossibilities.net.

We employed two complementary econometric methods:

difference-in-differences and synthetic control. Of all avail-
able econometric methods and strategies, these two offer Figure 3. T
 anzania’s National Broadband Backbone
the most robust, reliable, and accurate way to estimate
causal effects in the context of subsea cables. Each one of
these methods derives from cutting-edge statistical tech-
niques14,15,16 and have been used to investigate research
questions similar to those posed by our analysis.17,18

3.1.1 Difference-in-Differences (DID)

DID estimates the causal impact of subsea cables on employ-

ment and firm-level outcomes. It consists of identifying the
impacts associated with a specific intervention or treatment
over some period of time. In this analysis, subsea cables
(and increases in international data connectivity) are the
intervention. The impact (“treatment effect”) is identified by

13 A detailed technical addendum accompanies this report.

14 Athey, S., Imbens, G. W. 2017. The State of Applied Econometrics: Causality and Policy Evaluation. Journal
of Economic Perspectives, 31(2): 3-32.
15 Baum-Snow, N, Ferreira, F. 2017. Causal Inference in Urban and Regional Economics. National Bureau of
Economic Research (NBER) Working Paper Series. Working Paper 20535.
16 Imbens, G. W., & Wooldridge, J. M. 2009. Recent developments in the econometrics of program evalua-
tion. Journal of Economic Literature, 47(1), 5-86.
17 Hjort, J, Poulsen, J. 2019. The Arrival of Fast Internet and Employment in Africa. American Economic
Review, 109(3): 1032-1079. Source: NICTBB.
18 Abadie, A., Diamond, A., Hainmueller, J. 2010. Synthetic control methods for comparative case studies:
Estimating the effect of California’s tobacco control program. Journal of the American Statistical
Association, 105.490 (2010): 493-505.

Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in Tanzania | Page 7
 terrestrial fiber to the same changes for individuals located
Figure 4. D
 ifference in Differences Technique for Analysis of the
Impact of Subsea Cables
just beyond this distance but still located within a few kilome-
ters of the fiber. Excluding individuals located farther than a
few kilometers from terrestrial fiber and focusing on changes
between groups located just on either side of a narrow
margin produces a control group with high comparability
to the treatment group. The resulting groups are similar in
terms of both demographic and geographic characteristics,
and they would arguably be subject to the same shocks (i.e.
there would not be an event that affected a majority of one
group but not the other) with the exception of subsea cables.
Essentially, the only aspect differentiating individuals in the
treatment group from members of the control group is that
individuals in the treatment group may have much greater
potential to access (or benefit from) high-speed internet after
subsea cables arrive. Applying DID in this way enables us to
tease out the effect of subsea cables from various potential
comparing the difference in outcomes before and after the
confounding factors such as distance to other infrastructure
intervention for the group exposed to the intervention (“the
and arguably any other shocks that may affect employment
treatment group”) to the same difference for the unexposed
status, in addition to time invariant characteristics (which are
(“the control group”).
inherently controlled for in DID).22
Assignment to the treatment group is based on close proxim-
Because the firm-level data from WBES are spatially aggre-
ity to terrestrial fiber in the base period.19 Being located near
gated at the city level, we were unable to achieve the same
terrestrial fiber is a key factor that would enable individuals/
level of specificity for firms as for individuals. For example,
firms to access the benefits of subsea cables. Because DID
with a small number of cities, within which all firms are either
estimation is based on the differences in the changes that
assigned to the treatment or the control group (based on
occurred between the two groups pre- and post-subsea
whether the city is connected to the terrestrial fiber in the
cables, the technique inherently controls for many time-in-
baseline period), it is conceivable that an event unrelated to
variant factors such as age and gender. See Figure 4.
the arrival of subsea cables affected the outcomes of a large
The data we used for our analysis of employment comes from share of firms in one group but not the other (e.g. municipal
the United States Agency for International Development’s policy changes). Therefore, we regard the impacts on firms
(USAID) Demographic and Health Surveys (DHS),20 which ask using our DID approach as suggestive.
individuals about their employment status and type of occu-
pation. The data for our analysis of firm outcomes come from 3.1.2 Synthetic Control (SC)
the World Bank’s Enterprise Surveys (WBES).21 The DHS data
SC estimates the impact of subsea cables on economic
are geocoded, which enabled greater precision in our econo-
outcomes by comparing Tanzania’s actual outcomes after
metric approach than the less spatially explicit WBES data
subsea cable arrivals to a model of Tanzania in which the
(which identify the location of firms down to the city level).
cables did not arrive but for which all other prevailing
Using the DHS data, we were able to compare changes in economic trends continued. This latter version of Tanzania is
employment outcomes (before and after subsea cables) referred to as a synthetic counterfactual.
for individuals located within a few hundred meters of the

19 We use the baseline terrestrial fiber to assign treatment to avoid upward biasing the estimates. Note that the expansion of terrestrial fiber between baseline and endline only makes
the estimates more conservative.
20 U.S. Agency for International Development. Demographic and Health Surveys. See https://dhsprogram.com/Data/.
21 World Bank Group. 2019. Enterprise Surveys. See https://www.enterprisesurveys.org/.
22 Many things affect employment status, but factors that would bias the DID estimates are events that occurred between the baseline and endline surveys that differentially affected
the outcomes of the two groups. Based on the method of treatment assignment, it is highly unlikely that an event systematically affecting employment outcomes for one group but
not the other occurred between the two periods, besides the addition of subsea cables.

Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in Tanzania | Page 8
 dimensions than any single comparison country alone. Key
Figure 5. S
 ynthetic Control Technique for Analysis of the Impact of
Subsea Cables
dimensions include GDP per capita, labor composition by
industry sector, and the proportion of people living in urban
areas.

The construction of the synthetic counterfactual is

completely computationally driven and optimizes the fit
of the counterfactual based on the countries’ actual data.
Importantly, the counterfactual can be tested for its robust-
ness and reliability, which helps assess confidence in each set
of results. See Figure 5.

The country-level data we used for SC analysis come from

the Penn World Table (PWT)23 and the World Bank’s World
Development Indicators (WDI).24 These sources provide
relevant national statistics from officially recognized sources,
which are then standardized using well-documented meth-
odology. Importantly, the detailed methodology and data
quality control measures used to standardize the data enable
The synthetic counterfactual is a weighted combination of
comparison across countries and over time, and thus for our
similar countries which did not receive subsea cable landings
application of SC to match on a variety of important macro-
during the time period of interest and that is calibrated to
economic characteristics and outcomes.
Tanzania’s pre-arrival state. We use a weighted combination
of multiple countries because the resulting counterfactual is The estimated effects using DID and SC provide complemen-
more like Tanzania across a variety of important and relevant tary insights due to their similarities and differences across

Table 4. S
 imilarities and Differences of Econometric Analysis Strategies

DIFFERENCE IN
IMPACT DIMENSION SYNTHETIC CONTROL
DIFFERENCES

Treatment Subsea cables (explicitly) � �

Temporality Discrete point-in-time impacts � �

Employment � �
Outcome
Economic growth � �

Spatially-specific impacts (specific to fiber-connected areas) �

Space
Spatially-inspecific impacts (at the country-level) �

Microdata geocoded to identify individuals/firms in fiber-

�
connected/unconnected areas within countries
Data aggregation

Macrodata on countries (national statistics) �

23 Feenstra, R. C., Inklaar, R., Timmer, M. 2015. The Next Generation of the Penn World Table. American Economic Review, 105(10), 3150-3182.
25 World Bank Group. 2019 World Development Indicators. See https://databank.worldbank.org/source/world-development-indicators.

Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in Tanzania | Page 9
different dimensions, as described in Table 4. By applying two
econometric methods, our work provides insight into various
4. Economic Impacts of
aspects of economic impact caused by subsea cable landings. Subsea Cable Landings
3.2 T
 HEMATIC ANALYSIS OF INTERVIEWS The impact of the connectivity increases delivered by subsea
WITH KEY STAKEHOLDERS cables appear to be limited to those areas where the fiber
infrastructure was particularly robust. This would include
We interviewed 13 Tanzanian experts with telecommuni-
Tanzania’s largest city, Dar es Salaam. The impacts here were
cations firms, research entities, and government agencies.
not large enough to be detectable in national employment
Interview topics included current connectivity trends and
or GDP statistics. We studied 2009 to 2014 because this is a
challenges (e.g., network expansion, latency, affordability),
5-year period following cable arrivals.
public-sector priorities driving network expansion, role of
subsea cables in the broader landscape of connectivity and Looking closely at areas of impact, those who are benefiting
internet quality, role of connectivity in economic develop- are living within 200 meters of the fiber infrastructure. People
ment, and future trends and issues. So that interviewees here are 18.7% more likely to be employed than people who
could be open and candid, we advised that participation live within 10 kilometers of the fiber infrastructure. This is an
could be confidential, that we would not attribute responses extremely narrow connectivity radius. See Figure 6.
to individuals, and that only the synthesized remarks of all
interviewees would be presented in our reports. In cities connected to the terrestrial fiber network we found
weak evidence of mixed effects on firms. The evidence could,
at best, be described as signals because the robustness of the
Figure 6. E
 ffect of Subsea Cables on Employment Among Working
results were low.
Age Individuals in Areas Within 200 Meters of Terrestrial
Fiber We found that firms here were more likely to use websites to
conduct business, but they were no more likely than firms in
90%
unconnected areas to leverage online training or use email
80% for business. Ironically, we also found that these firms seemed
18.7%
70% to employ fewer people and had lower revenue per worker.
Likelihood of being
60% 65.9% The results, however, were not very robust so we have limited
employed if one lives within
50%
~10 km of fiber
confidence on the inferences that can be drawn. It is likely
40% that the effect of subsea cables on firms in connected cities
30% Increase in the likelihood of vary substantially among different types of firms.25
20% being employed if one lives
within the average radius for
We were unable to detect any impacts on GDP per capita,
10%
fiber connectivity overall employment, employment in services, or exports
0% of financial services exports from subsea cable landings.
Source: Authors’ estimates.
Analysis of effects at the aggregate level, however, obscures
underlying dynamics such as the varying impact by geogra-
phy, demographics, and industry sector.

Taken together, our results suggest that a narrow slice of

Tanzania benefited from the subsea cable landings from
2009. This finding is notable enough, however, to suggest
that there is likely significant economic development poten-
tial for the country overall if internet usage were greater.

25 Unfortunately, the high degree of geographic clustering in the WBES sample prevented us from further disaggregating our analysis to examine how effects on firm-level outcomes
varied by industry or other characteristics of the business.

Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in Tanzania | Page 10
5. Stakeholder Perspectives on Connectivity
Broadband penetration, and therefore the ability to derive •A
 pplication Service (AS) license permits the resale of elec-
economic development value from connectivity, is low tronic communication services to end users; and
because of challenges in affordability (see Table 5). Tanzania’s
•C
 ontent Services (CS) license permits services offered for
telecommunications market is very competitive, with multi-
sound, data, text or images whether still or moving except
ple operators in all market segments competing under a
where the service transmits through private communica-
proactive policy and regulatory framework. However, there
tion.
is a government restriction on the middle mile. One key
player, National ICT Backbone (NICTBB), was created by the Of importance for bandwidth distribution are NF licenses,
government to reduce network resource duplication but is which include all the main operators (described further
now viewed by experts as an obstacle to affordability, which below). Operators are permitted to be vertically integrated
in turn has limited broadband penetration and its associated but must be licensed for each service.
benefits.
The government has licensed the following key players in its
broadband sector. Subsea cables are SEACOM, EASSy, and
5.1 TELECOMMUNICATIONS MARKET SEAS. NICTBB is the principal intercity terrestrial fiber opera-
STRUCTURE AND COMPETITION tor, but networks are also operated by Vodacom and Halotel.26
The Tanzania Communications Regulatory Authority (TCRA) Metropolitan fiber networks are operated by Vodacom, Airtel,
segments the telecommunications market into four license Tigo, and Halotel.
categories, as follows: At the consumer end, there are three large operators:
•N
 etwork Facility (NF) license permits a licensee to Vodacom (33%), Airtel (26%), and Tigo (30%). Halotel, the
construct, install, maintain, operate, manage and make youngest operator in the market (from 2015), now has
available network facilities to other licensed electronic about 10% of the market. Government-owned Tanzania
communication providers in Tanzania; Telecommunications Corporation (TTCL) holds 1% and is
struggling to get a foothold in the market. The TCRA esti-
•N
 etwork Service (NS) license permits a licensee to provide mated that there were over 22 million mobile subscribers in
a pre-defined set of services for carrying information 2018. About 96% of all mobile subscriptions are prepaid.27
except those provided solely on the customer side of the Roughly 95% of the population is covered under 2G technol-
network boundary; ogy, while 3G covers 61% and 4G covers 28%.

Table 5. K
 ey ICT Indicators

INDICATOR VALUE YEAR

Electrification 33% of population with access to electricity 2017

Internet users 16% of population 2017
Fixed broadband subscribers 1.53 subscriptions per 100 inhabitants 2018
Fixed Broadband Speed 1 megabits per second 2017
Fixed Broadband Monthly Subscription Charge 12.35 2011 USD PPP 2017
Mobile Cellular Subscribers 77 subscriptions per 100 inhabitants 2018
Mobile Download Speed 10 megabits per second 2020
Mobile Broadband Prepaid Subscription Charge 1.47 2011 USD PPP per 500 megabits 2017
Source: International Telecommunication Union and Ookla Speedtest.

26 Halotel is an operation of Viettel, a Vietnamese operator.

27 GSMA. 2019. Market Overview: Tanzania. London: GSM Association.

Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in Tanzania | Page 11
In the middle mile,28 operators carry bandwidth through to enhance sharing of education and research resources both
terrestrial fiber networks inland with government sanctioned locally and globally. Without owning its own infrastructure,
player, NICTBB, whose infrastructure is government-owned TERNET is somewhat limited and resorts to relying on the
and managed by TTCL. NICTBB provides national coverage to licensed operators to lease bulk capacity for onward resale
regional headquarters and cross-border points for regional to academic institutions. However, it leverages its economies
connectivity to Kenya, Uganda, Rwanda, Burundi, and of scale. TERNET uses the aggregate bandwith requirements
Malawi. of its clients as a bargaining chip and is able to negotiate a
wholesale price of US$ 3 per Mbps from a wholesale provider.
Established as a strategic vehicle facilitating implementa-
tion of e-government, e-health, e-commerce and e-learning The Universal Communication Service Access Fund (UCSAF)
to accelerate socioeconomic development, NICTBB offers is expanding the national network into the rural areas. UCSAF
wholesale high capacity transmission services nationwide aims to deliver broadband connectivity in line with the coun-
and into neighboring countries. NICTBB has 7,650 kilometers try’s National Broadband Policy. Services are being upgraded
of terrestrial fiber. from 2G to 3G. UCSAF however continues to experience
daunting expansion challenges. About 6% of Tanzania’s
A second middle mile supplier is the operators’ consortium,
population has no connectivity to any network while 30% of
a fiber network built in partnership with the Government
its land area has no coverage. The poorer populations in these
of Tanzania through the Ministry of Works, Transport, and
areas are also in need of devices, airtime, and skills to operate
Communication. The role of the ministry is to provide rights
the devices.
of way for the terrestrial fiber network while the consortium
provides funding to build the infrastructure. At the end of the
fiber network installation, the Ministry acquires ownership 5.2 NETWORK EXPANSION
of the infrastructure while the consortium gains Indefeasible When subsea cables landed in 2009, the price of connectivity
Rights of Use (IRU).29 The consortium has built 3,024km of dropped significantly, from satellite fees of $2,500 to $3,000
fiber. Other operators outside the consortium can lease the per Mbps to $500 per Mbps within the first year. The price is
fiber. currently at US$ 30 (depending on the operator and loca-
tion of delivery). The price for broadband for the end user
Halotel, licensed to construct fiber network infrastructure
however is the same all over the country.
where the NICTBB network does not operate, is both in the
middle and the last mile. Halotel’s entry into the market The price for the middle mile through NICTBB is a major
changed the market dynamics by serving rural areas with determinant of the cost to subscribers, as per the costing for
fiber and 3G. Halotel has an agreement with the Tanzanian IRU and Lease (Table 6).31 There is little competition.
government that allowed it to build its own fiber and only
lease infrastructure through NICTBB where NICTBB’s infra- For operators who want to establish their own terrestrial fiber
structure is already available. Halotel has constructed last infrastructure, the government-imposed levies (Table 7) are
mile connectivity from regional centers to district offices a barrier with the high costs incurred on both initial costs and
and other social service centers. Based on its license terms, it annual maintenance.
is obligated to provide free internet to all public secondary While the government, and specifically the roads sector, had
schools and charge half price for internet to government a goal to generate revenue, these levies are a great burden on
offices, hospitals, police stations, and courts. fiber infrastructure buildout, according to interviewees.32
A unique operator is Tanzanian Education and Research In addition to operational costs in Tanzania, operators face
Network (TERNET).30 TERNET is a network of universities and high taxation rates and fees. Taxation is a major issue for the
research institutions providing internet and related services

28 Borrowed from World Bank nomenclature – first mile is the undersea, second mile is terrestrial backhaul and third mile is consumer end connection.
29 IRU is a contractual agreement that confers an indefeasible and exclusive right of access to equipment, fibers or network capacity on a telecommunications system to another telecom
operator for an agreed-upon period in return for upfront or recurring payments. An IRU agreement is usually for a longer term (e.g. 10–20 years).
30 See www.ternet.or.tz.
31 Tanzania Communications Regulatory Authority. Competition Assessment in Tanzania Telecommunications and Broadcasting Markets.
32 These levies apply to other utilities as well who wish to use the road space – oil, gas, water, electricity and roadside fuel stations. Incidentally the ICT sector is under the same Ministry.

Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in Tanzania | Page 12
 Table 6. S
 elected NICTBB pricing IRU and Lease Tariff structures

CAPACITY
PERIOD AND TERMS CAPACITY PRICING PRICES (US$)
(MBPS)

IRU Tariff Structure/month

10 years lease contract STM1 155 140,224
15 years lease contract STM1 155 186,993
20 years lease contract STM1 155 233,741
Lease Tariff structure
1 Year Lease contract STM1 155 46,748 per year
3 Year Lease contract STM1 155 119,208 per 3 years
Initial charges STM1 155 9,739

whole chain in the telecommunication sector including: 5.3 PUBLIC POLICY PRIORITIES
•1
 8% Value Added Tax (VAT) applicable to general services Tanzania’s economic development blueprint, Vision 2025,
and products articulated a range of focus areas to create an optimal
environment for the growth of the ICT industry, including
• Excise duty 17% plus VAT
infrastructure, human capital, legal and regulatory frame-
• Corporate Income Tax (CIT) 30% of net income of company works, and universal access. The government established the
ICT Commission33 in 2016 to promote investment in the ICT
• TCRA fee 0.8% of turnover sector and regulate ICT professionals.
•U
 niversal Communication Access Fund Contribution 0.3% In the rural areas, UCSAF has the mandate to extend univer-
of turnover sal connectivity to the lowest administrative level and social
• City levy 0.3% centers through NICTBB, with the aim of making e-govern-
ment services accessible to all citizens. Additionally, a priority
Based on interviews conducted with players in Tanzania’s is to create a level playing field by ensuring universal access
broadband sector, new undersea cables, like 2Africa, could on at least a 3G network.
lead to a decrease in price on undersea bandwidth. The cost
to the end user is however largely defined by NICTBB. As Through TCRA, all regional IXPs are now housed under
such, it is unclear whether any increases in competition in the TCRA since they are considered critical infrastructure. TCRA
subsea market would affect pricing for Tanzanian consumers. also took over management of the domain name system

Table 7. A
 nnual Road User Charges

INITIAL MANAGEMENT ANNUAL MANAGEMENT

TYPE OF UTILITY/FACILITY TYPE OF STRUCTURE UNIT
CHARGE RATE (US$) CHARGE RATE (US$)

Telephone overhead wire Pole Number 2 15

Telephone underground cable Line Kilometer 50 30
Fiber optic cable Line Kilometer 1,000 1,000
Duct > 0.28m 2
Line Kilometer 100 100

Source: The Roads (Financing and Participation of Public Private Partnership) Regulations, 2013, Ministry of Works, Transport and Communications.

33 See www.ictc.go.tz.

Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in Tanzania | Page 13
administration. At the infrastructure level, the government contribution in connectivity to landlocked countries through
is requiring a dig-once policy which is currently rolling out in existing submarine cables. Cross border linkages through
major towns with operators jointly building ducts. Operators operators such as Liquid Telecom and Wananchi Telecom use
are required to cede some of the space for government use. NICTBB through the border points to connect landlocked
countries.
5.4 ECONOMIC DEVELOPMENT The government has initiatives aiming to address urban-rural
The government recognizes ICT as a mechanism for grow- divides, social disadvantage, and other inequities, however it
ing the economy and has created institutions to champion is unclear the extent to which these efforts will be sustainable
development. These include the ICT Commission cited or successful over the long term, given affordability chal-
earlier, e-Government Agency with a mandate to promote lenge.
e-government services, and the Commission of Science
and Technology (COSTECH) to promote innovation in ICT.
Unifying themes are economic growth, ICT utilization, entre-
preneurship, and education.

The government is committed to provide a supportive

environment through policy guidelines for cooperation
and collaboration with regional and international ICT
organizations for mutual benefit. Tanzania and other East
African Community (EAC) countries established and operate
coordinated communications infrastructure, including devel-
opment and deployment of ICT applications and services,
and promotion of postal services. A strategic objective is
to harmonize ICT policies, laws and regulations in the EAC
partner states, encourage establishment of communication
infrastructure and services, standardize technology and
services, and grow communication markets.

Within the region, Tanzania participates in various regional

organizations including African Union Commission, East
African Community Broadband ICT Network (EACBIN) and
other initiatives under the Southern African Development
Community (SADC). These efforts increase Tanzania’s

Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in Tanzania | Page 14
6. Conclusions
Subsea cable landings in Tanzania from 2009 generated For Tanzania’s ICT sector to grow, there is need for the middle
employment benefits for people who were living in very close mile to open up for price and service competition. This will
proximity to the terrestrial fiber infrastructure. These people ensure operators provide services to their customers at
were 18.7% more likely to employed than people in the same an affordable rate. The opening up of the market, and the
general area but further away from fiber. The benefits were review of fees and policy will encourage more investment
not sufficiently widespread or large to have an impact on in Tanzania’s ICT industry, thereby increasing accessibility
national employment or GDP. However, we take the results as for the final consumer. The government should address the
a signal that the economic development potential is there. affordability challenge by reviewing and lowering its taxation
on devices and services. Doing so would lower prices and
Our analysis suggests that because such a small share of the
encourage uptake, which would stimulate economic activity
population is connected to the internet, increasing connec-
(and public revenues).
tivity—whether by increasing the coverage of terrestrial fiber,
investing in last-mile infrastructure, working to make internet This action would also address what superficially comes
access more affordable, or addressing connection quality across as cognitive dissonance. On the one hand, there
issues—could be among some of the most effective policy are strategies for ICT-based economic development.
measures to positively impact national employment and Connectivity for all is prioritized. On the other hand, there
income. Evidence from analyses we conducted in other coun- are public-sector cost drivers that worsen the affordability
tries suggest that subsea cable landings and (and by proxy, problem, undermining the ability of plans to deliver on their
increases in international bandwidth) are complementary to objectives.
and inseparable from the broadband penetration rate. Hence,
Indeed, the high cost of capacity delivered by the middle
increases in speed and quality without increases in penetra-
mile is the key barrier identified by all interviewees. Opening
tion will only marginally contribute to the overall economy. In
up the middle mile to competition would perhaps be one of
Tanzania’s situation access (the intersection between afford-
the most significant actions the government could take to
ability and availability) appears to be a paramount issue to
address network expansion, access, and affordability.
address.

New subsea cable landings would certainly stimulate compe-

tition and innovation. They certainly would be impactful for
Tanzania’s operators. However, it is not clear the extent that
they could have the most significant impact on affordability
for Tanzanians overall.

Economic Impacts of Submarine Fiber Optic Cables and Broadband Connectivity in Tanzania | Page 15
 Economic Impacts of Fiber Optic Subsea Cables
and Broadband Connectivity in Tanzania

Acknowledgment
The authors thank the Tanzanian telecommunications experts who
shared their insights and perspectives with us. Thank you also to Steve
Song, who provided reviews and technical guidance that strengthened
this work.

The authors wish to gratefully acknowledge the financial support of

Facebook, Inc. The research design, method selection, results, and
conclusions are the authors’ alone.

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November 2020

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