Economic Update

A new submarine fibre-optic cable network is already boosting Papua New Guinea’s internet speeds and ICT capacity in some regions, with further improvements set to come this year through a subsea link to Australia.

On February 19 the first stage of the Kumul Domestic Cable – a fibre-optic link from Port Moresby to Madang, via Alotau, Popondetta and Lae – was completed.

The project, which was developed by the state-owned ICT infrastructure development firm PNG DataCo in collaboration with Chinese telecoms giant Huawei, has resulted in a rise in transmission speeds compared to previous traffic carried on microwave radio systems.

The new cable is set to connect with two other fibre-optic networks, one linking Jayapura in Indonesia to Arawa via seven coastal cities, and the other linking Daru to Kerema, with all three stages of the project expected to be fully operational by the end of the year, according to PNG DataCo.

See also: The Report – Papua New Guinea 2018

Building international connections

While the coastal cable is already starting to deliver improved services to those areas brought on-line, a more significant increase in capacity is expected to come later this year when the network ties into another subsea cable being laid from Australia.

The PGK324m ($96.4m) Coral Sea Cable System is set to connect Sydney with Port Moresby and Honiara, the capital of the Solomon Islands, and is scheduled to come into service late this year.

Upon completion, the cable will provide a technical maximum capacity of 10 TB per second, approximately 1000 times the existing load capability.

While the Australian government is meeting two thirds of the cost of the project, all revenue will be divided between PNG and the Solomon Islands, allowing the country to control costs incurred through the development.

Time needed for gains to spread

While the completion of the first stage of the Kumul project has brought improvements to the country’s internet service, given the current low level of internet penetration, the benefits may take some time to become apparent.

Internet penetration stood at only 11.7% in PNG in 2016, significantly lower compared to the 2017 rates of neighbouring Indonesia (54.7%) and Fiji (46.8%).

According to Jacky Xu, CEO of Huawei PNG, it may take between two and three years for the country to find itself in a position to really compete on an international level, but as these improvements gather momentum, the gains in ICT capacity will bring further advantages and opportunities.

“The platforms they offer will make everything better, more reliable and more affordable,” Xu told OBG. “This will open opportunities for both large and small investors.”

Although internet penetration is very low in PNG, it is increasing rapidly – up from 6.5% in 2013 and 1.3% in 2010 – a trend that should continue as these new cable systems are completed.

“Papua New Guineans are great adopters of new technology,” Peter Goodwin, CEO of business and ICT solutions provider Remington Technology, told OBG. “In terms of business applications, the new cable network will significantly change the market.”

Indeed, these technological developments may enable PNG to benefit from economic leapfrogging, presenting real potential for growth in the mid to long term.

Faster connections to bring growth opportunities

While low internet penetration rates are dampening short-term profits for ICT firms, they do highlight the potential for growth in this sector. Once these cable links are completed and active, opportunities are set to emerge for ICT equipment and service providers, as demand for more advanced software and hardware platforms that can utilise the increased capacity brought by the cable network rises.

This demand will increase in the years to come as internet prices, which currently remain high due to loan repayments for the cable upgrades, start to drop. According to government projections, once capital recovery rates increase, internet prices may be reduced by 80% or more – opening the way for far higher ICT activity among both individual consumers and small and medium-sized enterprises.

This provides an opportunity for ICT providers to try to expand their client base, while also educating their existing customers on the need to upgrade their current products and services.