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04DJIBOUTI488 2004-04-04 11:59:00 UNCLASSIFIED Embassy Djibouti
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E.O. 12958: N/A


1. (U) SUMMARY: Djibouti has begun to market itself
as a potential hub for trade activity. It is trying
hard to bring the country up to speed for the 21st
century with significant reform and development in the
telecommunications sector. Already home to a hub for
the SEA-ME-WE#3 (South East Asia-Middle East-Western
Europe #3) transoceanic cable, Djibouti is hoping to
be the site for bigger, better bandwidth as
a termination point for the new SEA-ME-WE#4. The two
cables serve as connectors for Internet and
telecommunications between Europe and Asia. The #4
cable is proposed to have eight times the bandwidth
of the #3 cable. The Government of Djibouti sees
the #4 cable as a crucial piece in the
telecommunications development puzzle. Djibouti
Telecom is currently preparing a bid and searching
for the necessary funding that the connection to
SEA-ME-WE#4 will need. END SUMMARY.

2. (U) Telecommunications and Internet availability,
connectivity and cost are some of the largest obstacles
to conducting business in Djibouti. Despite Djibouti's
status as home to a large hub in the SEA-ME-WE #3
transoceanic cable, the country only has a two-Megabit
information capacity in its connection to the Internet.
Djibouti currently has 270 access lines for the Internet
available to individual customers. These access lines
have a maximum of 56Kbps connection speed. Internet
connections are extremely slow due to the overload of
these access lines and cannot support most modern
Internet technology, limiting the possibilities of
business activities online. However, Djibouti Telecom
also offers the option for businesses to lease an access
line of their own. If a business chooses to lease an
Internet access line, the highest bandwidth available is
256Kbps. The cost for leasing an access line is between
US$ 1200 and US$ 2100 per month. This cost prohibits most
businesses from affording an access line of their own.

3. (U) The average cost per month for Internet on a
non-leased line ranges from US$ 16 to US$ 34 per month,
depending on the plan chosen. To put this into
perspective with the Djiboutian economy, the reported GDP
per capita is US$ 1,200 annually. (Note: This figure only
includes those listed as citizens and does not factor in
the fifty percent unemployment rate, meaning only half the
population contributes to the GDP. End Note.) These costs
are prior to the 8.5 cents per minute rate charged for
local calls, and the seven percent service tax that is
charged on all telephone and Internet services. If a
Djiboutian spent just one hour per day online, the
per-minute charges would be an additional US$ 153. After
all installation, taxes, monthly fees and per minute
charges are added up and speed factored in, it is evident
why most business who use the Internet do so only at
Internet cafes.

3. (U) Telephone lines and service in Djibouti are
expensive and is considered a luxury to most Djiboutians.
The average monthly cost for fixed line service is around
six U.S. dollars. The real cost is of course the per-
minute charge. The above mentioned price of 8.5 cents
per-minute is a result of a January 2003 fifty percent
price cut. Since the option of GSM mobile phones has been
introduced, with the ability to have less costly pre-paid
usage, a number of people have requested cancellation of
their fixed line, and opting instead to only use mobile
phones. Currently, Djibouti Telecom has approximately
9,500 fixed lines available and 23,000 GSM service
subscribers. The actual number of fixed and GSM lines
available is much lower. The current overload of the
telephone system causes connections to be unreliable and
difficult to obtain, especially when dialing
internationally. International rates range from 90 cents
per minute for Djibouti's immediate neighbors to $3.39
per minute, with calls to the U.S. and most of the French-
speaking western world falling in the $2.26 per minute

4. (U) Djibouti Telecom is currently in negotiations to
expand its bandwidth on SEA-ME-WE#3. The company
recently announced an increase to four megabits of
information capacity. Within six months, information
capacity will increase to 45 Megs and ADSL service will
be provided to individuals who want the increased
bandwidth. The Chinese government is funding a project
to build a fiber-optic ring around Djibouti City to
enhance the network capability of Djibouti Telecom.
This project is critical to being able to increase the
bandwidth and proceed with the overall development plan
for telecommunications. Though the project is scheduled
for a completion date of 2005, it got off to a late start
and a termination date has not been determined.

5. (U) In the long term, a project spearheaded by South
African Telecom (reftel) plans the construction of an
Eastern African Submarine System (EASSy) to connect the
east coast of Africa to the SEA-ME-WE#3 cable, starting in
Mtunzini, South Africa and ending in Djibouti. Djibouti
Telecom has signed a Memorandum of Understanding and
other preliminary agreements with the other telecom
corporations along the East Coast. Scheduled completion
of this project is 2006.

6. (U) The SEA-ME-WE#4 transoceanic cable is one of the
most important development projects for Djibouti. At a
bandwidth eight-times greater than the #3 cable,
SEA-ME-WE#4 is the project that would greatly impact the
speed and quality of telecommunications over the next
ten to twenty years. After an unsuccessful negotiation
last year, Djibouti is in the process of once again
putting together a bid to the international consortium
which is constructing SEA-ME-WE#4. In order to bid on a
connection, Djibouti will approach the banking community
in order to appropriate around $30 million dollars in
funding that access to the #4 cable will require.