Bora Varliyagci Issue: Africa and the Middle East 2015
Article no.: 7
Topic: South Africa’s broadband challenge
Author: Bora Varliyagci
Title: Head of Digital Infrastructure, Africa
Organisation: Mott MacDonald
PDF size: 217KB

About author

Bora Varliyagci is Head of Digital Infrastructure in Africa for Mott MacDonald, a global management, engineering and development consultancy. With over 15 years’ international experience in the telecommunications industry, he has worked with utilities, fixed and wireless network operators and service providers, financiers and investors and original equipment manufacturers, as well as transportation and energy companies, in both the private and public sector. Throughout his career, Bora has successfully set-up business divisions and new practices, established and managed large project teams in emerging markets and fast-paced environments, pioneered strategic alliances and partnerships with both industry players and investors and led the development of value added solutions to complex business challenges.

Article abstract

South Africa seems to have plenty of metro and long distance fibre, especially in the main metropolitan areas. However, this fibre tends to serve mainly large enterprises as it is usually located around business districts or parks, so not much of it can benefit small to medium enterprises or residential users. Therefore the biggest challenge seems to be the limited reach and coverage of broadband access networks. Fixed and wireless broadband access infrastructures are still limited in terms of accessibility and affordability despite a great demand for faster services at a competitive price. Taking a closer look into the access layer will reveal a better understanding of broadband challenges in South Africa. 

Full Article

The impact of telecommunications has been profound over recent years, both globally and in Africa. While South Africa is one of the largest economies on the continent, the opportunities for economic development and growth remain substantial. As has been seen elsewhere in the world, telecommunications is undoubtedly a key enabler of that development. Indeed in Africa, the rapid adoption of mobile telephony has demonstrated the enormous demand for communications and has transformed the lives of many both economically and socially.
Despite its advanced infrastructure and broadband being seen by policy makers and business leaders as a catalyst for economic and social development, South Africa is struggling to meet fast growing demand for reliable and affordable broadband internet access by consumers and businesses alike. As per Akamai’s ‘State of the Internet’ report for the first quarter of 2015, it recorded an average broadband speed of 3.4Mbps and broadband adoption rate of 19%, with the broadband adoption growth rate of just 0.3%. This indicates a relatively low performance in the Europe, Middle East and Africa region.
So what is holding back South Africa from improving reliability, affordability and accessibility in its broadband service delivery? The main challenges can be attributed to infrastructure and cost.
Infrastructure
Telecommunication network infrastructure is undoubtedly the foundation of broadband service delivery. International and national backbone infrastructures are predominantly made of high-capacity fibre networks, while access networks are often a mixture of fixed and wireless technologies.
From an international backbone point of view, the arrival of submarine cables to Africa in the last six years has unlocked one of broadband’s major infrastructure challenges. The effects of these new cables, which have been installed on the east and west coasts of Africa, have been remarkable. There has been a significant drop in bandwidth prices, driven by new competition and increased capacity. This has resulted in significant improvement of broadband service uptake, indicating that there is a strong price elasticity of demand. As a result, South Africa has seen a sharp rise in the number of individuals using the internet over the last five years. Until around 2010, only approximately 10% of individuals had access to the internet at home, a figure which had been growing very slowly. However, since then this figure has been rising very steadily and while still below levels of most European and even north African countries, it is estimated that almost half of the South African population now uses the internet at home.
South Africa has also made great progress over the last five years with regards to national backbone infrastructure. Telkom, the incumbent fixed-line operator, has an extensive backbone network. Broadband Infraco, FibreCo and NLD – a partnership between MTN, Vodacom and Neotel – are the other key players in national long-haul fibre transmission networks.
Regional and metro layers have also been developed extensively. Dark Fibre Africa (DFA) has an extensive open access network across several South African cities and towns, while Link Africa, Bwired and Metro Fibre Networks are other notable players, though these have relatively smaller footprints compared to DFA. Additionally, several provincial governments such as Gauteng and Western Cape, as well as metro municipalities like eThekwini, Cape Town and Johannesburg, have been deploying their own fibre networks primarily for use in meeting information and communications technology service needs and public e-services.
South Africa seems to have plenty of metro and long distance fibre, especially in the main metropolitan areas. However, this fibre tends to serve mainly large enterprises as it is usually located around business districts or parks, so not much of it can benefit small to medium enterprises or residential users. Therefore the biggest challenge seems to be the limited reach and coverage of broadband access networks. Fixed and wireless broadband access infrastructures are still limited in terms of accessibility and affordability despite a great demand for faster services at a competitive price. Taking a closer look into the access layer will reveal a better understanding of broadband challenges in South Africa.
South Africa has achieved high levels of mobile penetration, running at over 150% with an average of around 2.2 SIMs per unique subscriber. Almost half of all mobile users are either 3G or 4G enabled and the GSM Association estimates that at the end of 2014 there were around 22 million mobile internet users in South Africa. However the release of 4G spectrum by the regulator ICASA, together with more efficient 800Mhz spectrum that is often referred to as digital dividend, has been delayed so far and timelines remain uncertain. Furthermore, completion of the ongoing digital migration programme is not expected before 2016, so utilisation of digital dividend spectrum in the short-term seems unlikely. While limited 4G connectivity is offered by the mobile network operators through re-farming of their existing spectrum, unavailability of 4G spectrum remains a challenge for efficient mobile broadband delivery.
Fixed line access in South Africa has been in decline for some time. The World Bank estimates that there are currently around seven phone lines per 100 inhabitants. The Broadband Commission meanwhile puts South Africa’s fixed internet penetration at around 3.1 subscribers per 100 inhabitants, which equates to approximately 1.7 million. While this is an improvement from the 2013 figure of around 2.2 subscribers per 100 inhabitants, this ranks South Africa 106th on a global scale and well below the global average of 9.4 subscribers per 100 inhabitants.
The fixed line broadband market is dominated by the incumbent Telkom, which has an extensive backbone network and is the sole provider of copper based access. There are several other fixed wireless broadband providers, notably Neotel, Comsol and Amobia, and there are also a number of smaller fibre-to-the-home players such as Vumatel, Fibrehoods, Link Africa and 123net that have emerged within the last year. These providers are aiming to capture broadband opportunities by meeting the demand of communities for reliable and affordable connectivity. Some communities have run tender processes to identify service providers who understand their requirements and are capable of providing a moral commitment of service uptake. This could be seen as a clear indication of the demand for reliable and affordable broadband in South Africa.
Cost
Even when a fibre network is close by, the one-off cost to connect to the subscriber can be high, irrespective of whether it is a fixed or wireless connection. Most cities in South Africa are well spread across a large area with single or double dwelling houses and multi-storey buildings are uncommon, particularly in residential areas. Therefore fixed access will require additional fibre deployment of anywhere between 10-50m to get from any main gate to the main dwelling. On the other hand, wireless solutions also face coverage challenges due to vegetation in residential gardens and distances of dwellings from high sites. Therefore, it requires additional small and micro sites and sometimes customer premise equipment, depending on the technology choice. All these add up to additional cost for the delivery of a reliable broadband service.
Due to the significant costs, commercial roll-out tends to concentrate on those areas of highest population density and wealth. Access to broadband telecommunications, however, is increasingly seen as a human right and a key infrastructure for a modern economy, so extensive coverage is required to maximise the socio-economic benefits of broadband.
Driven by cost challenges, South Africa has seen the emergence of open access infrastructure providers over the last few years. Open access networks enable more affordable service provision as they negate the need to replicate expensive and complicated infrastructure. They provide various new business opportunities to both established service providers, as well as ease the entry of new market players by reducing required capital expenditure significantly. There is also an emerging policy consensus that there should be an open access approach to national broadband infrastructure which has been clearly captured under South Africa’s Connect policy. While open access approach has significant benefits to both end-users and communication service providers, it has to be structured carefully to successfully reap the desired outcomes. Transparency and non-discretionary service delivery are two fundamental success factors for an open access network. Operators failing to demonstrate these key values are likely to end up with expensive yet underutilised networks. Nevertheless, the demand for open access infrastructure seems to be clear. Players such as Teraco at data centre services, FibreCo and Broadband Infraco at long distance, DFA at regional and metro fibre connectivity services, Vumatel, Fibrehoods and Century City Connect at last mile fibre connectivity services, and ATC and Eaton at wireless passive infrastructure services are all good examples of the open access trend in South Africa.
Conclusion
Given the growing demand for reliable and affordable broadband services from consumers and businesses alike, South Africa has the opportunity to leap-frog copper based legacy networks and invest in a mixture of fibre and wireless based technologies to bridge its digital divide. Supported by evolving infrastructure and business models that reduce the cost of service delivery, South Africa can improve its ranking on broadband scoreboards with a little further policy and regulatory support to overcome resource barriers such as spectrum availability, and cost barriers through local loop unbundling.