The battle for access in South Africa

by david.nunes
Dobek PaterIssue:AME 2013
Article no.:15
Topic:The battle for access in South Africa
Author:Dobek Pater
Title:Director & Analyst
Organisation:Africa Analysis
PDF size:348KB

About author

Dobek Pater has fourteen years experience in the telecoms industry and is currently a telecommunications market analyst with Africa Analysis.
Mr Pater’s previous experience includes working for a South African fibre optic cabling and systems integration company, later joining BMI-TechKnowledge in the capacity of a telecommunications analyst, and a short stint in the consumer product research field.
As a telecommunications analyst he has been responsible for analysis of numerous telecommunications markets in Africa, and directly participated in major projects in over a dozen African countries. Mr Pater also regularly presents at shows and conferences and is frequently quoted in the local and international media, and regularly appears on TV and radio shows.
Dobek Peter has a BA in International Relations and BA Political Science; Master of Business Leadership (same as MBA) and a MA International Relations.

Article abstract

South Africa’s telecommunications infrastructure is growing, but with some shortcomings in the access network and national long-haul. The best coverage is still in major urban areas. The market is quite competitive, but only mobile operators have full coverage in cities, surrounding low-income areas and rural regions. Few operators can afford to deploy their own infrastructure; so they tend to buy dark fibre or lease capacity. Better connectivity is helping businesses use cloud services, unified communications, and remote office work.

Full Article

The infrastructure landscape in South Africa has become competitive over the past several years across all four network geographies – international, national, metropolitan and access – as indicated in the graphic below. The greatest constraint continues to manifest itself in the access network and to an extent in the national long-haul segment, although in both cases this is being alleviated with new infrastructure being deployed. The access networks vary significantly, depending on the specific area within the country. The metropolitan and large urban locations have the widest range of access technologies, the most infrastructure competitors and the greatest coverage. Some of the peri-urban and the rural areas continue to rely on mobile networks only (often lower than 3G) or on satellite connectivity.
Exhibit: Competitive Infrastructure Landscape

Source: Africa Analysis, 2013

Competitive access infrastructure environment
Overall, the market has become quite competitive if one considers the wireline and wireless (mobile and fixed wireless access) infrastructure that has been deployed and continues to be deployed. However, only mobile operators can claim effectively ubiquitous coverage in the urban areas and often the only available terrestrial connectivity in the peri-urban areas (occupied mostly be low income groups) and rural areas.
Other wireless technologies, (Fixed Wireless Access) (FWA) tend to be deployed to a limited extent in the main urban areas of the country.
While the deployment of LTE networks by the mobile operators is currently limited due to lack of access to requisite spectrum (for the large MNOs), competition has been intensifying in the deployment of fibre optic infrastructure in the metro and access networks. Some of the deployment is for the operators’ own service provision; some is being undertaken by emerging infrastructure operators selling dark fibre on a wholesale basis (not active in the provision of retail services).
At present, most of the fibre deployment is taking the form of FTTS and FTTB. FTTH pilots are being conducted by a few operators, but a wider scale deployment to the home is not likely to take place over the short to medium-term future. One of the reasons is the topography of the South African urban environment. Most residents live in single family dwellings; only some six per cent of the population lives in multi-tenant dwellings (gated communities included). This makes it very costly from a capex perspective to invest in last mile wireline networks. Only when the cost of fibre deployment to the house decreases and the value proposition for services over fibre improves is the uptake of fibre connectivity by residential users likely to grow. Nonetheless, future greenfields deployments of fixed infrastructure are likely to be fibre rather than traditional copper.
FTTS (fibre to the site) shows the highest deployment as mobile operators deploy back-haul fibre connectivity to LTE and 3G sites, in order to cater for the growth in mobile data traffic. FTTB (fibre to the building / business) has been targeting business nodes and office parks, with a number of operators also prepositioning themselves for future connectivity of business premises by deploying fibre to the kerb or running metro rings close to various business / commercial nodes. Speeds of up to 600Mbps are available over fibre to enterprise users, with one Gbps connectivity likely to become available in the market before the end of 2013.
With the proliferation of infrastructure, operators who have historically deployed their own physical infrastructure are now moving towards build / buy decisions, buying dark fibre or leasing capacity on networks wherever it makes commercial sense, rather than always building their own.
The following table provides a summary of the common access technologies used in South Africa at present across different access environments, as well as the expected changes in the deployment of access technologies by 2018.
Access Area 2012 Status 2018 Expected
Metropolitan Copper: DSL family available; VDSL (20 & Mbps) services piloted.
Mobile: 2G & 3G family available; launch of LTE in business hubs of main metros.
FWA: Limited coverage by WiMAX, CDMA / EV-DO, iBurst & WiFi; limited point-to-point microwave (business users only).
Fibre: Available in certain parts as FTTC / FTTB & very limited FTTH.
Satellite: Available, but used mainly for redundancy (not primary market). Copper: ADSL upgraded to 20/40Mbps (VDSL) with fibre to MSAN.
Mobile: 3G/HSPA; LTE available in most metro areas (defaulting to HSPA where 3G is not available).
FWA: WiMAX & EV-DO replaced by LTE; expansion of WiFi access and for mobile traffic offload; point-to-point microwave replaced with fibre.
Fibre: FTTB / FTTH available. Greenfields deployment will be fibre rather than copper.
Satellite: Available, but used mainly for redundancy (not primary market).
Other Urban Copper: DSL family available, but exchange-dependent.
Mobile: 2G & 3G family available (upgrade from WCDMA to HSPA).
FWA: Limited WiMAX & WiFi; limited point-to-point microwave (business users only).
Fibre: Very limited deployment.
Satellite: Available, but used mainly for redundancy (not primary market). Copper: Higher ADSL speeds exchange and copper loop length dependent in most areas.
Mobile: WCDMA upgraded to HSPA; LTE deployed in select urban areas.
FWA: WiMAX & EV-DO replaced by LTE; expansion of WiFi access and for mobile traffic offload; point-to-point microwave will continue to be used.
Fibre: FTTB / FTTH availability will depend on income and subscriber density.
Satellite: Available, but used mainly for redundancy (not primary market).
Rural Copper: Very limited; no ADSL available.
Mobile: 2G with GRPS / EDGE (not ubiquitous) available; limited 3G coverage.
FWA: No deployment except for possible limited private WiFi initiatives.
Fibre: No deployment.
Satellite: Available (to complement limited terrestrial infrastructure). Copper: No new deployment; very limited legacy deployment.
Mobile: Limited 3G deployment in 800MHz spectrum.
FWA: WiMAX / LTE mostly to government institutions (e.g. schools); limited WiFi.
Fibre: No deployment.
Satellite: Available (to complement limited terrestrial infrastructure).
Source: Africa Analysis, 2013

Regulatory Enabling Factors
One could argue that to date the regulatory environment has only partially enabled greater access infrastructure development and competition. The right of telecommunications service providers to self-provide infrastructure, as encoded in the Electronic Communications Act, 2005, was only brought into practice in 2008 when tested in court by one of the large ICT service providers (Altech). Even though practically every service provider (over 400 in total) has an infrastructure licence (Electronic Communications Network Services licence) now, few have the available funds or access to the requisite spectrum to deploy own physical infrastructure.
The market regulatory authority (ICASA) will take further steps to make the market more competitive from an infrastructure and access to infrastructure perspective. The enablers will include:
Regulatory Enabler Reason Envisaged timeline
LTE spectrum licensing This is to award the long-awaited 2.6GHz for the deployment of mobile broadband (so-called LTE spectrum). 800MHz spectrum will be more suitable to peri-urban and rural area coverage. Start the process in 2013. 800MHz spectrum to be awarded after 2015 (post digital migration).
Wayleave application simplification This aims to simplify the application process for wayleaves with municipal authorities and expedite network deployment. Draft phase; to be published in 2013.
Local loop unbundling This will allow service providers access to the Telkom copper local loop (last mile). However, access fibre may also be taken into consideration. Begin addressing again in 2013.
Wholesale / retail separation Functional separation will most likely be prescribed to operators with significant market power. This will require operators to charge uniform wholesale rates of its own retail divisions and third party service providers. No defined timeline. (Telkom is required to implement functional separation by the Competition Commission.)
Source: Africa Analysis, 2013

Furthermore, the government is finalising its Broadband Policy, which should clarify how the government plans to achieve universal access to broadband services in the country by 2020. This will include a strategy for access infrastructure deployment in under-served areas of the country.
Impact of Technologies
The following graphic presents growth in the average bandwidth speed per unique IP address in South Africa with the deployment of new infrastructure (international and domestic) and the introduction of new services enabled by this infrastructure. SEACOM was the first submarine cable available in South Africa as an alternative to the Telkom-controlled cables (SAT-3 / SAFE), followed by EASSy and WACS.
Exhibit: Increasing bandwidth speed

Source: & Africa Analysis, 2013.

The result of the new infrastructure development has been a decrease in the cost of international bandwidth (over 90 per cent since 2009), which (along with greater domestic infrastructure-based competition) has been positively impacting retail prices of data and voice services.
Infrastructure expansion and improvement will continue to have a positive impact on the retail price of data services. We anticipate that the average data consumption over a smartphone will surpass 400MB per month by the end of 2014 (from less than 40MB at the beginning of 2011), while the price per MB will be about five per cent of what it was in Q1 2011. This signifies a twentyfold retail price decline and a tenfold increase in monthly data consumption over a period of four years.
Expanding access to broadband services (on account of growing access infrastructure and greater service affordability) will begin to bridge the digital (data) divide at the individual user level, as well as social level, e.g. through greater equality in the connectivity of educational institutions across different geographic areas.
Better quality connectivity has also begun to change the business operational environment with growth in the move towards cloud services, unified communications, and remote office work. The new infrastructure will allow South African businesses to interact more efficiently with the global village and not be disadvantaged from an ICT perspective in trying to become more competitive.

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