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Townships the new broadband 'land rush'

Nicola Mawson
By Nicola Mawson, Contributor.
Johannesburg, 23 Apr 2015
Townships are set to be the new battle areas for mobile operators as the market nears saturation.
Townships are set to be the new battle areas for mobile operators as the market nears saturation.

End-users are the victors in a new land rush that is seeing service providers tap into previously cash-conscious areas, in a bid to beef up their bottom lines and ward off increasing competition from free WiFi providers.

This week alone, two new offerings aimed at the less privileged have come to the fore. Yesterday, Vodacom said it would target five townships with its new base station in a container pilot project, as it seeks to keep up with demand in areas where operators are challenged for space.

This followed Moovah's announcement that it would enable free Internet access for taxi commuters in 75 taxies in Johannesburg and Cape Town this month. Moovah is the second entity to offer free WiFi service, after the SA National Taxi Council said in the middle of last year that it would provide free WiFi for 15 million daily commuters.

There are also several regional projects on the go to provide free WiFi, and bridge the connectivity gap, to allow users to surf the Internet and access information and job listings. Among these is Project Isizwe's pilot project for the City of Tshwane - the first metropolitan municipality in SA to roll out free WiFi - which recently breached the half-million user mark.

Yet another project specifically targets Soweto with free WiFi: the Soweto Wireless User Group aims to benefit previously disadvantaged people and integrate them into the ICT and socio-economic mainstream.

Founder and technical director Jabulani Vilakazi says the concept originated from his time as a call centre agent when he dealt with the frustrations of customers who could not connect to the Internet. "For example ... a student literally crying when she could not submit her assignment online."

Vilakazi adds: "I realised that mobile was the only option they had, and the only alternative Internet connection, which would be cheaper and much more reliable, would be WiFi."

Pilot sites have been running since November, on GSM technology, and the first 10 of these will be cut over to fixed wireless next week. He adds the foundation phase is complete, and last mile infrastructure will be rolled out over the next three months. "The demand for data consumption will increase and it only makes sense for telcos to increase their capacity."

Competitive play

Adrian Schofield, ICT commentator, notes moves such as that in Soweto are spurring on operators, as they must see the free WiFi movement as competition. "Even if they provide the backhaul for it, they will still lose out on the consumer spend they would otherwise have got.

"Operators have to improve the service quality in the townships as there is an increasing number of users needing voice and data signals in those areas." In addition, penetration is reaching saturation point, so operators have no choice but to chase lower spenders.

The operators will target "any consumer who can afford to pay for connection", Schofield says, noting smartphones and good feature phones are more prevalent than many may realise.

Several companies, such as MTN and Vodacom, have been pushing low-cost smartphones in a bid to increase data consumption, while local manufacturers are also making cheaper handsets. "We live in a connected world but nowhere near everyone is connected yet."

Digging deeper

World Wide Worx MD Arthur Goldstuck adds the focus on people who had previously mostly been left out of the loop is a bit like miners turning their attention to mine dumps. "When gold was closer to the surface and easier to mine, the technology needed to extract gold from the 'waste' sand was too expensive to make it worthwhile. But as it became more expensive to extract gold from ever-deeper mines, it became viable to invest more in extracting traces of gold from the dumps.

"Operators have saturated the easily-mined customers and are now going both for deep-mining and for extracting value in areas that were previously too expensive to service."

However, says Goldstuck, this inevitably means lower average revenue per user (ARPU) for the operators, as a consequence of pursuing lower-value customer segments, adding customers that have less disposable income, and chasing market share in lower-income areas.

Ovum analyst Richard Hurst adds, despite the lower average spend from a cash-conscious group that was previously underserviced, there is still revenue to be had from township dwellers. He notes operators had been "leaving the change on the table" but are now "picking up the pennies".

Hurst notes operators will take a clever approach to mining this income source, such as Vodacom's container in a box, and consumers will benefit as they will have more choice and better connectivity. He adds townships will be the new battle areas, as he anticipates other operators staking claims in cash-conscious areas, with resultant downstream benefits such as more resellers of airtime.

"Who is going to go and mine those lower ARPUs?"

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