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SA's fibre race heats up

Paula Gilbert
By Paula Gilbert, ITWeb telecoms editor.
Johannesburg, 24 Nov 2015
SA's suburbs are expected to have 360 000 active FTTH subscriptions by 2019.
SA's suburbs are expected to have 360 000 active FTTH subscriptions by 2019.

Fibre-to-the-home (FTTH) is on the rise in South Africa's residential suburbs and could reach more than 360 000 active subscriptions by 2019.

This is according to a new report from BMI-TechKnowledge, entitled "The Fibre Land Grab: the Status of FTTx in South Africa".

BMI-T says FTTH deployment and uptake gained a major lift in 2015, with the majority of the growth coming from subscribers in residential suburbs, where much of the recent action has been focused. This is a shift from past trends which saw growth primarily in gated estates.

"Prior to 2015, gated estates had seen a higher rate of FTTH deployment and service uptake, but without achieving a significant presence in the broadband market overall," says the report's co-author and BMI-T research director Brian Neilson.

"Across South Africa, there are also far more houses in suburbs (15 million) than in estates (420 000), although estates, in general, have an obvious economic attraction of higher uptake and lower per-unit costs."

Neilson says the 2015 fibre boom has been pushed by initiatives started in communities such as Parkhurst in Johannesburg, as well as the advent of open access models incentivising Internet service providers to offer attractively priced broadband services over these fibre links.

"Telkom's launch of Openserve - with aggressive new wholesale FTTH pricing - fits in with this trend," according to Neilson.

"Telkom is proceeding with an aggressive strategy to win the FTTH deployment race, with a particularly strong move in suburbs, but also in estates. Vodacom is by far the most aggressive in terms of the sheer number of estates deploying, but Smart Village (recently acquired by MTN) has two very large estates, giving it a significant market share of both 'houses passed' and active subscriptions," says Neilson.

George Kalebaila, senior research manager for telecoms and digital media at IDC, says the FTTH space "is a little fragmented" at the moment, with some smaller regional-based players ? like Vumatel, Fibrehood, Link Africa ? making some headway. However, he agrees the major players in the space will likely remain Telkom, Vodacom and MTN.

"In the short- to medium-term, the FTTH market will be driven by the smaller niche players, but in the long-term we expect consolidation around the big players due to the commodity nature of the business and as such requires economies of scale to be sustainable," adds Kalebaila.

"FTTH is at the same stage that mobile was 20 years ago. Therefore, we expect the strong growth to continue in the short- to medium-term before normalising around 2020. But FTTH will also have competition from other technologies, such as LTE (long-term evolution) and FWA (fixed wireless access), that are also making similar inroads within the consumer market," according to Kalebaila.

The players

The BMI-T report analysed the plans and implementation status of all the key players in 448 areas across South Africa, consisting of 368 suburbs and 80 gated estates. It found that of the 15 most prominent 'fibre builders' identified, seven made up the majority of the deployments.

Infographic

Telkom versus other FTTH players per areas of deployment.
Telkom versus other FTTH players per areas of deployment.

Telkom's aggressive rollout plans, to reach one million homes by 2018, are clear when comparing BMI-T's analysis of areas completed versus planned or in progress. Telkom currently has the most FTTH deployments, with 77 compared to 41 for all other players combined. Those under construction are dominated by the other players that have 58 in progress while Telkom is currently building 22.

When adding planned deployments, Telkom's total areas (217) will come in just below those of all other players combined (232).

The report also found that for most of the players, funding rather than consumer demand is the primary constraint for expansion.

FTTH drivers

"Prices are coming down so fast that there is a real potential to undermine the business case for new deployments," according to Neilson.

He says this could slow the pace of investment in new suburb deployments, resulting in a lower forecast scenario. In such a scenario, there would typically be more VDSL (very-high-bit-rate digital subscriber line) connections, enabled by FTTC (fibre-to-the-curb) rather than to the home.

"However, the general trend is still one of FTTH being the new 'land-grab' on the local telecoms scene, and falling prices will only serve to stimulate subscriber uptake in areas that do have the FTTH option available."

Video on demand (VOD) is expected to be a key driver of FTTH uptake levels. Previously, BMI-T forecast that South African VOD penetration could range from 692 000 to 917 500 active user households by 2020, illustrating the low-road and high-road scenarios respectively.

"Based on the new FTTH forecasts, it is clear that most of these VOD households will still be using a combination of DSL and wireless technologies," says Neilson.

Kalebaila agrees FTTH is largely being driven by access to digital content, especially video.

"Mobile broadband has not delivered the level of performance expected to drive digital video consumption. Also, the cost per MB has been declining over time and has become affordable for most middle class.

"Triple or quad play services will drive the adoption of FTTH in SA, just like the case in other African countries, notable among them being Kenya," adds Kalebaila.

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