ADSL growth unsustainable?

Local Internet service providers (ISPs) seem to be divided over whether ADSL growth, which is currently enjoying a purple patch, is sustainable.

On the one hand, some providers argue that, along with the rise of mobile phones and mobile voice over IP (VOIP), there is a related demise of landlines, with big implications for telephony as well as broadband Internet.

On the other hand, some point out that ADSL growth in SA is inevitable and sustainable thanks to the increased consumption of rich media online.

According to a recent Internet Access in SA report, compiled by Cisco and World Wide Worx, wireless broadband in SA has been growing almost three times as fast as fixed-line broadband in the country.

Rob Lith, director of Connection Telecom, notes that, for now, as regards Internet, copper-based broadband is growing, but its stagnation is not that far off. As for fixed telephony, he adds, it is already on the wane.

“Telkom's financial results for the six months to September 2011 give a fairly clear indication of the answer. The numbers show a 13.7% increase in ADSL subscribers to 795 000 - 19.5% of the fixed-line base (around four million).”

He argues that ADSL growth is, therefore, clearly unsustainable. “But to be fair to Telkom, the strategy is both predictable and reasonable, given the rise of mobile and the poor business case for copper in disadvantaged and rural areas.

“Where the install base of copper is mature, stable and not under threat from thieves, ADSL can continue to grow. As for new installations and threatened areas, wireless (microwave over long distances and WiMAX over shorter distances) is the better broadband delivery model.

“By and large, the gap will be filled by mobile and wireless solutions together with networked voice offerings from a plethora of alternative telcos,” Lith says.

However, Rihana Hoosain, head of products at MWeb, says since the rolling out of uncapped ADSL, there has been a demand for services like video, gaming, live streaming and VOIP.

“ADSL is undoubtedly the broadband product of choice for services like these. The industry has faced some challenges, which have made growth challenging, but there are positive signs that things are improving,” she says.

“Current ADSL penetration is only about 800 000 out of a potential of at least four million fixed lines; there is still significant room for growth. With investment in the right technologies, we have no doubt that fixed-line access will continue to grow in SA.”

Hoosain adds: “Like many other rich media services consumed over the Internet, a voice call is optimised over an ADSL connection, which reinforces why true broadband connections like ADSL are here to stay.”

Bennie Langenhoven, managing executive at Tellumat Communications Solutions, believes that fixed line remains more reliable and will continue to grow in metropolitan areas.

“Also with services like video-on-demand coming, this will stimulate demand further. Of course, some of these services will be available over 4G and LTE networks. My belief is that the demand is there for fixed broadband; the question is: can the providers provide it quick enough?”

Langenhoven points out that one of the reasons for high growth in mobile broadband is the fact that the operators cannot supply fixed lines fast enough.

Among the challenges that local ISPs are facing, Hoosain pointed to Telkom's high IP Connect (IPC) costs as well as the cost of access to the last mile, both of which make up a considerable portion of input costs.

“Consumers are expecting the cost of access to decline, but much of this hangs on the cost of IPC and last-mile access.”

She adds that the other major challenge ISPs are facing is the cost of an ADSL line rental. “We need lower access costs for consumers; if these costs do come down, naked ADSL will have a significant impact on the uptake of ADSL.”