Broadband costs to drop slowly

Wholesale broadband prices have come down by as much as 8% since the introduction of Seacom, says Neotel CTO Dr Angus Hay.

Speaking at the MyBroadband conference, in Midrand, yesterday, Hay said the savings can't be filtered to the consumer until the actual capacity gets into homes. “The wholesale bandwidth market is a commodity market and prices are dropping. The bottleneck is in the local capacity.”

Malcolm Kirby, marketing executive at Dark Fibre Africa, agreed, saying that - while SA can expect to see a flood of undersea capacity - the trouble is getting that capacity to the people. “In SA, geography is an issue; one that will need to be solved.”

Early this year, much-anticipated undersea cable Seacom made its debut and many in the industry expected a rush of connectivity to it and a subsequent cut in broadband costs. However, the company has been sorely disappointed by the industry's response to a competitive cable.

Before Seacom, SA's only international connectivity was through Telkom's SAT3/Safe cable system. Suveer Ramdhani, strategy advisor for Seacom, said the company has had good responses from the rest of Africa, where Altech's Kenya Data Networks has been building infrastructure to connect the people to the cable.

For South African operators, local capacity has traditionally been leased from Telkom. However, this situation is changing, with three fibre national networks being rolled-out by Neotel, MTN and Vodacom, and Telkom updating its own backhaul infrastructure.

According to MTN SA CTO Sameer Dave, the national fibre networks will unblock the bottleneck of access to consumers, but it will take around two years to have the fibre backbone completed.

He said the regulator also needs to start releasing access to microwave spectrum, and lower cost devices need to be distributed, before the lower wholesale costs can be passed to consumers.

Johan Meyer, Telkom executive for global capacity business, said the cost pressure is on the horizon and consumers will soon feel the benefits of cheaper access. However, he reminded conference delegates that telecoms is a capital-intensive industry and operators will want to recoup investments in infrastructure before they pass it onto the consumer.