Forecasting firm Frost & Sullivan expects the SA broadband market to grow at a compound annual growth rate of 25% between the period of 2007 to 2013, and the firm`s ICT industry analyst Lindsey Mc Donald says she expects the market to be worth at least $290 million (R1.6 billion) by year-end.
Mc Donald was commenting after Vodacom CEO Alan Knott-Craig recently told a French South African Chamber of Commerce and Industry lunch that there "is no reason, without a little bit of innovation, that we can`t get that [Internet] penetration up to 91% in 15 years".
Knott-Craig was lamenting that, while telephone penetration in SA was over 90%, Internet access was just 10.6%.
The outgoing Vodacom chief added that it was "incumbent upon us" to bring up Internet diffusion to the same level. Knott-Craig told his audience that telephone availability was also just about 10% in 1994. He avers that "healthy competition in the market changed that relatively quickly".
An Internetworldstats.com report, in March 2008, found that SA`s Internet usage grew 112.5% between 2000 and 2008, from about 2.4 million surfers to 5.1 million. Their figure for SA Internet penetration as a percentage of the population was 11.6%, slightly higher than the figure given by Knott-Craig. However, both figures are double the African average of 5.1% and about half of the global usage rate of 21.1%, meaning that globally eight out of 10 people had no Internet access while in SA it is nine out of 10.
Red lights
Mc Donald, as well as IDC telecoms analyst Richard Hurst and the World Wide Worx MD for strategy Steven Ambrose, blamed the pedestrian pace of SA`s Internet growth - relative to that of Africa where it climbed by over 800% in the same eight years - on "a dearth of infrastructure accompanied by very high bandwidth costs".
"Interestingly," says McDonald, "fixed-line Internet services have been significantly impacted by the growth in mobile Internet subscribers."
"This comes as a result of healthy competition between Vodacom, MTN and Cell C and a strong downward pressure on prices."
"This is, therefore, a confirmation of Mr Knott-Craig`s comments regarding the value of healthy competition. MTN and Vodacom are the most competitive at present and, in fact, have almost half the Internet market between them, giving an indication of their challenging position towards fixed-line services."
"There is no doubt that mobile services will continue to play a key role in this market moving forward, although Frost & Sullivan believes that current developments in the fixed-line space will see a boom in the provision of cheaper fixed-line services," concludes Mc Donald
Apples and pears
Ambrose says Knott-Craig`s comparison of Internet access with the explosion in telephone usage after 1994, when mobile GSM phones became available in SA, is "a little simplistic, even if the sentiments are laudable".
He says the "killer app" that got telephone penetration to 90% was voice "and the costs are very manageable due to pay-as-you-go solutions".
"A similar solution may not work in the Internet space, which is defined by the 'always connected, always on` paradigm."
He says World Wide Worx research shows that the "haves" in SA are well connected, often using multiple connections such as ADSL and 3G, while the "have-nots" are not connected at all."
"There is much work to be done at the grassroots levels of schooling and education before we can hope to achieve high Internet penetration. Never mind the actual cost - in fact, giving Internet access away for free will not change the current situation."
Ambrose and Hurst add that the state also has a role to play by allowing more competition and rolling back "over-engineered" laws and regulations.
"A strong, well-regulated, and highly competitive market will always deliver better than the alternatives, such as the current situation of entrenched monopolies and uncertain regulatory environments, that have plagued the SA telecommunications space," says Ambrose.
Hurst says one example of this uncertainty is the confusion surrounding the ability of value-added networks and Internet service providers to "self provide".
Positive moves that could realise Knott-Craig`s dream, Hurst says, include competitive pricing from the likes of Neotel, "together with the new converged licensing regime under the Electronic Communications Act, which should see competition emerging in the services space of the communications sector."
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