Can we FTTX it?
Cheap, plentiful access to fibre broadband has transformed how some live and work in South Africa. It’s time to take stock and ask, what’s next?
It’s fast, it’s cost-effective and, as long as you have a back-up power supply for your router, it almost always works during loadshedding. Since the fibre revolution took hold of South Africa just a few short years ago, it has become the de facto choice for home and business fixed-line broadband.
The days of dodgy ADSL connections that failed in a storm are almost behind us, thanks to a swift national deployment of fibre infrastructure by first the private sector and then Telkom. Businesses no longer grind to a halt when copper wires are stolen; families are switching off premium satellite services in favour of streaming TV.
If you can go down just one LSM rank in reach, that’s four million potential homes, more than double the current market.Shane Chorley, Frogfoot Networks
With the initial land grab over, however, what’s next for the fibre industry? Is it mission complete for high-speed internet in South Africa, or is there more to be done? Brainstorm convened a special roundtable of experts to find out.
What’s next for fibre is a common question, says Vumatel COO Simon Butler. “Most metros are, by and large, complete,” he says. “But there are pockets that people are focussing on, leaving areas that have been overlooked.”
The panel agrees that there’s still plenty of work to be done before the country is fully connected.
“From a public and business perspective, there are still lots of buildings to be connected,” says Vino Govender, executive for strategy, mergers and acquisition and innovation, DFA. “There’s lots of construction going on and buildings going up, which is driving future growth in metros. The other area of growth is backhaul.”
“Proliferation of 5G is really going to increase demand for fibre backhaul,” says Shane Chorley, head of sales at Frogfoot Networks. “The base station count required for 5G to create a network that is seamless is enormous.”
“Fibre network operators (FNOs) have moved from grabbing all the land they can,” says SEACOM’s head of SME and FTTH business unit, Matthew Campbell. “People are looking at how to invest money wisely, not just throw fibre into the ground.”
“They’re addressing the business cases that make most sense,” says Frogfoot’s Chorley. “There are some relatively easy areas that haven't been fibred, such as multi-unit dwellings, which have so far been blocked by homeowner associations and so on.”
Crime, battery theft and loadshedding all affect mobile reliability more than fibre.Matthew Campbell, SEACOM
Fibre isn’t the only networking gold rush that South Africa has seen in recent years, and conversation about the challenge of connecting those who don’t yet have high-speed broadband quickly turns to a comparison with the mobile network operators.
“There was a big drive for fixed LTE connectivity 18 to 24 months ago,” says Philip Wessels, CEO, Open Fibre, citing examples of aggressively priced unlimited or high monthly cap packages. “The uptake was good, which is a strong sign that there’s high demand for affordable broadband. The problem is that mobile networks are struggling with capacity.”
That capacity problem isn’t helped by the ongoing failure to release spectrum used for analogue TV to the mobile networks, of course. But even if that were available, the table argues, high-speed mobile broadband will always be a ‘gateway drug’ to fixed-line options. Once customers have tried mobile broadband, they quickly move to more fibre.
“It’s inevitable,” says Vumatel’s Butler. “The challenge is that the fixed mobile tech is not a cost-effective model. To deliver a gigabyte over a wireless network will always be more expensive than delivering it over a fixed network. And usage is growing 50% year-on-year.”
“The cost of data is just too high to stream a movie over mobile,” says Juanita Clark, chief executive, FTTX Council Africa.
“The two have to coexist,” says Greg Wilson, CEO, Reflex Solutions. “LTE and 5G have specific use cases. Just the current bandwidth demand predicted from driverless cars would use all currently available mobile bandwidth.”
Many of the attractive fixed LTE packages are no longer available, Wilson says, precisely because mobile operators have struggled with the increased demand for bandwidth, causing connection quality to suffer.
The challenge is that the fixed mobile tech is not a cost-effective model.Simon Butler, Vumatel
Mobile operators will always face the problem that every additional megabyte delivered comes at a price, says DFA’s Govender, whereas costs for fibre are relatively static once the infrastructure is in place.
“Mobile is also really open to the adverse elements that SA throws at it,” says SEACOM’s Campbell. “Crime, battery theft and loadshedding all affect mobile reliability more than fibre.”
Future growth, Butler says, is focussed on secondary cities and lower LSM areas, with the latter being the most critical.
“By and large, we’re done with connecting the ‘Bryanstons’, but the danger is that we’re creating a far greater digital divide than was there before,” he says.
“That’s almost going to get worse before it gets better,” adds Wilson. “People who don't have fibre now are in a worse position than those who do. This should be renewing our spirit to roll out the networks. The challenge is that hitting the cost of less than R1 000 per month per user was tough in the metros, and now we’re looking at areas that are less dense in terms of subscribers.”
Vumatel, Frogfoot, VAST and Telkom have all been piloting schemes to offer fibre broadband to townships, looking at the balance of deployment costs and what consumers are willing to pay. Areas as disparate as Soweto, Alexandra, Diepsloot and Mitchell’s Plain have all been targeted for testing, with packages as low as R100 per month for 100Mbps.
These pilots have been going well, says Vumatel’s Butler.
“You need to distinguish between a Mitchell's Plain-type area with formal housing, and informal settlements,” he says. “We’re mostly still trying to solve the informal settlement model, and looking to get those citizens on a better service.”
The uptake was good, which is a strong sign that there’s high demand for affordable broadband. The problem is that mobile networks are struggling with capacity.Philip Wessels, Open Fibre
For the formal settlements, Butler continues, “it's a very lucrative new market, and we’ll be going aggressive next financial year. The uptake we’re seeing is providing a business case that makes sense. But you have to remember that it’s a different product to what’s currently in the market.”
In other words, to reach those lower price points, customers will have to settle for higher contention ratios and quality of service. Even so, it will be very attractive.
“Vumatel has done a very good job,” says Frogfoot’s Chorley. “The first challenge is that you have a significant amount of unbanked people in these areas, which makes collection of funds difficult. And identifying the need for data in those areas is challenging. We've taken on a project for Soweto, which is challenging, but going well. If you can go down just one LSM rank in reach, that’s four million potential homes, more than double the current market.”
One issue that Frogfoot has encountered, continues Chorley, is that many customers who have only used mobile data have very different expectations of a fixed product.
“That user is used to switching SIMs regularly and shopping around for today’s best deal,” he says. To make low-cost fibre work needs more stickiness.
“But we’re addressing a segment that owns homes and has bonds,” Chorley says. “We’ll get there eventually.”
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The industry will almost certainly get there. It’s been a staggering few years of growth, thanks to the level of innovation shown by fibre providers in developing their business models.
“Eight years ago, we were told that the FTTX market was, at most, the size of the then ADSL market,” says Clark. “Four years ago, we were still being told this was the mobile continent.”
Today, the council calculates that 1.75 million homes and businesses have been passed with fibre, of which 656 600 premises have an active connection.
“The irony is that the people who could benefit most from fibre – being able to study from home or find work – are those who don’t yet have access,” Clark continues. In the US, for example, this challenge has been taken up by local government, but in South Africa, municipalities just have too many other problems to contend with.
Government doesn’t have a great track record on its involvement in high-speed connectivity. The 2013 SA Connect plan, for example, is notable mostly for being ineffectual. The difference with the uptake of fibre, says Frogfoot’s Chorley, is simple.
“It’s driven by entrepreneurs.”
Where fibre is available, however, providers may find themselves struggling to differentiate in a crowded market. Price points and connection quality are more or less the same across the board.
“Price doesn't get you a customer anymore,” says Campbell. “What all ISPs are going to have to do now is look at add-on products. How do we assist customers to get more value from their connections?”
Aside from the obvious entertainment options, security also figures high in services. Live monitoring of premises and neighbourhood CCTV networks are early use cases of additional services offered where fibre is available.
Pricing for fibre started aggressively, says Frogfoot’s Chorley, leaving little room to fall further and ruling out a price war.
“As FNOs, we’re selling you a utility,” Chorley says. “And we still have to build out, so costs are going up – including the cost to dig in the ground. Right now, prices are likely to go up rather than down.”
Even so, there is movement, particularly in the cost of business fibre, which is moving to convergence with residential pricing.
“Over time, you will find average revenue per user won’t come down,” says DFA’s Govender. “However, the amount of data that you consume will go up. Pricing won’t move beyond a certain point, but the proposition will get better.”
The future, says Clark, is exciting.
“It’s never been like this. The industry is coming together in such a way, everyone is trying to find new niches.”
“We’re in a very fortunate space,” says Chorley. “We’re delivering an infrastructure where demand is growing, working out how to deliver it in a better way, for more people.”