African broadband set to boom

Broadband uptake in SA and the rest of Africa is set to accelerate next year, according to two new studies.

Research house World Wide Worx reported this week that broadband Internet access in SA, which finally made an impact this year, will double in 2006. The research firm expects the number of users to rise from 147 000 this year to 277 000 next year.

Meanwhile, a new report by UK-based research firm Balancing Act says the move to broadband in Africa has gained momentum and is still accelerating.

The report, based on a survey of 100 African operators, says between 2001 when the first broadband access was rolled out and the present day, a wide range of both wireline and wireless broadband technologies have been deployed across Africa. The pace has picked up from 2003 onwards.

World Wide Worx MD Arthur Goldstuck says SA`s broadband growth is "the kind of growth rate we saw in the early years of Internet take-up in SA, but it`s still going to be a big disappointment for some operators".

The biggest success story of broadband, according to the report, is Telkom`s ADSL service. Aggressive marketing and continual movement in pricing and bundling strategy has seen far more rapid roll-out than Telkom`s critics had forecast. Telkom dominates broadband, with ADSL holding 66% of the market - a share that is unlikely to diminish in 2006, says Goldstuck.

"We found that there is little incentive for Telkom to respond to critics of ADSL, since the customers are voting so strongly with their wallets," says Goldstuck.

For now, he says, Telkom can continue to rely on continued demand from small and medium enterprises, as well as pent-up demand from high-end consumers. Only after it has met this demand will it be forced to address pricing issues, unless the regulator steps in first.

The barriers to consumer entry also mean broadband will not grow SA`s Internet user base dramatically in the short- to medium-term. The report, which forms part of World Wide Worx`s annual study of the Internet access market, shows that if broadband growth rates projected for 2006 continue through to 2008, the broadband market will still only represent around 14% of the Internet user base.

Telkom`s ADSL, Sentech`s MyWireless, WBS`s iBurst, Vodacom 3G and MTN 3G are likely to be joined by another two players in 2006, while the second national operator may well launch wholesale services that open the way for more niche operators.

Balancing Act`s report on the African broadband market notes that at least 18 incumbent fixed-line operators had deployed ADSL by September 2005, with a few including Telkom SA and Telecom Egypt, offering a wider range of wireless solutions, including WiFi, FWA, CDMA2000 and WiMAX.

According to report co-author, Paul Hamilton: "Uptake of broadband is accelerating in the most developed Internet markets. In terms of uptake of broadband, the survey indicates that there are four tiers. The markets of Egypt, Madagascar, Reunion and SA have tens to hundreds of thousands of broadband subscribers. There is a middle tier, such as Senegal, which has between 1 000 and 10 000 subscribers. And then there is a third tier with the majority of other countries which have deployed broadband in which operators currently report several hundred subscribers.

"Behind this lies a fourth tier in which operators in some third to a half of African countries have either tens of broadband users, or have not yet invested in the roll-out of broadband networks. This exaggerates a similar pattern seen for existing dial-up Internet markets."

The report adds that with the launch of 2.5G and 3G services, mobile operators are now positioning themselves to compete against fixed-line operators for the provision of broadband services.

Russell Southwood, co-author of the Balancing Act report, observes: "If broadband access can`t be supplied at lower prices than at present, it will remain a niche market for corporates and wealthy individuals. More competition is needed to lower prices for every element in the delivery of the service. The SAT3 monopoly keeps international prices high for West Africa and there is not yet enough competition at the national backbone and local loop levels. However, things are beginning to change quite quickly in countries like Kenya and SA, and others are sure to follow."

On the local market, Goldstuck says: "The good news is that we are seeing real choice beginning to emerge, not just among the five broadband providers, but also within the product range of each of the operators.

"The premium offerings may be expensive, but for the ordinary user with average Internet needs, there is a price point to suit the pockets of most working people who have computers and phones at home.

"Technology by itself won`t change the lives of the disadvantaged," says Goldstuck. "For that you need a commitment from government, and that commitment must run from top to bottom. In the absence of meaningful policy leadership, access to technology will remain the domain of the privileged."