South African operators are "cherry-picking" the choicest places to roll out fibre networks while low-tiered market segments are looking on.
Local market research firm BMIT has released a new report on its Digital Lifestyle Measure (DLM) segmentation, which classifies South African consumers based on the extent of their digital lifestyles.
In the study, consumers are scored by answering a list of questions about their personal digital activities, as well as the technologies within their household. Each consumer then receives a total DLM score, which indicates which of the five DLM segments they fall into. DLM one consumers are considered "low-tech" consumers, while DLM five consumers are considered "high-tech" consumers.
The DLM segmentation only applies to those who access the Internet, while those who don't access the Internet are termed DLM 0.
BMIT recently applied the DLM segmentation to the BMIT Digital Consumer Survey 2018 conducted on Flash Panel, a mobile survey of over 1 500 South African consumers.
Overall awareness
In terms of home Internet access, 25% of DLM five consumers have fibre Internet in their homes, compared to only 1% of DLM one consumers.
Ryan Smit, MD of BMIT, notes that in terms of overall awareness of fibre services, "in our Digital Consumer Survey 2018, 54% of respondents overall knew what fibre Internet is".
"This is largely because only 43% of consumers in households with under R6 000 household income are aware of fibre Internet, and they are the largest income segment. This is compared to 92% of consumers in households with over R50 000 household income per month who were aware of fibre Internet."
BMIT director Brian Neilson comments that operators have certainly "cherry-picked" the choicest suburbs to begin with, although many high-income areas, particularly gated estates, are still being fibred up, often due to the lengthy process of gaining support from residents and their respective home owner associations.
"Some players are now moving to adjacent suburbs and business parks, thereby seeking rollout cost efficiencies; others are deploying fibre in high-rise or otherwise densely spaced dwellings, again in the interest of cost saving. Others are entering into partnerships with developers of high density complexes," says Neilson.
He points out that the most interesting announcements in 2017 came from Vumatel in respect of its intentions to roll out fibre in various townships, which if followed through on would immediately close the infrastructure gap between wealthy and poorer areas.
Fibre stampede
For Charley Lewis, independent analyst and researcher for ICT policy and regulation, fibre deployment was a stampede that began in affluent, relatively high-density Parkhurst.
"It's common cause that affluent urban areas have been the focus of attention of Vumatel and its competitors, which now number upwards of 30. This is unsurprising given that the deployments are commercially-driven and hence dependent on return on investment. It is obvious, therefore, that FTTx providers will prioritise suburbs where the cost of deployment is less and where household consumption patterns and incomes can sustain the cost of access."
Lewis adds it is only recently that FTTx providers have begun to look at more marginal areas. "Witness Vumatel's venture into Alex; it'd be interesting to hear how that's progressing, what the level of awareness in the community is, what the degree of uptake is; and FibreCo's plan to target Kroonstad.
"It's interesting that the BMIT report picks up on income as the major cause of the digital divide, as this tallies with findings from both Stats SA and World Wide Worx."
However, Lewis notes that by focusing more on the affluent areas, SA runs a real risk of creating an entirely new digital divide.
"From telephony divide, to Internet divide, to broadband divide, to fibre divide. This is all the more critical in the light of international analysis of the future of infrastructure. It is essential that policy-makers and regulators turn their attention to dealing with the widening divide in access, affordability, awareness and uptake. That means targeted and funded interventions to address the access gap."
Gated communities
According to Derrick Chikanga, research analyst for telecoms, media and IOT, Africa at IDC, fibre is an emerging technology in SA that has, to date, been primarily targeted at the affluent neighbourhoods in gated communities, where uptake is high.
"Generally, it has been perceived to be an enterprise service, meant for large businesses, which has discouraged most consumers from taking up fibre services. Further, most consumers are content with existing options such as mobile data, which they believe fully serves their needs, thereby resulting in low fibre uptake," he notes.
Chikanga points out that the increased demand for data and the growing adoption of video streaming services necessitates the need for fibre deployment in SA.
"Further, fibre provides fast and reliable connectivity, with minimum downtime, as compared to the traditional copper infrastructure. Fibre is less prone to theft and has minimum maintenance requirements, further justifying its deployment in the country.
"While fibre is currently experiencing rapid growth in South Africa, we strongly believe this technology still faces stiff competition from other technologies such as fixed-LTE and mobile broadband. Hence, the industry might fail to achieve the targeted one million connected homes by 2020. Beyond 2020, growth will significantly slow down, as the market matures and competition from other connectivity options intensifies."
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