How should we measure the success (or otherwise) of the market for fibre-based broadband in South Africa? By download speeds and latency times? By the number of kilometres of optical networking cables buried in the ground, or how many households are signed up to fibre services, perhaps?
It’s tricky: the amount of fibre in the ground is increasing at an exponential rate, and any statistics for connected households would be out of date as soon as they were printed. That is, if the numbers were shared in the first place; few companies are obliged to reveal actual subscriber numbers, and those that do are cryptic. Telkom, for example, says that 144 512 homes and 42 136 businesses have access to FTTH (fibre to the home) on its network, but of those, only around 13% have taken up the service so far.
It’s less than three years since MTN installed the first 100Mbps FTTH connections in South Africa. In April 2014, it laid cables in the exclusive Monaghan Farm community near Fourways. Connections were so expensive, the firm wouldn’t even confirm pricing for end users, saying it would be on a “case-by-case basis”. At the time, no one really expected that homes outside of high priced “lifestyle developments” would be economically attractive to network operators for some time to come. The prevailing wisdom was that most of us would be stuck with somewhat patchy ADSL connectivity.
Fast-forward to 2017, and most of the suburban areas in Pretoria, Cape Town and Johannesburg are either already criss-crossed with fibre optic cables, or there are concrete plans to start digging up the streets. Work has also begun in Durban and Port Elizabeth. It’s hard to drive in northern Joburg without passing at least one fenced off trench filled with telcoms engineers and a roll of fibre optic cable.
Perhaps the best indicator of all is that the market for fibre is maturing so quickly and so competitively, legacy infrastructure can’t keep up with pricing: uncapped and unthrottled fibre connections at up 100Mbps cost about the same as a 10Mbps ADSL line with a 200GB daytime cap — plus there’s one bill, not three, and connectivity is much more reliable (they’re both in the region of R1 000 a month, if you’re curious).
The twin booms in fibre and 4G mobile data have seen the quality of South African connectivity rise substantially. According to the latest Akamai State of the Internet Report, 42% of South African internet users now connect at speeds of more than 4Mbps on average, an increase of 90% over last year’s number. But all things are relative: there are still 91 countries with populations that connect at faster than 4Mbps.
The big change was that an unexpected slew of small, independent companies saw a gap to provide service which wasn’t enticing enough for the existing telcos to invest in, but that they could exploit for reasonable margins. First Vumatel — which began with four full-time staff and now has a workforce of around 7 000, including contractors — then dozens of other “last mile” providers began wiring up homes and connecting to the big internet backbones operated by the likes of Neotel/Liquid Telecom, Dark Fibre Africa, Vodacom and Telkom itself.
The model all of these providers have settled on is an open access one: they provide the physical connection to a house or business, and the customer can choose which Internet Service Provider (ISP) from a large number of competitive options to provide the data itself.
Competition is good
The rapid deployment of FTTH in South Africa will almost certainly find its way into economic textbooks as a quintessential example of free market economics at work. A small, nimble private sector with an open ecosystem that promotes competition has outpaced the incumbent — a state owned enterprise — to the point where Telkom is shedding ADSL subscribers for the first time. What’s more, even though there’s a huge number of fibre providers and ISPs at work in the country now, most of those involved want to see even more competition in the market.
“The high number of services available can be overwhelming at first, but ultimately the benefits of competition are fairly clear,” says Vumatel chief executive Niel Schoeman. “The ISPs are constantly providing more competitive services, seeking ways to differentiate their offerings and add value to the end user, so that their service stands out from the rest. This fierce competition means that ultimately the consumer wins as the internet service providers compete for their business.”
In the home market right now, this competition is manifesting itself in a price war where some offerings include services such as a thrown-in subscription to Netflix or Showmax. Where ADSL packages have traditionally been sold with high prices or restrictive “Fair Use Policies” which slow down or cut off traffic to the most prolific users of broadband services, the majority of fibre deals available are sold as uncapped and unthrottled. Plus, as they aren’t reliant on the ageing copper cable infrastructure of the telephone network, they’re also more reliable.
ADSL is a “best effort” service. If you buy a 10Mbps package, for example, the actual download speed may be much lower depending on the state of the wiring in the ground, distance from your nearest exchange or street cabinet and so on.
Fibre, by comparison, carries data as bursts of light along a flexible glass tube. It either works or it doesn’t, and there’s virtually no data integrity issues from the cabling itself — although there might be issues with other elements of the infrastructure. It can also carry a lot more data per connection. The upshot is that if you buy a 10Mbps service you’re much more likely to actually get 10Mbps, and have a more reliable connection to boot.
What can you do with fibre?
Provided you’re in an area that has been cabled up, fibre is arguably much simpler, more cost effective and faster to install and use than ADSL services. This is why many small businesses are confused as to why fibre to the business (FTTB) services are so expensive. A 10Mpbs FTTH line might cost just over R500 a month: for a business service the cost can be eight or nine times that.
Shaun Kaplan is the chief executive of Crystal Web, an ISP that also owns fibre infrastructure provider Evonet. The problem, he says, is around contention: all residents on a street might share a single connection to a network to network interface (NNI) that links the so called “last mile” of connectivity to a network backbone. So if everyone tries to watch 4K Netflix movies at the same time, the whole neighbourhood will suffer.
In practice, the huge capacity of fibre networks means that this contention for traffic is rarely an issue in FTTH, but business lines are uncontended: every customer has their own physical line all the way back to the nearest point of presence. While this guarantees quality of service, the construction costs can’t be shared.
Fibre installations are very expensive too: once you factor in administration and applying for wayleaves (official permission) to dig, an FTTH connection costs around R15 000 to 20 000 to install, so fibre companies costs are recouped over a long period of time. This payback period has to be accelerated with businesses, he says, but as infrastructure is extended into industrial parks and office blocks, costs should come down.
As quickly as the home market has grown, however, there’s going to be some slowdown soon, says Kaplan. Once the easy to reach and profitable suburbs are connected, fibre will likely prove too costly to lay in the rest. Evonet is addressing this with wireless technologies for the so-called “last mile”, which Kaplan says are already competitive with fibre for performance and much cheaper to build.
In other words, fibre is here and for those lucky enough to live and in relatively affluent suburbs, there’s no go going back to the slow old days of ADSL. But once this initial rush for fibre is over, wireless may still be the access technology of choice for the majority of South Africans.
The challenges of fibre
Vumatel’s Niel Schoeman says that for the most part, the company has been able to cope with the huge demand for its services.
“The nature of infrastructural projects sees that you run into obstacles almost daily, but we have not encountered any insurmountable challenges,” he says. “We have, for example, had challenges with getting wayleaves in certain parts of the country. We have also discovered that in very old suburbs, the wayleaves are no longer 100% accurate due the ground shifting over time, which increases the risk of damaging services during the roll-out.”