By Wawa Nkosi

The mass deployment of fibre across South Africa has become a salient feature of the developing fixed-line broadband market. Traditionally, broadband data via fibre has been the domain of businesses who needed access to fast data connections for their operations. However, in more recent years, fibre broadband data offerings for households have expanded at a rapid pace. This fibre expansion is proportional to the current and forecasted demand for data (see Figure 1) resulting from a global environment in which innovation, development and economic growth increasingly require broadband connectivity. The World Economic Forum has dubbed this era “the Fourth Industrial Revolution”.

Figure 1: Forecast of consumer data usage in South Africa from 2016 – 2021

Source: Cisco.com

The increase in fibre penetration in SA is aligned with government’s objective of universal broadband access as an important impetus in reaching the overarching goal of increased job creation and poverty reduction. According to the SA Connect broadband policy, the goal is to achieve a universal average download speed of 100Mbps by 2030. This entails achieving an average broadband experience of 5Mbps for 90% of the population and 100Mbps for 50% of the population by 2030. Although recent fibre deployments have mostly been targeted at high income areas like suburbs and cities, change is occurring in this regard, albeit slow. In September, Vumatel announced that it would begin a pilot project in Alexanda, a low-income township in Johannesburg. This development represents a progression towards the attainment of fast universal broadband access.

Taking a closer look at the fibre market we’ve seen rapid changes and vibrant competition. Figure 2 illustrates these developments over the last three years. Recent notable transactions include: the acquisition of Liquid Telecom by Neotel, the acquisition of Smart village by MTN, and Vumatel’s acquisition of a portion of Link Africa.

Figure 2: Developments in the wholesale FTTH Market between 2014 and 2018

Source: BMI-T (2017), Econex figure

The main players in the fibre to the home (FTTH) market include Vumatel, Openserve (Telkom’s wholesale subsidiary), MTN and Vodacom, which together hold 80% of the market (calculated as the number of areas in which wholesale fibre access providers are active).

Traditionally Telkom has been the only supplier of fixed-line internet access via Asymmetric Digital Subscriber Lines (ADSL) in South Africa, but through fibre the emergence of new players and increased competition for a byte of the market has had a positive impact on prices and product offerings. In 2017 we’ve witnessed a reduction in fibre prices at the wholesale as well as the retail level. In August 2017, Openserve reduced their prices by an average of 9% across their wholesale pricing portfolio, whilst also upgrading their 2Mbps and 8Mbps lines to 4Mbps and 10Mbps lines respectively at no extra cost. Vumatel also reduced their wholesale fibre prices by an average of 9% across their wholesale pricing portfolio (see Figure 3).

Figure 3: Price reduction at the wholesale level (Openserve and Vumatel)

Source: Econex calculations

These price changes were passed through, at least to some extent, to internet service providers (ISPs). MWeb cut their fibre prices across all their fibre offerings following Openserve’s price reductions, Vox reduced the prices on their 100Mbps and 50Mbps uncapped FTTH packages as well as Afrihost on their uncapped packages. As mentioned above, Vumatel’s offering into the Alexandra Township will cost residents R89/per month for uncapped 100Mbit/s fibre.

The FTTH market is one that has shown vibrant and dynamic competition which has benefitted the final consumer through price reductions and diversity of product offerings. Let’s hope we can continue along this trend.

Author/s: Wawa Nkosi

Nothing in this publication should be construed as advice from any employee of Econex and should be seen as general summaries of developments or principles of interest that may not apply to specific circumstances.