The ‘truth’ about broadband growth in South Africa

Recent media reports suggest a steady growth in broadband uptake over the next year, but the figures bantered around are not all that impressive when compared to international standards.

By - November 30, 2005

A recent report from World Wide Worx predicts that the amount of ADSL lines will nearly double by the end of 2006.

The author of the report, Arthur Goldstuck, also predicts that the other broadband services will grow by a similar margin.

A similar report by BMI-T, an IT research company, released a few months earlier forecasts 150 000 ADSL lines in 2006 and a further 128 000 wireless PC connections.

The predictions from these reports are firmly grounded on scientific research and mathematical growth models but they are not half as ambitious as the targets Telkom recently set.

The previous Telkom targets were around 250 000 ADSL customers by the end of 2007, which is the figure listed by Goldstuck in his report.

The new Telkom CEO Papi Molotsane unveiled the new plan at Telkom’s interim results and he has set the very lofty target of between 680 000 and 800 000 ADSL customers by the end of 2008.

The incumbent looks to be gearing up to try and meet these targets with the rate of ADSL installations per week on the rise.

Steven White, Product Development Executive at Telkom, informed journalists that Telkom is now installing 4000 new ADSL lines per week.

At this rate there should be well over 200 000 new installations next year, which should place the total ADSL user base at around 320 000 by the end of 2006, a decent inroad into the 680 000 mark set for 2008.

But Telkom will face a bit of competition regarding broadband penetration from the wireless providers.

We can expect the mobile providers to also aggressively expand their broadband customer base. The introduction of HSDPA, a technology based on 3G with expected data rates of around 2 Mbps, should convince many prospective customers that wireless broadband is now a truly competitive option.

A major constraining factor on the predictions of the growth rate is cost. So Whilst Molotsane may wish to see 15-20% fixed line ADSL penetration, the limitations of high prices may be the one factor that narrows the potential market significantly.

Unless the cost of broadband is drastically reduced we may just see a saturation of the market segment which can afford these services.

Our current broadband penetration rate of 0.3% is well below the OECD average of 11.8%.

If South Africa wants to get close to this average penetration rate we need to up our current broadband growth rate to nearly 100 000 new broadband installations per month.

South Africa will definitely not see this growth unless a massive price reduction takes place.

The Department of Communications has indicated that broadband growth is high on its list of priorities, but so far the lack of decisive action to reduce telecommunication costs sends a different message.

Proactive steps from Government like true liberization in the telecoms arena, Local Loop Unbundling, fair and cheaper SAT3 access and truly affordable local bandwidth is what is required.

Without urgent Government intervention South Africa is likely to remain at the lowest end of the worldwide broadband spectrum.

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