SA falls behind Africa in broadband adoption

Rudolph Muller

Rudolph Muller is the editor at MyBroadband and covers telecoms and broadband news. Rudolph comes from an academic background, but left the University of...

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The set-top boxes that many South Africans will need for watching television when local broadcasting goes digital, will only be available at stores throughout the country in the first quarter of 2010. The switch over from analogue to digital terrestrial television broadcasting is scheduled to be completed by the end of 2011.

Government has budgeted R2.45bn for this change-over. This includes subsidies for the supply of set-top-boxes (STBs) to qualifying analogue television set owners.   Government sources state that the retail price of STBs is estimated at around R700, but the prices are likely to fall as consumer take-up increases. There is expected to be a subsidisation of five million of the poorest households who receive a 70% subsidy of the retail price, excluding installation.

Digital migration should open up a huge opportunity for growth in the local Information and Communication Technology (ICT) sector. Various companies will be appointed to manufacture the set-top-boxes (STBs) and are expected to be subsidised by government.  It is hoped that this will help promote local manufacturers and ICT sector growth in 2010 and beyond.

Internet bandwidth

Seacom announced that its 17 000 kilometres submarine fibre optic cable system linking South and East Africa to global networks via India and Europe, has been completed and commissioned.   Backhauls linking Johannesburg, Nairobi and Kampala with the coastal landing stations have been established, and Seacom is also working with its national partners to commission the final links to Kigali and Addis Ababa shortly.

The launch of Seacom opens up unprecedented opportunities, at a fraction of the current cost, as government, business leaders and citizens can now use the network as the platform to compete globally, drive economic growth and enhance the quality of life across the continent, through internet connectivity. 

A large portion of the Seacom potential has not filtered through to South Africa as yet,   because of restrictive legislation and lack of competition in the telecommunications industry.  When Seacom launched in South Africa in July 2009, it had very little impact on internet prices or usage. This in contrast to East African countries where enormous benefit has been seen.

South Africa is falling behind other African countries in adopting broadband internet as a result, and with other African countries making giant leaps in this area, there is a concern that South Africa could loose its competitive edge. In a recent deal between South African telecoms giant Altech and Seacom, East African countries were connected to the highest international internet speeds available in Africa, but South African users have no access to this.

The mobile phone sector

2009 saw an across-the-board reduction in interconnectivity fees on the price that mobile operators charge when customers call from one network to another, going from R1.25 to 89c. The reduction was mainly as a result of political pressure exerted from several fronts including Icasa and government.

In 2010 we expect further gradual cuts in interconnectivity fees in response to this directive.  This will bring South African cellular costs in line with the rest of the world.

Interconnectivity fees have been a good revenue stream for mobile operators over the years, and in 2009 financial year, Vodacom’s South Africa’s business generated R8.6bn in revenue from interconnection, an increase of 8.6% over the previous year. 

Interconnectivity is seen as the second-largest source of total revenue (R47bn), after airtime and access (R25.7bn). In addition, Vodacom paid Telkom R462m in interconnectivity fees, while receiving R2.96bn in interconnection payments from the fixed-line operator. These figures are expected to increase in 2010 supporting strong growth predictions in this sector.

Regulation of Interception of Communication-Related Information Act (Rica)

The implementation of the new cellular phone legislation named Regulation of Interception of Communication-Related Information Act (Rica) is having a severe effect on mobile operators as well as retailers. The law requires that people register their cellphones by showing ID books and proof of residence, to prevent crime-related incidences.

Rica’s implementation started in July 2009, with a grace period of one month.  All network users need to be registered by August 2010.  Vodacom, MTN and Cell C saw new connections to their networks fall at the beginning of August.  For example, in July Vodacom connected more than 1.3m SIM cards.   A month later, after Rica was implemented, this figure went down to fewer than 300 000 SIM cards.

A similar trend happened with MTN as 800 000 users were disconnected due to the Act.   Cell C, which targets the lower end of the market, also saw the sales of new starter packs being severely affected (the company did not give exact figures). 

Telecoms analysts state that we could lose out on the economic benefits provided by higher cellphone penetration.   Many other countries that have implemented a similar Act have had the deadline dates postponed in an attempt to prevent a downward turn for the economy and industry.

The Act will also make it more difficult to access mobile telephones, and in particular is likely to affect the lower end of the market.  The market between LSM (Living Standard measurement) one and five has been a major target for the cellphone companies.

IT and the 2010 FIFA World Cup

It is estimated that about 12 000 IT professionals are going to be needed to sustain and implement the World Cup.  However, industry analysts state that South Africa’s IT skills are very scarce, as few work-ready graduates with specialised skills are entering the industry at the end of 2009, however many of the South African graduates are being lured by the power of the dollar and the pound to work abroad.

Broadband adoption in SA – comments and views

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