Slow pace
There are many things in which South Africans are spoilt for choice — from natural splendour to world-class loose forwards — but they are certainly not spoilt when it comes to broadband Internet connectivity.
Rather, South Africans are still living with the hangover of a disastrous five year exclusivity period — which has stretched many years longer — granted to Telkom.
Broadband usage in particular has suffered as Telkom has been able to monopolise the wholesale cost of connectivity coming into the country and to artificially keep these prices as high as its voice calls.
That said, consumers are experiencing the cheapest broadband they have ever had, even if it’s still unusually high compared with other countries. Telkom’s price party had to come to an end sometime, and that time appears to have arrived.
Telkom CEO Reuben September says increased competition made Telkom’s headline earnings drop 15,1%/share in the six months to September 30, even though group operating revenue increased by 8,3%.
Competition is appearing from aggressive play by other Internet service providers (ISPs), including Telkom’s 50%-owned subsidiary Vodacom. Cellular operators around the world, including MTN, are all aggressively targeting data usage as a new form of revenue as income from voice calls declines.
Combined with this are other players like iBurst and the impending mass market take-up of WiMax, a powerful new mobile broadband technology that could seriously threaten any telecom company’s business model — if it lives up to its hype.
“The broadband ecosystem in SA is looking for a knight on a white charger armed with an RPG (rocket launcher) to get things moving,” says Dave Gale, business development director at Storm, which was recently acquired by Vox Telecom. Such a knight might not have arrived, but an advance guard of lesser challengers certainly has.
The most significant is third-generation (3G) cellular data networks, and the 3,5G high-speed downlink packet access (HSDPA) service that followed it.
Now users can bypass Telkom’s notoriously slow installations and poor customer service and use their datacards wherever there is a good 3G signal. Services such as iBurst, which uses a variant of 3G, sell themselves on a similar proposition.
This is best revealed in how 3G users are quickly catching up to wired broadband users, though the figures do need some clarification.
Vodacom announced in late November that its HSDPA users had trebled in the past year (to 266000 from 87000), while Telkom’s ADSL users grew too — albeit by a more sedate 31,1% to 335112 users since the end of last March.
However, not all wireless subscribers use it as their primary connection, says Arthur Goldstuck, MD of research firm World Wide Worx.
“A crucial distinction that World Wide Worx has made is that a high proportion of these users use wireless broadband as a back-up form of connectivity when out of the office (travelling, at conferences, office workers working at home) or in case their main connection goes down.”
According to research by Goldstuck and former IT academic Rudolph Muller, there are about 485000 wireless broadband users in the country. Vodacom has 350000 3G HSDPA users, MTN an estimated 70000, iBurst about 60000, and Sentech’s MyWireless a mere 2500. The number for primary connections via wireless was about 280000 at the end of 2007, says Goldstuck. The total number of broadband users is 658000, though the total amount of subscribers is 828000. ADSL accounts for 378000, while wireless services claim 280000, he says.
Goldstuck predicts “1,37m broadband subscriptions (connections) by the end of 2008, representing 1,07m users. Thanks to Eskom’s impact on 3G usage, this number may well be revised upward”.
Goldstuck is one of the most respected commentators on telecoms in the country, as is Muller, who started the MyBroadband activist website, which is now one of the major sources of telecom news and analysis.
“Competition will solve most problems,” says Muller. “Local loop unbundling and more competition in the international bandwidth market will help a lot with competition,” he says.
But the factors that limit more rapid broadband uptake are not hard to find, says Goldstuck.
“Cost is a key factor in the consumer market. Our SME survey shows that the SME market is embracing ADSL almost as a standard, while our mobility 2007 survey shows that the corporate world is embracing 3G. It is only ordinary home users who are still left out in the dial-up cold. And, of course, those who are not connected at all,” he says.
Muller agrees, adding that lack of rural availability is a problem. “Capping is a big drawback. It is therefore not really flat-rated.”
Indeed the capping of broadband is one of the biggest headaches for SA users. Telkom claims the caps are necessary because of the high cost of international traffic, and is meant to exclude local bandwidth from the cap limit. This is, however, only now being implemented and is a sore point with users, who have had to endure capping, which is not common practice internationally.
Vox Telecom CEO Doug Reed says: “The biggest contributor to the cost is the international Internet portion because, unlike the European and American telecom companies, which basically sit on the traffic, we still have to transit this traffic to SA.”
But “the forthcoming undersea connections will bring these prices down and the local network will cost less once Neotel, Vodacom, iBurst (Vodacom) and MTN roll out their fibre and WiMax infrastructure. These developments are imminent and will contribute significantly to price reductions as competition becomes a reality”.
Reed says: “Voice is going to be the main driver that fuels the demand for ever increasing connections with uncongested bandwidth.”
Gale says: “ADSL pricing will probably drop to about half of what it is now, but only when Telkom comes under serious competitive pressure, maybe in 2009. Telkom lives in an Alice-in-Wonderland world where it thinks the quality of its ADSL service is great. My 512Kbit/s service varies from 400Kbit/s plus to a pathetic 18Kbit/s on an off day.”
“Telkom lives in an Alice-in-Wonderland world where it thinks the quality of its ADSL service is great”
Loading ...