Bandwidth explosion means cheaper broadband
The over-hyped and long-expected broadband price cuts have begun. This has translated into the launch of affordable (cheap?) uncapped ADSL packages from most of the larger internet service providers in South Africa.
But just how much has the bandwidth situation changed in the country?
Before July last year, we were reliant on two providers (Telkom and Neotel) for international bandwidth (via the SAT-3/SAFE cable system). Worse still, before April 2008 international access was only available from one provider: Telkom.
One route into and out of the country. With limited access. That’s how bad things once were.
The arrival of Seacom in the middle of last year saw the early beginning of true competition. The price of international bandwidth on Seacom was significantly lower than what was previously available in the market. Seacom’s total capacity is 1.27Tbps, but only 10Gbps was provisioned to South Africa.
No surprises then that in October, Telkom announced significant upgrades to the SAT-3/SAFE cable system. The capacity of the cables was 120-130Gbps, and this was roughly tripled to 340Gbps (for the SAT-3 link to Portugal) and to 440Gbps (for the SAFE link to Malaysia). Prices fell and Telkom launched (non-redundant) City-to-City international private leased circuit packages at a price even lower than Seacom’s.
Here’s an example of the type of price declines Seacom has forced: the monthly lease cost for a STM-1 circuit dropped from R2.1m per month in 2006 to less than R800 000 per month. This is why you’re able to buy ADSL bandwidth at R29/GB. This is why uncapped services are viable.
Deals for international bandwidth are typically complex, multi-year ones (especially on SAT-3) and many suggested that those still in effect would need time to run their course before they could be renegotiated at steeply lower rates. We’re no doubt starting to see this.
Ironically, despite the lack of interest in Seacom capacity at launch, the entire allocation of capacity has been sold out. Neotel’s executive head of technology Angus Hay confirms that the operator is in discussions with Seacom to have more capacity lit up.
Seacom capacity “lands” at the Neotel campus in Midrand, and there will surely be an increase in the quality of service and added redundancy when the Joburg to Durban leg of the national fibre network lights up after the World Cup. If you’ve driven down to Durban from Gauteng recently, you’ll have seen the trenching.
This R2bn network, spanning 5 000km will connect all major centres in the country. It’s being co-built by Neotel, MTN (JSE:MTN) and Vodacom (JSE:VOD) and (roughly) follows the routes of the N3, N2 as well as a combination of the N12 and N1 between Cape Town and Joburg.
This massive fibre network won’t only help with Seacom backhaul between KZN and Gauteng, it’ll also dramatically increase the amount of bandwidth in the country. This will push fairly steep national bandwidth prices lower.
Industry experts joke (with more than a hint of sincerity) that national bandwidth (mostly provisioned by Telkom) is now more expensive than international capacity.
Despite the national fibre network and the criss-crossing of the major metros with fibre by Vodacom (through Dark Fibre Africa), MTN and Neotel, this disconnect between the two prices may actually worsen.
The 1.4Tbps EASSy (East African Submarine Cable System) cable, which will come on stream during the fourth quarter of 2010 will mean another steep drop in international bandwidth prices. Many thought this cable, led by governments and telecoms operators in the region, would never be built. The memorandum of understanding was signed in 2003 – with construction only starting five years later.
Even more impressive though is the West Africa Cable System (WACS) being built up the west coast (along a similar route to SAT-3). This cable will have a capacity of 5.1Tbps and will land in mid-2011.
By the end of next year we’ll be awash in bandwidth. The problem is Telkom still remains in control of the local loop – the so-called last mile from an exchange to your home/business. There have been continuous delays in the freeing up of access to that infrastructure (local-loop unbundling).
Now we only need to solve that conundrum.
Bandwidth explosion means cheaper broadband<< Discussion
Related links
MWEB Uncapped tested…and it flies!
* Hilton Tarrant contributes to “Broadband“, a column on Moneyweb covering the ICT sector in South Africa. For what its worth maybe Patricia de Lille should start a crusade focused on local-loop unbundling. But will it be populist enough?
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