When affordable fibre projects for townships in South Africa come online, they will destroy the prepaid mobile market in those areas, said Vumatel CEO Niel Schoeman.
Schoeman said it is not their aim to erode the prepaid mobile market, but it will be an unintended consequence of Vumatel’s plan to roll out fibre to townships.
Vumatel plans to offer uncapped 100Mbps fibre for R89 per month in SA’s townships, with Alexandra its pilot site.
Should the pilot succeed, Vumatel will expand its network to Diepsloot. It then aims to connect 10 million residents in 2.5 million homes within the next two years.
While the technical and commercial feasibility of the project is being assessed in Alexandra, Schoeman said it is important to consider the social impact affordable fibre will have in South Africa.
“We need to find ways of dealing with the digital divide as an industry,” said Schoeman.
Poor subsidising the rich
Schoeman said mobile operators have essentially created a market where the poor are subsidising the rich.
“The more you consume the less you pay, and yet mobile operators talk about data like it’s a scarce resource,” he said.
“Why charge approximately 12-times more per megabyte to those who can’t afford data, while charging significantly less per meg to those who can afford it in abundance?”
Schoeman argued that mobile operators complain about the availability of spectrum, but their business models say otherwise.
“For any utility, the rates are consistent up to a point. Beyond that, the heaviest users are charged more to try and prevent large consumption.”
With the mobile operators, it is the other way around.
“Run the numbers here – the average household income in Alex is R2,500 per month and the average revenue per mobile prepaid user is R90 to R110.”
Operators have 90% penetration in townships, and SIM penetration is over 100% because subscribers hop between networks to capitalise on the promotions networks offer.
This means subscribers in townships are probably paying closer to R140 per month for cellular connectivity, said Schoeman.
For a household with two subscribers, that is almost 12% of the total household monthly income – well above Vumatel’s R89 per month price point.
Vumatel conducted research in Alexandra and found that 2% of residents understood the term “uncapped” data.
Schoeman believes that when homes in the area have access to unlimited data, opportunities will emerge.
It has the potential to have a significant impact on mobile operators, and will be good for competition in the telecommunications industry.
“We’re laying the foundations for smart cities in South Africa, but how can we say we’re building a smart city if we’re only building smart leafy suburbs?”