Fibre-to-the-home in SA: curb your enthusiasm

South Africa’s telecommunications industry is slowly making its way to full fibre-to-the-home (FTTH), but fibre-to-the-building (or -business) is where the action is right now.

This is according to analyst and MD of World Wide Worx, Arthur Goldstuck, and telecommunications industry heavyweight Jannie van Zyl.

Van Zyl, who is head of data at Vodacom, confirmed that Vodacom has plans to roll-out fibre services to business parks within the current financial year.

From there the next logical step for the telecoms industry is to roll out carrier-grade fibre services to gated communities, though Van Zyl said Vodacom doesn’t have firm plans for that yet.

He went on to predict that within the next 12–18 months we’ll see the first gated communities with fibre supplied by telecoms players that can provide carrier-grade services.

Arthur Goldstuck – World Wide Worx

Follow the money

This is in line with predictions Van Zyl made in 2011, when he also explained that mobile operators would roll out services along a specific path that follows from the deployment of Long Term Evolution (LTE) technology, eventually leading to full FTTH.

Van Zyl explained that the road to FTTH began with the build-out of the national backbone, which led to further investment in core networks by network operators.

From there, mobile network operators rolled-out of fibre links to their towers to support faster HSPA and LTE connections.

With the towers acting as fibre distribution points for operators they could then look at providing FTTB services to enterprises and now, business parks.

Van Zyl explained that the business model for corporate parks is very similar to that of gated communities, which makes them the likely next target for operators.

The reason telcos would rather target complexes first is because it’s easier to connect them than normal residential areas, Van Zyl said.

There are also a few thousand of these communities in South Africa, Van Zyl said, which means there’s a decently-sized market to go for.

Jannie van Zyl

Carrier-grade fibre services will cost

Residential roll-outs, beginning with gated communities, do face some serious challenges.

The main problem, Van Zyl said, will be the initial cost of such services. A secondary issue relates to offering additional services such as TV over fibre, though this too is related to pricing.

To start with these fibre services to complexes will go for around R2,000 per month while operators recoup their investment and build out their networks, Van Zyl predicted.

This price includes access, data, and telephony, and Van Zyl said he thinks operators will be able to give subscribers speeds of around 40Mbps with 50–100 Gigabytes of data and a few hundred voice minutes per month at that price.

He added that costs are affected by the amount of infrastructure spend needed to roll-out the fibre. If there are existing trunks for carriers to use costs will be lower, but if they have to trench to lay cable ducts themselves before putting the fibre in costs will be higher.

“It can cost thousands to drop [fibre] in a house,” Van Zyl said.

Viable alternative TV service needed to boost residential fibre

While this price will already make potential subscribers think twice about opting for a fibre service when compared to ADSL, Van Zyl said a further hurdle is the lack of a viable alternative to MultiChoice’s satellite television subscription service.

This makes it difficult for fibre players to offer a true triple-play service, and they just end up providing a DStv satellite feed over the fibre, Van Zyl said.

Subscribers would then still need to install a DStv decoder and have a separate subscription to DStv in addition to their fibre broadband service.

A capped fibre connection with DStv Premium would then run at least R1,000 more per month than an uncapped 4Mbps ADSL connection with a separate DStv subscription.

If prices aren’t more in-line with what we pay for our Internet and TV services together now it will be difficult for residential users to justify fibre, Van Zyl said.

In short, you may as well install your own dish if you have a loose-standing unit in a residential estate instead of going through the trouble of having it delivered over fibre.

Since it’s just a satellite feed, it means that bad weather will still adversely affect signal and you introduce another point of failure (the fibre network) for your television service.

Asked if competition to DStv could come from different quarters, online services such as Netflix and Hulu, Van Zyl said they could offer some competition, but didn’t address all segments of the market.

Television services are composed of a number of different offerings, Van Zyl explained, including:

• Transactional video-on-demand (TVOD), such as DStv’s BoxOffice movie rental service or iTunes. This content typically becomes available after the theatrical release but before it comes to linear TV;
• Linear television, or a “normal” TV service; and
• Subscription video-on-demand (SVOD), such as Netflix, which offers content around the same time as a DVD release.

There are exceptions, such as HuluPlus which is a subscription service that offers episodes of certain TV series at the same time as the normal linear broadcast. However, it doesn’t offer live sport which remains a big driver in South Africa, Van Zyl said.

Entering the content space is also not easy as the model they use is very complex, Van Zyl said.

On top of the different content-release time-windows, the media industry also wants you to pay licensing per media house, per country, per device. This means you would have to separately licence content for TV, mobile, and PC in all the countries where you would like to offer it.

Predicting the future is easy! Just follow the money

The future of fibre in South Africa: prophecy check

In July 2011, Van Zyl predicted that mobile network operators would start providing FTTB services within the next 5 years, with more affordable FTTH offerings only likely within 5–10 years.

Just shy of two years later, mobile networks are gearing up to roll-out fibre to business parks.

Van Zyl also predicted that R2,000 – R3,000 would be the price point networks aim for to provide residential customers in gated communities with fibre broadband services. He went on to say that more affordable residential fibre services would then become available in 5–10 years (from July 2011).

He is still forecasting a price of R2,000 per month for an entry-level residential fibre service, and added to his list predictions that the first carrier-grade fibre services provided by established telcos to gated communities will come online in 12–18 months.

Van Zyl has also gone on to say that fibre deployments from mobile operators will start popping up in residential areas within the next 2–3 years, but will be expensive.

It promises to be an interesting 2–3 years indeed, as mobile operators encroach ever more on what  used to be the exclusive domain of fixed-line incumbent, Telkom. However, there still seems to be a long road ahead before FTTH becomes a reality in South Africa.

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