Getting fibre-to-the-home if it is available in your area is not necessarily a no-brainer, according to research from adjunct professor Brian Armstrong, the chair in digital business at the Wits Business School.
Armstrong’s research shows that the cheapest Internet connection in South Africa, measured in terms of price per megabyte (per-MB), changes depending on the amount of data being consumed per month.
If you use up to 6GB or 7GB per month, a normal data contract is your cheapest option. For those using less than 100GB per month — around 70GB or 80GB — a fixed LTE package would be the cheapest option.
A 20Mbps FTTH service only becomes significantly cheaper than fixed LTE once you start using more than 100GB.
It should be noted that Armstrong’s observations are based on data sourced from company websites. He collected the wireless prices in September 2018, and fibre prices in July 2019. It is therefore possible that slight deviations from the above figures are possible.
For the cellular services compared, he confirmed that he only looked at monthly bundles. The wireless contracts compared are 24-month deals and SIM-only. Fixed LTE prices exclude the cost of the router.
He also noted that for fibre prices, he only looked at 20Mbps services available on 24-month contracts, which usually include the installation and connection fee. Uncapped services were assumed to have fair usage thresholds of 1,000GB, and are therefore located at that point on the graph.
Opportunity for fibre to compete with fixed LTE
Armstrong concluded that for homes that fall within the high bracket of the Living Standard Measure (LSM), fibre will be the preferred and more cost-effective option for Internet access.
For lower LSM homes, fixed LTE will be more cost-effective unless a new affordable price point for fibre can be reached.
He showed that the traditional view of the opportunity for FTTH in South Africa includes mainly households in high-density residential areas that earn over R12,800 per month. By 2023, it is estimated that this will be around 4.3 million homes.
Fibre will not be rolled out to absolutely every one of those homes by 2023, and Armstrong said that current estimates are that around 3 million homes will be covered in the next 4–5 years.
However, there is an emerging view of the mass market opportunity for FTTH in South Africa which includes households that earn R12,800 or less. There are set to be 7.6 million such homes in high-density areas by 2023.
As with the middle- to high-income segment, Armstrong said that not every one of the households should be considered part of the total addressable market for 2023.
He estimated that only around 650,000 homes in the low- to middle-income segment would be part of the potential addressable market for FTTH by 2023.
Armstrong said that the target price for the mass market segment is between R199 and R299 per month for 10GB to 20GB packages.
This is below the current price curve, but Armstrong also highlighted that the price still represents 5% to 10% of the total monthly household income for that segment of the market.