Fibre in SA: are we headed for regional monopolies?

Two affluent Johannesburg suburbs took their broadband future into their own hands in 2014, with home owners organising a tender for the laying of fibre infrastructure in their neighbourhoods.

Vumatel, a newcomer to South Africa’s fibre space, won the bid to roll out fibre in Parkhurst, while Dark Fibre Africa (DFA) won a bid in Parkview.

Shortly after Parkview announced that DFA had won its bid, Telkom revealed that it would be launching South Africa’s first commercial Long Term Evolution Advanced (LTE-A) services in those neighbourhoods.

South Africa’s telecoms giant also revealed that it had stopped its roll-out of last-mile fibre infrastructure in Parkview and Parkhurst, with spokespeople for the company suggesting that the self-started fibre roll-outs had caused Telkom to re-evaluate its fibre plans for the area.

This means that — at least for now — Vumatel and DFA will not be competing against other last-mile fibre infrastructure players in Parkhurst and Parkview.

This raises the question: is South Africa heading to a situation where infrastructure providers have regional monopolies, similar to cable companies in the United States such as Comcast, Time Warner, and AT&T?

So many competitors, yet so little competition

Those who are following the debate around net neutrality currently taking place in the United States (or those who watch South Park) will be aware of the criticism leveled at cable companies for services that are poorer and more expensive than those in other developed countries.

Among the reasons cited for this situation is the fact that America’s largest cable companies don’t really compete with one another.

Media reports from the US have criticised the country’s regulator (the Federal Communications Commission), and state regulators for not putting more pro-competitive measures in place.

Should South Africa not learn from the United States’ mistakes?

With a large infrastructure player like Telkom declining to compete against DFA and Vumatel in Parkview and Parkhurst, is South Africa heading to exactly the same situation?

Accepting competition however we can get it

These concerns were raised with the Internet Service Providers’ Association of South Africa (ISPA), and regulatory advisor Dominic Cull with Ellipsis Regulatory Solutions said that the American cable companies have a very different history to South Africa’s budding fibre players.

Vumatel is building a “proper open access network” in Parkhurst, Cull said, as opposed to other fibre deployments in South Africa where the company providing the fibre either limits, or does not allow third-party service providers onto their infrastructure.

Such “vertically integrated” last-mile fibre deployments are problematic, Cull said, because they do not allow for competition in the service layer, let alone fibre infrastructure providers.

“These deployments are based on outdated models and reflect the challenges presented to incumbent operators by IP convergence and the shift to ‘fibrenomics’ – it is difficult to be satisfied with utility-type returns when you have been feasting at the trough for so long,”, said Cull.

In contrast to this, DFA and Vumatel are rolling out their networks on an “open access” basis, meaning that any Internet service provider (ISP) or telco may strike an agreement with Vumatel and/or Dark Fibre Africa to offer services in the relevant neighbourhoods.

“Obviously we want competition in both infrastructure layer and services layer, but at this stage service competition is more important,” Cull said.

Alternative access technologies, strong regulation

Another consideration is that even though infrastructure players may not feel that it is economically feasible to compete with one another in the same suburb, broadband users will have a number of alternative access technologies to choose from.

For example, Telkom’s ageing copper infrastructure is not replaced by the fibre, and those who wish to take up digital subscriber line (DSL) services may still be able to do so.

High-speed wireless access technologies such as LTE and LTE-Advanced are also being (or already have been) rolled out in these neighbourhoods.

This means that in Parkview and Parkhurst, there are in fact already a number of infrastructure providers competing with each other, using a variety of access technologies.

Where there could still be an issue is if the fibre monopoly in an area also provides backhaul for competing access technologies such as LTE, but Cull said that in South Africa’s case that won’t be an issue because mobile providers are allowed to build their own networks and have been laying fibre to their base stations since 2004.

This doesn’t mean that there won’t be problems that could arise due to only one fibre player servicing any particular area. “A new mindset is going to have to be imposed,” he said.

To address any such potential issues, Cull said that the fibre network in an area should be considered an essential facility and regulated as such.

He added that South Africa is going to need a regulator (currently Icasa) which understands what “open access” is and how to implement and enforce it.

Although everyone is talking about open access networks, they also all have their own idea of what it means.

More than one way to blow a fibre cable

Cull went on to suggest that there were also ways fibre could be deployed that would further decrease the risk of regional monopolies.

If one company lays the infrastructure, it need not be the only electronic communications network (ECN) provider in the area.

Vumatel could sell on the right to provision services to other ECN service providers licensed by Icasa.

A consortium of companies could also get together to roll out fibre in an area and follow a similar model to undersea cables, such as the West Africa Cable System, Cull said.

Under this model, each company in the consortium contributes to rolling out the infrastructure and then each of them is able to sell capacity on the fibre.

Companies therefore cooperate to roll out the fibre, and then compete against one another to sell the capacity they control.

This gives the benefits of not duplicating the physical network infrastructure, thus lowering the capital costs that need to be repaid, while allowing for competition in the selling of capacity on that network.

“This is already the model adopted for international cable systems and, increasingly, for national long-distance deployments in South Africa. What’s to stop providers to partner up to roll out fibre for the access portion?” Cull said.

More SA fibre news

More fibre-to-the-home for Joburg suburbs

Best fibre-to-the-home prices in South Africa

150Mbps uncapped fibre, unlimited free calls

Vodacom fibre chosen for Baywest City

Parkview FTTH project chooses Dark Fibre Africa