26 May 2014
Eckart Zollner, Head
of Business Development, Jasco ICT
There has been
much investment into the South African telecoms market over the past few years,
particularly with regard to undersea and terrestrial fibre backbone networks as
well as wireless mobile coverage. The market has also seen investment from
international carriers and content providers into addition Points of Presence
(PoPs), while local mergers and acquisitions gain momentum. These factors combine
to indicate that the local telecoms market is on the brink of change, with the
most anticipated factor being increased competition and reduced cost of calls
and connectivity. While we may not see much of this in 2014, the groundwork is
being laid for new services, new solutions and more pervasive communications to
connect more users than ever before.
Africa is seen
as a market that offers substantial opportunity for growth, which has resulted
in significant investment. In the past few years, many undersea cables have
landed on South African shores, including SEACOM, EASSY and WACS, linking the
country to the world and helping to bring the cost of broadband down. The
launch of the Fibreco network late in 2013 – a 2 000km fibre-optic network
interconnecting Johannesburg, Bloemfontein, East London and Cape Town – further
opened up the telecoms landscape. Fibreco is essentially a privately owned,
independent, open access terrestrial backhaul fibre network that offers
businesses greater choice with regard to broadband fibre delivery. It also
provides multiple drop off points along its route, connecting smaller cities
and towns to national broadband infrastructure. Even satellite operators have
seen opportunity in the market, offering new and more affordable services to
remote customers.
The upshot of
this has been greater access to services, more pervasive Internet access,
enhanced access to point-to-point communications links, and a greater ability
to interconnect between different operators and service providers. In essence,
many new service providers have emerged, offering new solutions and bringing
about reductions in pricing. On the mobile and wireless side, there is currently
much investment being made into rolling out 4G or LTE mobile coverage, as well
as wireless local loop access and other mobile broadband infrastructure. This
will give service providers the ability to reach customers at the last mile,
offering broadband speed connectivity at economical rates without the need to
wait for the local fibre loop to be unbundled.
In addition to
greater availability and higher quality of bandwidth, the telecoms market has
also seen a slow-down in growth and an increase in subscriber churn. Mobile
voice has effectively reached maximum penetration, resulting in users
constantly seeking better value from their subscriptions. The recent reduction
of the interconnect rate will help to drive traffic volumes and decrease costs
for the users, but will further squeeze the margins of service providers. This
along with factors such as the high cost of building new infrastructure, the
commoditisation of voice and data services, and limited available spectrum, is
driving market consolidation both in the mobile and fixed line space. Large and
smaller players are now looking to work together to share infrastructure and
provide services to a broader audience. The true impact of these proposed
mergers is unknown at this stage, as the terms of the consolidation have not
been finalised, and there are potential upsides and downsides for consumers and
other service providers. The foundations for change have, however, been laid,
and 2015 will see the effects of this consolidation take effect.
While the impact
of these changes will not be felt for the next year or so, one factor remains
constant – the need to reduce the cost to communicate and bring communication
services to the entire population. This is vital for the growth of the economy,
as there is a direct correlation between data penetration, Internet access and
the economy. In fact, studies estimate that every 10% penetration achieved with
regard to Internet access results in a 1.8% growth in the economy. In a local
economy that has been fairly stagnant over the past few years, this is
essential. Data remains expensive because of low penetration, and outside of
the major metropolitan hubs, connectivity is sparse. Service providers need to
be incentivized to take solutions to rural users, and need to share
infrastructure to reduce the cost involved with reaching this important volume
market. Creating competition is another vital aspect of change, as this is the
foundation of a dynamic, innovative market. In a competitive environment,
service providers are forced to differentiate with new services, solutions and
packages, driving them to better meet the needs of customers in order to remain
in business.
Interest from
the international market and the establishment of additional PoPs and transport
routes will aid in reducing costs, as shorter routing means lowered costs. However,
the biggest benefit of this investment is the ability to deliver additional
redundancy and resiliency on transport routes, which ensures more reliable data
services. For cloud-based and hosted solutions, reliable connectivity and optimised
transport routes are critical to performance, so this move will also enable a
greater variety of cloud services to be offered.
The South
African telecoms market is poised for change, with all of the pieces moving
into place to enable further cost reductions, better, faster broadband
connectivity and greater choice of providers and solutions. The ability to
introduce new services will also revolutionise the market, as cloud
technologies such as video on demand, Internet-based video conferencing and
more become increasingly viable. The year 2014 sees the consolidation, planning
and laying of groundwork to deliver exciting change in the near future, and the
recent drop in the interconnect rates is the first step on this journey.
Service providers need to stay on the forefront of technology, and offer
innovative services and solutions rather than hardware and products, if they
are to remain relevant in this shifting landscape.