Balancing Act (London)

18 April 2014

South Africa: David Takes On Goliath - South Africa's Posix to Offer Fibre-to-the-Home Ahead of the Big Gorillas

London — South Africa is potentially a large market for home high-speed broadband but a number of factors have held up its implementation. Kenya got there three years ago so Russell Southwood looks at why and talks to Mark Elkins, Posix about what they've got planned.

Jamii Telecom launched a public Fibre-To-The-Home (FTTH) network in Kenya in early 2011 but except for a few gated communities and pilots, nothing has happened in South Africa on this front. But 2014 might be the year of all change as the lumbering Telkom promises to turn its FTTH pilot into a public service and Posix goes live with its offer.

South Africa has somewhere between 0.5-1 m households that can probably afford to pay for an FTTH service yet this opportunity has remained the elusive chicken-and-the-egg market. Without someone prepared to invest, there will be no customers. And there will be no customers until someone believes they can make a return and invests.

So why has no-one been prepared to invest? For all the rhetoric of innovation, the South African telecoms and ISP markets have been fairly conservative in their approach. The bigger ISPs like Internet Solutions who might have made the move have clearly thought it was too high-risk and long-term and have remained focused on the more lucrative corporate market. The smaller ISPs have lacked the capital or an appetite for high risk.

But that's not the whole story by any means. The big gorillas MTN, Vodacom and Telkom have been content to offer bandwidth to individual users as if it was being rationed. There is no market on the continent where you can get so little bandwidth in quite so many different ways: with some honorable exceptions, users are capped and operators have tended to make good money from people paying the punitive rates when they burst these caps.

(One business hotel I stayed at last year actually blocked You Tube even though I was paying for capacity not access time. Go figure.)

The big gorillas have thus far controlled the main fibre highways so even if you felt inclined to hurl yourself at this opportunity, you meet the pricing and quality walls of what the big operators will give you to move data on a wholesale basis.

And then there's another twist to the story that comes from the dominant position of an operator that is not in the telecoms field. Elsewhere insurgent challengers have offered triple play and fibre delivery. But in South Africa, DStv has effectively dominated this market to the point where local companies will tell you: You can't take on DStv. It's not true but DStv has a psychological lock on the market. But there's a brave new world approaching with Video-On-Demand and who knows, maybe the dam will burst at this point.

I just happened to notice on Facebook that Mark Elkins, owner of a small ISP called Posix Systems in Midrand is offering potential customers FTTH. Thus far Elkins, who has between 1,500-2,000 customers nationally, has been selling ADSL supplied by MTN and Telkom.

So if it ain't broke, why change?

All ADSL is reliant on what Telkom has. It depends on how far you are from the exchange and that doesn't give very fast speeds for many people. There's also contention issues because of multiple exchanges and the network is not designed for what's happening. Telkom is rolling out fibre-to-the-curb but its a very slow process.

To overcome these obstacles, Elkins is planning to build his own fibre backhaul route between Pretoria and Johannesburg:

Our FTTH route is from Rosebank to Midrand, Isando to Midrand and then from Midrand to Pretoria via Midstream Estate/Highveld, Irene, Cornwall Hill, Elarduspark, Menlyn, Lynnwood, The Willows, Equestria, Silver Lakes, Wapadrand, Faerie Glen and Garsfontein. He will be offering customers off of this route FTTH services.

If you are in, close to or between these areas, we can provide a 100Mbps or 1Gbps fibre connection. You can then get blindingly fast access to the majority of South African Content and a fixed contention ratio link to the rest of the Internet. No Caps, no Data shaping, just Pure Internet. Additional services can include Dial Tone (Telephone), TV Signal, Video on Demand, offsite backup and Cloud based services. We are currently asking you for your expressions of interest in taking a connection to assist with our planning of supplementary routing.

So what will it cost? Residential pricing will be around R600 (US$57) a month for a 100Mbps local connection which includes 3Mbps International connectivity and static IPv4 and IPv6 addresses. Businesses will pay R2300 (US$218) per month, includes 1Gbps Local and 10Mbps International. Additional International Internet access will cost about R30 (US$2.84) per Mbps at a 20:1 contention ratio.

African Internet users elsewhere on the continent might not understand the idea of buying international connectivity separately when there's an almost endless supply cheaply at the landing station but lets leave the peculiarities of the South African market to one side for a moment.

Thus far Elkins calculates that 1 in 20 of those expressing interest get to the point of making a positive commitment and that interest is building. There are particular niches of interest like security:

I would supply FTTH to cameras. These currently are on Wi-Fi and dont always work that well. There is some scepticism based on price because thus far people cannot see what they would be getting for the extra money: back to the chicken-and-egg again. But once you see flawless high speed broadband it begins to sell itself.

High speed broadband to the home, driven with content and services like voice, has the potential to shake up the rather slow moving South African data market. It will be interesting to see whether David can get in the first blow before the usual South African Goliaths show up.

Video interviews to watch - see link below

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