Motivating broadband reach for the south african rural and domestic consumer

Motivating Broadband Reach for the South African Rural and Domestic ConsumerVitalis G. OzianyiSenior Research AnalystFrost & Sullivan

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Contents

• Introduction

• Aims and the role of government

• Current status

• Comparisons

• Challenges

• Industry participation

• Regulations

• Opportunities and dividends

• The way ahead

• About Frost & Sullivan

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Introduction

• Broadband – Always available multimedia capable connection

supporting downloads at 256Kbps

• Access to business, medical, educational, government and

entertainment information.

• Mobile broadband for domestic and rural African mass market

• Need low cost broadband

– Limited technical involvement

– Minimize customer care

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Aims and role of South African Government

• Cheaper broadband access by 2019 - Government’s broadband

policy gazette 33377

• To fund building networks in marginalized areas

– State owned enterprises

– Universal Service and Access Agency of South Africa (USAASA) to develop

network provisioning policies.

• Strengthen capacity of ICASA to regulate ICT sector

Broadband

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South African Provincial and Local Government

• Develop policies for unique requirements of each region

• Increase uptake of ICT for enhanced service delivery

• Ensure financial sustainability of self provisioned networks

– Establishment of municipal fibre networks – direct government ownership

reduces costs of building networks (City of Cape Town)

– Physical (dark) fibre owned by local government – leased to ISPs

– Open access networks operated by private company

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South African Provincial and Local Government (Contd…)

• Incentivise businesses to use broadband in commerce

• Case studies – Johannesburg, Durban and Cape Town

• Durban’s eThekwini municipality

– Network managed by Internet Solutions

– Sells to 13 licensed service providers for re-sell to clients

– Currently focused on business segment

• Johannesburg’s fibre is under construction by BWired

• Cape Town municipality’s network is operational

– Currently serving government offices and business segment

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Current Status – South Africa

• Broadband penetration in South

Africa at 3% - international

average 22.5%

• ADSL and fibre fixed broadband

access

– Over 600 thousand ADSL

subscribers – domestic, SME,

businesses

– FTTB emerging in business sector

• Wimax, Wi-Fi, 3G wireless access

– Growing Wimax coverage across

South Africa

– Growing Wi-Fi coverage in urban

areas

– 3G coverage in major metros

36%

41%

5%

9%

1%8%

ADSL

Mobile

WiMAX

WiFi

Satellite

iBurst

Broadband Market: Market Share by Technology (South Africa), 2008

Broadband Market: Market Share by Vertical Sectors (South Africa), 2008

Tourism

12.0%

Government

22.0%

Other

27.0%

Retail

12.0%

Healthcare

9.0%

Financial

18.0%

Source: Frost & Sullivan


Frost & Sullivan will release a report in November 2010 updating forecasts for this market

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Current Status – South Africa (Contd…)

• Increasing International and terrestrial

bandwidth

– Undersea fibre cables – SAT-3, Seacom,

EASSy, WACS

– Terrestrial fibre links between major

cities – Soccer world cup cities, major

metros

• Broadband benefits to South African

economy

– Job creation – BPO, hosted services

– Managed services revenue to exceed $2

billion by 2013

Broadband Market: User Forecasts (South

Africa), 2008-2015

0.0

5,000.0

10,000.0

15,000.0

20,000.0

2008 2009 2010 2011 2012 2013 2014 2015

Years

Us

ers

(T

ho

us

an

ds

)

0.0%5.0%

10.0%15.0%

20.0%25.0%

30.0%35.0%

Us

er

Gro

wth

Ra

te (

%)

Users (Thousands) User Growth Rate (%)


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Benchmark UK and Finland

• UK government broadband policy

– At least 2Mbps for all citizens by 2012

– Best superfast broadband network in Europe by 2015

• Finland

– At least 1Mbps for all citizens

– 100Mbps a legal right by 2015

– Uses legislation to force telecoms companies to meet theses goals

• Note: motivation for telecom companies to turn these ambitions to reality

is needed.

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Benchmark Canada

• Canada has 9.8 million broadband

subscribers

• Broadband Canada: Connecting

rural Canadians project

– $225 million (economic action plan)

over 3 years to cover unserved and

underserved households

– Federal government funds 50% of

CAPEX

– Industry presents project proposals

for funding based on best value and

most households covered


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Benchmark Australia

• Government allocates grants or owns equity in a broadband entity

• April 2008 - National Broadband Network

– $43 billion over 5 years

– Fibre-To-The-Premises (FTTP)

– Wholesale only open access broadband network

– To connect 90% homes, schools and workplaces in urban and regional towns

(towns with 1000 inhabitants connected) at 100MBps

– Fibre linking cities and towns – NG wireless (12Mbps) for rural

– 25,000 local jobs

• 51% government owned – privately and commercially operated

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Benchmark Kenya

• Wireless broadband is the dominant access mechanism

• Broadband growth spurred by landing of Seacom, Teams and

Eassy

Network

operators

13.4%ISPs

86.6%

Broadband Market: Distribution of Market Participants (East Africa), 2009

Fixed

Broadband

6.3%

Other

Broadband

(For

example,

Satellite)

7.7%

Mobile

Broadband

56.9%

Fixed-

wireless

Broadband

29.1%

Broadband Market: Subscribers and access technologies (Kenya), 2009



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Benchmark Kenya (Contd…)

• Digital village initiative

– Computers, broadband internet

connections and other ICT facilities

– 1% levied by CCK or operators to provide

5 digital villages in each constituency

– Government trains and funds young

entrepreneurs to manage them

Broadband Market: Operator Market Share by Subscribers (Kenya), 2009

ISPs

0.8%Telkom

Kenya

23.3%

Zain Kenya

Limited

24.5%

Safaricom

Limited

46.7%

Essar

Telecom

Limited

4.7%


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Challenges – South Africa

• Inadequate knowledge of broadband service usage and benefits (e-

government, e-health, e-business, e-education)

• Large geographical area

–Reachable by expensive low capacity satellite and microwave

–Low fixed line penetration

• Lack of elaborate public-private engagements and partnerships

Low

disposable

income

High

CAPEX &

OPEX

Limited

range of

services


Spectrum

regulations

Expensive

end user

devices

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Industry Participation - Requirements

• ROI within tight timeframes

• High profit margins

• Business potential of investments

• Proven business models

• Mass uptake of products and

services

– Rich multimedia

– Content

– Value added services

Broadband Market: Revenue Forecasts (South Africa), 2004-2014

0.0

200.0

400.0

600.0

800.0

1,000.0

1,200.0

1,400.0

1,600.0

1,800.0

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Years

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

Revenues ($ Million) Revenue Growth Rate (%)


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Industry Participation – Status South Africa

• Telkom expanded its national fibre

network to meet world cup needs

– Fibre connectivity to all stadiums

– Telkom invested over R.18 billion in 2008 and 2009 for network capacity expansion.

• Neotel, Vodacom and MTN jointly

building national fibre network

• Broadband Infraco – state owed

enterprise

– Mandate to connect marginalised

areas

– Lower priced aggregate bandwidth

• Deployment of Wimax, WiFi, ADSL

Broadband Market: Tier I Competitive Market Shares (South Africa), 2008

Other

5.0%iBurst

8.0%Neotel

6.0%

Vodacom

36.0%MTN

12.0%

Telkom

33.0%

– Operators upgrading 3G networks to

offer higher speeds

• Smaller ISPs reaching to

marginalised and underserved

areas, both urban and rural markets


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Regulations – South Africa

• ECNS licensing

• Spectrum allocation and supervision by ICASA

– Informed decisions on optimal spectrum usage

– Improved supervision of telecoms sector

• Facilitate speedy licensing

– Self regulation

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Opportunities and Dividends - Africa

• Broadband drives investments in

dependent sectors

– Healthcare ICTs

– BPO

– Managed services

• Growing demand in key areas

– eHealth

– eEducation – Access to ebooks

Financial

28%

Government

13%

Technology

7%

Manufacturing

15%

Healthcare

9%

Retail

10%

Other

18%


Other = Transport; Mining; Oil & Gas

Managed Services Market: Key End User Respondent Sectors (South Africa), 2010

– eGovernment

– Market and trade information for SME in rural areas

– Entertainment – music and movie downloads, and gaming

• Increasing demand for information in the comfort of the home

– Internet based telecom services like VoIP to inspire usage of advanced

services

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The Way Ahead - Africa

• Spread 1st generation broadband and drive next generation

broadband

• Public-private partnerships in backhaul infrastructure deployments

–Government

– Industry

• Operators to engage government through technical advisory groups

with engineering advice on investments in broadband

• Intensive government investments in connecting municipalities

countrywide

– Build digital communities

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The Way Ahead - Africa

• Drive wireless access for last mile connectivity

–Wimax, LTE, WiFi

• Affordable integrated end user devices for mass broadband access

–Low priced integrated handsets for voice, video, broadband

(Wimax, LTE, 3G) etc

• Simplified billing models

–Simplest non-misleading prepaid billing

• CSPs to create services adoptable across all segments of the

broadband market

–Services around day-to-day business and social lives – eHealth,

eGovernment, eEducation

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Analyst Bio – Vitalis G. Ozianyi

Vitalis Ozianyi joined Frost & Sullivan’s ICT practice in 2010. His primary research focus is on infrastructure development and telecommunications in sub-Saharan Africa. This includes the markets for fixed and mobile broadband, and access technologies such as fibre, WiMax and CDMA.

Vitalis is currently engaged on studies of the sub-Saharan African converged networks, and broadband markets.

His work experience includes various positions in systems administration, research and academia. He has conducted technical analysis on different aspects of telecommunications and has published papers in journals such as Elsevier. He is in the final stages of PhD studies in electrical engineering.

Vitalis’ background in research linked to telecommunications and engineering provides him with a thorough understanding of the technical demands of the industry.

Vitalis G. OzianyiSenior Research AnalystICTAfrica

MSc (Electrical Engineering) -

University of Cape Town (South

Africa)

BTech (Hons) (Electrical and

Communications

Engineering) – Moi University

(Kenya)

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Motivating broadband reach for the south african rural and domestic consumer

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