Growing pains for roll-out of fibre networks
• Slow rate of infrastructure deployment remains biggest hurdle, writes Pedro van Gaalen
Pent-up consumer demand for internetbased content and the need for an alternative to unreliable ADSL services provisioned over degrading copper infrastructure has fibreto-the-home (FTTH) providers clamouring to lay claim to prime roadside real estate, to trench and trunk fibre optic cables. Yet, for a variety of reasons, the pace of fibre rollouts is struggling to keep up with this demand.
There seems to be no lack of private sector funding to continue financing large-scale fibre infrastructure deployments across SA’s major metros, with the sector seemingly immune to the downturned economy and the dip in investor confidence experienced over the past two years. So, what’s the hold-up?
Many industry players have at their disposal significant funds — Vox recently announced it secured R550m in investment to aid its continued expansion, for example.
However, Niel Schoeman, CEO of Vumatel, explains that access to capital still affects the rate of fibre deployment. “The implementation of new infrastructure is extremely capital and resource intensive. The business requires constant capital through fundraising and reinvestment to expand its FTTH footprint,” he says.
While these deep pockets could conceivably fund expanded civil works to accelerate expansion, after a certain point this approach ceases to make financial sense in terms of asset allocation. A number of larger infrastructure providers have therefore opted to use some investment funding to acquire smaller players with an installed base, in addition to organically growing networks, as Vumatel did recently when acquiring Fibrehoods and Estate Connexions, as did Vox with its acquisition of Frogfoot Networks.
Juanita Clark, CEO at the FTTH Council, explains that up to 80% of the cost of deploying fibre is needed to open and close the road or roadside trench, and for reinstatement, making it the most resourceintensive aspect of the business. It’s also the most complicated, which significantly slows down a provider’s rate of expansion.
While a mix of options for deploying fibre, including micro-trenching, aerial cabling and sewer and storm water drain conduits, have been touted as more cost-effective and time-efficient methods, Clark believes that the rate of buried network deployment, which is less prone to theft and damage and less of an eyesore, can be bolstered by getting all stakeholders to work together to improve efficiencies.
“There’s a great need for effective collaboration between all players involved in the deployment of fibre in the road reserve, from infrastructure providers, to government and the private sector. This requires the centralisation of certain functions within government to ensure projects are aligned and that providers are invited to share a trench, which is not an insurmountable feat.”
These inefficiencies are also primarily a factor of the lack of standards with regard to the wayleave system, says Clark. “Each local authority has its own set of processes to be followed, which makes planning difficult and has a negative impact on investment.”
Schoeman elaborates, saying that every municipality has different rules and regulations regarding infrastructure rollouts in their metros. “Before starting in a new area, there may be a long engagement process with the council to ensure deployment happens in accordance with that municipality’s specific civil works guidelines and that the municipality is comfortable with how and why the new service is being deployed.”
In an attempt to address what is arguably the largest stumbling block in large-scale fibre roll-outs, Clark says the imminent release of the Rapid Deployment Policy document, which outlines a single set of processes and procedures to be followed in obtaining wayleave, will help to accelerate deployment.
The second hurdle restricting widespread adoption of fibre, according to Schoeman, is “multidwelling units”. While estimates suggest that fibre now passes more than 400,000 homes in SA, many of these are complexes and apartment buildings. “Unless the infrastructure provider has the consent of the body corporate or landlord to bring fibre into the property, those residents will be unable to access the utility. Obtaining this approval can take time, which slows down the roll-out to those particular properties.”
Despite these challenges, Schoeman believes the major metros will be covered within the next 18 months, following which fibre will be rolled out to other metros and suburbs across SA. “In a few years, fibre will have the same footprint as ADSL does today,” he adds.
Certain providers are already targeting tier two towns such as Polokwane and Mbombela, says Clark, having made strategic decisions to avoid the robust competition and prevailing land grab happening in major metros.
While this makes business sense for providers looking to carve out a niche, Schoeman says the cost of extending fibre networks beyond major metros is currently too prohibitive and doesn’t make financial sense.
“Most people are unaware of the costs involved in deploying and maintaining a network. For example, once the physical network has been built, it has to be connected to a data centre, which only exists in major metros. It is too costly to trench 400km to connect an outlying area to the nearest data centre.”