In­ter­net for 22m by 2020?

Govern­ment plans to ex­tend broad­band ac­cess into much-ne­glected ru­ral ar­eas

Financial Mail - Investors Monthly - - Special Report Infrastructure - Thabiso Mochiko

The in­sa­tiable ap­petite for broad­band In­ter­net con­tin­ues to spur spend­ing in telecom­mu­ni­ca­tions in­fra­struc­ture — mo­bile and fixed-line — with com­pa­nies al­ready com­mit­ting to fur­ther in­vest­ments in 2017.

The avail­abil­ity of re­li­able broad­band net­works has led to smart phone sales and us­age soar­ing, re­sult­ing in a surge in data us­age. The avail­abil­ity of fast In­ter­net has also opened up new in­dus­tries such as mo­bile app de­vel­op­ments and given rise to new on­line ser­vices such as on­line bank­ing, video and mu­sic stream­ing. Other tech­nol­ogy ser­vices such as the In­ter­net of Things and cloud com­put­ing also re­quire re­li­able con­nec­tion to the In­ter­net.

Ac­cord­ing to telecom­mu­ni­ca­tions and postal ser­vices min­is­ter Siyabonga Cwele, to­tal in­vest­ments to­wards in­for­ma­tion and com­mu­ni­ca­tion tech­nol­ogy (ICT) in­creased by 18.8% to R28bn in 2016 — de­spite the tough eco­nomic en­vi­ron­ment.

A re­cent re­port by the In­de­pen­dent Com­mu­ni­ca­tions Author­ity of SA (Icasa) showed that 3G cov­er­age has reached 99% and 4G 75% of the to­tal SA pop­u­la­tion.

How­ever, not all those who are “cov­ered” have ac­cess to or are us­ing the In­ter­net, as only 53.4% of SA house­holds have ac­cess to the In­ter­net. This year’s in­vest­ments are ex­pected to ex­ceed the 2016 lev­els as more com­pa­nies like Neo­tel, Vox, as well as na­tional, pro­vin­cial and lo­cal govern­ment plan to ac­cel­er­ate fi­bre-op­tic and wire­less net­work roll­outs.

Though com­pa­nies have been in­vest­ing heav­ily in tele­coms in­fra­struc­ture, the bulk of the in­vest­ments have fo­cused on ur­ban ar­eas. The depart­ment has set aside R1.9bn for the first phase of its broad­band in­fra­struc­ture pro­gramme un­der the SA Con­nect Pol­icy. It has pri­ori­tised un­der­ser­viced ar­eas, fo­cus­ing on schools, health fa­cil­i­ties and other govern­ment in­sti­tu­tions.

Cwele says govern­ment needs to con­nect 22m peo­ple to meet the SA Con­nect and Na­tional De­vel­op­ment Plan tar­get of univer­sal ac­cess to high-speed In­ter­net by the end of 2020. Govern­ment is en­list­ing the help of state-owned en­ti­ties to roll out the first phase of its broad­band net­work in­fra­struc­ture, mainly in ru­ral ar­eas.

There has been an in­crease in com­pa­nies en­ter­ing the fi­bre in­fra­struc­ture space. In­fra­struc­ture shar­ing and open-ac­cess net­work pro­vided by com­pa­nies such as Dark Fi­bre Africa have low­ered bar­ri­ers to en­try for some com­pa­nies. Dark Fi­bre Africa has built an open-ac­cess net­work and sells ca­pac­ity to any com­pany that wants to pro­vide data pack­ages.

One of the com­pa­nies that has ramped up in­vest­ment in telecom­mu­ni­ca­tions in­fra­struc­ture is Vox, which will spend about R500m in 2017. Vox CEO Jacques du Toit says the com­pany will de­ploy its own fi­bre in some ar­eas and lease ca­pac­ity from other com­pa­nies that al­ready have sim­i­lar in­fra­struc­ture in other ar­eas.

It is not tar­get­ing ar­eas prone to du­pli­ca­tion. Du Toit says Vox has se­cured 86,000 fi­bre-to-the-home and more than 10,000 fi­bre-tothe-busi­ness op­por­tu­ni­ties.

Vo­da­com is look­ing at a joint ven­ture for its fi­bre in­fra­struc­ture roll­out. It has so far con­nected more than 21,000 homes and busi­nesses with fi­bre. It wants to ac­cel­er­ate its roll­out as it aims for 1m fi­bre con­nec­tions.

Telkom wants to con­nect fi­bre net­works to 1m house­holds by 2018. At the end of Septem­ber 2016, it had con­nected fi­bre to 144,512 homes and 850 gated com­mu­ni­ties. It had 42,176 fi­bre con­nec­tions to busi­ness premises.

Telkom has led the pack in fixed-line net­work, by virtue of hav­ing pre­vi­ously been the only com­pany pro­vid­ing tele­phone ser­vices. But the com­pany is fac­ing com­pe­ti­tion not only from mo­bile net­work op­er­a­tors but from new en­trants in the mar­ket.

The in­vest­ment in telecommu- nica­tions net­work in­fra­struc­ture is set to in­crease with the al­lo­ca­tion of spec­trum to com­pa­nies to en­able the roll­out of the su­per-fast 4G net­work. As part of the ICT White Pa­per Pol­icy, govern­ment has pro­posed the es­tab­lish­ment of a wire­less open-ac­cess net­work (Woan), which is aimed at stim­u­lat­ing com­pe­ti­tion and re­mov­ing bar­ri­ers to en­try for new en­trants, es­pe­cially black en­trepreneurs and small to medium en­ter­prises.

The wire­less open ac­cess net­work com­pany will be al­lo­cated the lu­cra­tive spec­trum that will be partly leased to other com­pa­nies in­clud­ing mo­bile net­work op­er­a­tors. Cwele says given the cur­rent lev­els of in­vest­ment on the 4G net­work, the depart­ment will con­duct an ur­gent high-level study to de­ter­mine if Woan will utilise all high-de­mand spec­trum for the 4G net­work. The re­main­ing spec­trum will be li­censed to op­er­a­tors with ru­ral cov­er­age obli­ga­tions.

Anesu Charamba, pro­gramme man­ager for the Dig­i­tal Trans­for­ma­tion Prac­tice at Frost & Sul­li­van, says the move by the min­istry is ex­pected to al­lay any fears of a sig­nif­i­cant drop in op­er­a­tors’ in­fra­struc­ture in­vest­ment.

New tech­nol­ogy: Re­li­able broad­band net­works have led to a surge in smart phone sales and data us­age

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