THE BIG FIBRE PUSH IN SOUTH AFRICA

Niel Schoeman Vumatel CEO

Everyone wants it, but only a privileged few can get it – that’s been the status of consumer and business fibre access in South Africa in the recent past. Companies like Vumatel and Vox, however, are leading the charge in ensuring this changes and have made inroads into expanding their fibre networks in the country.

Both Vumatel and Vox have made big plays in the fibre market in recent months. Vumatel acquired Durbanbased fibre-to-the-home company Estate Connexions in March, following its acquisition of Fibrehoods in October 2016. Vox announced in April its shareholders had approved a R550-million investment to expand its fibre network, through subsidiary Frogfoot Networks, and bolster job creation. Vox CEO Jacques du Toit said the bulk of the investment will be used on its fibre-tothe-home and fibre-to-the-business programme.

Vox and Vumatel provide services to consumer and business clients, with small and medium enterprises next in line to benefit from the continued roll out of fibre.

The future of fibre

Vumatel CEO Niel Schoeman told Mybroadband that fibre network expansion to most large corporates in South Africa has already taken place, particularly in the metropolitan areas and business precincts, with the SME market next in line for business fibre.

“I believe that as FTTH deployments become more prevalent and metropolitan networks densify, the SME market will be addressed in the near term,” said Schoeman.

Du Toit echoed these sentiments, stating that the traditional fibre roll-out strategy had always been to target corporates and anchor tenants, which bring a quicker return on investment compared to small businesses.

“However, over the last two years, with more fibre being rolled out than ever, the SME market offers very attractive returns. The focus now is to sell as many endpoints within a given area with the majority of customers being SMES,” said du Toit . Fibre access in major metropolitan centres in South Africa will continue to expand, said Schoeman, and he believes that cities will be “fully fibred” within the next 24 months.

“From there, the challenge will be to get fibre to the smaller towns and further-flung areas of the country,” he said.

Both Vumatel and Vox hold the view that while fibre networks will continue to grow, it is unlikely there will be more entrants into the market.

“We don’t believe that we will see many more entrants into this space than there are currently, but rather a refocusing along with increased spending from the existing players, and at some point, definitely a consolidation,” said du Toit. Schoeman said new or recent entrants will find it “very difficult to reach sufficient scale to justify the magnitude of the capital investment required” and will be forced to consolidate with other fibre players.

“Therefore, the number of competitors will stabilise in the short term and a wave of consolidation will occur over the next 18 months,” he said.

1Gbps lines and huge data caps

The ideal situation for many consumers and businesses is a high-speed fibre line with a large data cap at a reasonable price – along with uninterrupted uptime and guaranteed throughput.

While this may sound like a lofty idea – particularly to those who only have access to slower DSL services – Vox and Vumatel offer high-end packages which can meet the needs of demanding clients.

Vumatel said it already provides 1Gbps connections to home users and there is a “real opportunity for the business market ISPS to leapfrog their competitors and provide these services today”.

Du Toit said he estimates that the average speed for businesses currently connected to fibre is 20Mbps, which will not rise at the same rate as new residential fibre connections being deployed. He added that it will “still be a couple years” before 500Mbps or 1Gbps connections become standard for every business in the country.

There are various challenges fibre players and Internet service providers face in bringing fast, affordable fibre access to clients, including the capital-intensive nature of fibre network deployment.

“The roll out of any infrastructure is very costly and investors must take a long-term return on investment. Not only does it cost money to install infrastructure in the last mile, but ISPS then need to consider the cost of equipment and backhaul,” said Schoeman.

“Depending on how far a property is from a centralised data centre in a major metro, these costs can become prohibitively expensive. As the market becomes more competitive and more saturated, we should see these prices start to come down,” he said.

Du Toit added that for fibre players to remain competitive in the market, they must conquer the challenge of providing value over and above the basic line and data service they provide.

“The reliability of fibre and the decrease in data costs is starting to level the playing field a bit and providers are having to offer additional services and value to remain competitive,” said du Toit. ■