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The broadband resolve

Jan 04 2011 12:49 Simon Dingle

Company Data

VODACOM GROUP LIMITED [JSE:VOD]

Last traded 127.20
Change 2.45
% Change 0.02
Cumulative volume 727449
Market cap 189.27bn

Last Updated: 22/07/2014 at 04:28. Prices are delayed by 15 minutes. Source: McGregor BFA

TELKOM SA SOC LIMITED [JSE:TKG]

Last traded 50.02
Change 1.84
% Change 0.04
Cumulative volume 1642640
Market cap 26.05bn

Last Updated: 22/07/2014 at 04:28. Prices are delayed by 15 minutes. Source: McGregor BFA

MTN GROUP LIMITED [JSE:MTN]

Last traded 224.99
Change 2.98
% Change 0.01
Cumulative volume 2496584
Market cap 416.21bn

Last Updated: 22/07/2014 at 04:28. Prices are delayed by 15 minutes. Source: McGregor BFA

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IT'S been a long time coming, but this year we are likely to see the resolution to South Africa's broadband woes taking shape.

By the time 2012 rolls around, SA should no longer be seen as a laggard in terms of global telecoms. A combination of international bandwidth arriving en masse and advances in domestic networks are set to take us there. Rejoice.

What will take longer to arrive is first world prices for internet access. While we are steadily approaching the kinds of connection speeds our friends in the USA and Europe enjoy on a daily basis, we are nowhere near obtaining it at reasonable prices.

At the time of writing, the theoretically fastest consumer internet connection in SA is available from Cell C.

At 21.6Mbps it is right up there with some of the best consumer connections available in Europe, barring a couple of exceptions. Of course, one will never experience the full line speed of a Cell C HSDPA+ connection. It would be more correct to expect speeds of about 5Mbps, that compare reasonably to Cell C's competitors.

A Telkom ADSL line, on the other hand, provides theoretical speeds of up to 10Mbps, depending on which of the company's exchanges customers find themselves on and the internet service provider they use. You are more likely to experience full-line speed on an ADSL connection than any of its wireless counterparts.

According to Speedtest.net, the fastest internet connections in the world are available in South Korea, where the average connection speed is 37Mbps. South Africa is 89th on the list, with an average speed of 3Mbps.

Sure, there are countries where 100Mbps, and even 1Gbps in the case of South Korea, connections are available to consumers. Bear in mind, however, that if you're in South Korea you are likely consuming 99% of your online content from within the country given the language barrier, whereas South Africans consume most of their content on servers in other countries, especially those hosted in North America.

The Speedtest.net lists also account only for lines that are actually tested, and most basic internet users will never do that, so we're really talking about upper middle class users here.

New Zealand would probably be a better country to compare SA to - and the kiwis are at number 51 on the list, with an average speed of almost 7Mbps.

All things considered, true speeds between 20Mbps and 30Mbps are very good by global standards, and they're around the corner in South Africa.

MTN Group [JSE:MTN] is in the process of implementing HSDPA+ technology that will provide speeds up to 48Mbps. Vodacom Group [JSE:VOD], Cell C and Telkom [JSE:TKG] are also implementing advances that will boost the speeds they make available to consumers.

ADSL is being left in the dust.

To support these faster technologies, South Africa needs better domestic networks. International bandwidth problems were solved, to a large degree, by the arrival of Seacom in 2008.

Prices per GB of international bandwidth have fallen to a level where providers now pay more to connect two points in South Africa than they do to connect to London. It sounds absurd because it is.

And we owe the domestic network situation to poor government foresight, in both South Africa's old and new political regimes.

Telkom's market monopoly and complacency in a market devoid of competitors created this situation.

The Altech court case in 2008 ushered in new policy, allowing other providers to establish domestic networks; we are now starting to see them finish off their own networks.

In the next year, companies like MTN and Vodacom will be able to rid themselves of Telkom once and for all with their own domestic networks in place.

National trenches shared by MTN, Vodacom and Neotel will also be filled with fibre connecting metro networks together into national loops.

The West African Cable System (WACS) will also finally reach the west coast of South Africa, bringing with it a further 5Gbps of bandwidth and increased competition that will drive down prices.

And price is the real concern. Broadband connections in SA are satisfactory and improving. But they are too expensive. An uncapped 4Mbps ADSL line in SA will set you back just short of R1 000 ($150) once line rental and ISP costs are factored in.

The cheapest country for internet access in the world is Japan, where a 61Mbps line costs around $17 per month. In France, an 18Mbps connection is $30. Australia compares more or less with America, where a 4.8Mbps connection will set you back about $15.

While there are countries in Europe, such as Poland and Portugal, where broadband connections are much pricier than their counterparts, none come close to being as expensive as South Africa.

But we have seen prices starting to come down, highlighting the ridiculousness of the situation before this all started happening.

Once infrastructure is bedded down, amortised to a reasonable degree and competition kicks in, prices will have to come down.

I don't see us dropping to first world levels when it comes to what we pay, although we certainly will get there in the next few years.

But I do foresee SA catching up with, and even overtaking, many of them in terms of line capability within the next year.

 - Fin24
mtn  |  cell c  |  vodacom  |  neotel  |  telkom  |  internet  |  broadband  |  adsl
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