SA internet ‘turnaround has begun’

8 December 2008

South Africa’s internet user base has seen its highest rate of growth since 2001, increasing by 12.5% to 4.5-million over the past year, according to the Internet Access in South Africa 2008 study by local internet research firm World Wide Worx.

The study was backed by US-based Cisco Systems, and the findings were released during the Networkers at Cisco Live! conference in Johannesburg last week.

“The increase comes on the eve of the biggest shake-up in South African internet access we’ve seen since the dawn of the commercial internet in 1994,” World Wide Worx MD Arthur Goldstuck said in a statement last week.

“It is only the beginning of a dramatic turnaround, and is occurring despite numerous obstacles in the way of growth.”

Restrictive regulator environment

Delegates at the conference heard that one of the obstacles was a highly restrictive regulatory environment, with the Minister of Communications only deciding late in the year not to oppose a court ruling allowing all network operators to supply their own telecommunication infrastructure.

“We believe these changes will lead to sufficient levels of competition, increase access to internet usage and, in turn, increase global competitiveness and economic diversity,” Cisco Internet Business Solutions senior manager Reshaad Ahmed said, adding that the evolution and changes in the local telecoms industry could not have come at a better time.

“South Africa could, potentially, go from five major service providers to more than 300 overnight,” said Ahmed. “The combination of new licensees, policy directions, and municipality networks has set the stage for a highly competitive telecommunications marketplace, with consumers and businesses leading the charge toward choice, competition, and fair market value.”

Goldstuck describes the minister’s decision as a pivotal moment, but one that should have occurred four years ago: “In that time we saw growth slow to a near standstill, and the possibility of bringing access to underserviced area becoming ever more remote.

“But the market has been anticipating this change, and numerous small, semi-legal networks have sprung up around the country in the past year,” Goldstuck said. “Many of these should emerge above the radar with their new licences, along with new entrants into the market.”

SMEs go broadband

The Internet Access in SA 2008 report shows that growth has come largely on the back of dramatic take-up of broadband offerings by small businesses, which alone accounted for half of the growth in the market, mainly through connecting office staff to their ADSL links.

At the same time, the market as a whole has seen a continued dramatic shift from dial-up connections to broadband, with growth in both ADSL and 3G at more than 50%.

‘Death of dial-up’

Goldstuck said that one could see the emergence of a broadband culture in South Africa, held back only by the restrictions still placed on data capacity – which should start becoming a non-issue by the middle of 2009, when a new undersea fibre-optic cable enters operation.

“At that point, dial-up will effectively be dead as a connectivity option – it is more expensive, and utterly inappropriate to the changing nature of the internet,” he said. “Once everyone who is connected is on broadband or high-speed networks, the internet will come into its own as an environment for business collaboration and personal interaction.”

Seacom cable

The Seacom undersea cable, commissioned mainly by new market entrant Neotel, will increase South Africa’s international bandwidth 40-fold, and will mark the beginning of what World Wide Worx describes as a seismic shift in the internet landscape in Africa.

But it is only one of a series of new cables in the works, which will make the connectivity landscape completely unrecognisable for both South Africa and the rest of the continent by 2013.

“It spells the birth of an entirely new industry, and we are already seeing the market champing at the bit to become part of that industry,” Goldstuck said.

Encouraging new services

Cisco warns that change won’t happen overnight, however, with only some of the 300-plus contenders being in a position to manage their own networks, due to their ability to raise the necessary capital.

Those that do take up the challenge will need to spend a significant amount of time building a business model that will be sustainable, innovative, and takes advantage of the strategic position with which a contender is faced, while employing the capabilities of existing service providers.

“We are therefore pleased with the findings, as they indicate a positive trend for economic growth – we belive that pervasive broadband at the right price is a key enabler for economic prosperity,” Ahmed said.

“It is imperative for all relevant stakeholders to drive broadband to encourage new services: skills, education, business interaction, and lowering the cost of doing business.”

SAinfo reporter

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