The cost of broadband in South Africa

The wholesale cost of international internet bandwidth in South Africa has collapsed by more than 95% since the monopoly on submarine fibre optic cables ended a few years ago. With now five such cables serving the country and several more planned to go online with even more terabit capacity in the next few years, these prices should come down even further.

While retail prices for broadband services have also come down, the changes have been less dramatic, only about 70% during the same time period. So there is still room for downward price pressure on the retail level.

The other elements in the value chain that determine the retail price level, apart from the international access, are the domestic bandwidth market on the one hand, and the local access networks on the other.

The market for domestic bandwidth is taking longer to become more competitive, because it takes the alternative carriers longer to build the backbone networks needed to take the international bandwidth from the cable landing stations on the coast to the population centres around the country. But major projects are now nearing completion, first and foremost a national fibre backbone rollout by a consortium comprising the second national operator (SNO) Neotel and the country’s leading mobile operators, Vodacom and MTN, which is expected to produce billions in savings by bypassing the infrastructure of the fixed-line incumbent, Telkom SA.

On the local access level, Telkom’s ADSL service is losing relevance because of the relatively low fixed-line penetration, but wireless and mobile broadband offerings have been held back by delays with the licensing of suitable frequency spectrum. There is particular interest in the 2.6 and 3.5GHz bands that are suitable for WiMAX and LTE services, but also in the ‘digital dividend’ 800MHz spectrum, and some service providers have gone as high as 28GHz to find vacant spectrum they can use for the provision of wireless broadband services.

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