MTN’s announcement on Wednesday night that it has launched a commercial pilot of fibre-to-the-home (FTTH) can be only one of two things…. It could be the catalyst for an arms race among (especially mobile) operators to get ultra-fast internet into as many high-density residential sites in metros as is practical in the next 12 to 18 months. Or it could be a non-event – trumped up to be something its not – which will be all but forgotten by mid-year.
Again, it’s telling that it’s MTN making the first move. Firmly on the back foot following its spectacular loss of prepaid customers (and the subsequent management changes) last year, it seems to have a renewed vigour in South Africa. Also, this official announcement comes days after murmurs surfaced that Vodacom is targeting a fibre-to-the-home rollout – which is reminiscent of the 3G/HSDPA/LTE space race from the past decade. (Also, both Vodacom and Neotel are on the record as saying that one of the motivations for the deal which will see Big Red buy the second national operator is the latter’s experience in and footprint of fibre nationally).
MTN’s pilot itself is modest. The official launch on June 1 at Monaghan Farm, a new eco-estate bordering Lanseria International Airport, is hardly equivalent to blanketing a high-density residential area like Fourways. But, early signs are promising – 60% of Monaghan residents have signed up. That’s probably not hundreds of residents (again, this isn’t a massive area), but it’s probably not a handful either. For now, MTN is relying solely on demand to drive the rollout of FTTH, with pricing “negotiated on a case-by-case basis” and speeds of between 10Mbps and 100Mbps.
So why are mobile operators in a position to do this to begin with? Simply, after five years of self-provisioning – where operators have been linking up their base stations on fibre networks – the building blocks are firmly in place. More than two-thirds of its total number of base stations, and practically all 3G base stations are connected on Vodacom’s fibre backbone (a significant part of which is via partner Dark Fibre Africa). That’s well over 6 000 towers. MTN has a proportionally similar number connected on its backbone. Add the two operators together and that’s thousands of kilometers of fibre within metro areas. As Vodacom chief executive Shameel Joosub explained to me in November: “Whilst we’re doing that we might as well… connect the housing estates, the densely populated areas and the businesses along the way.”
It’s an indictment on Telkom – which for decades has had a de facto legislated monopoly on fixed-line residential services – that mobile operators are taking up the slack and providing services that Telkom should’ve been providing five years ago! Yes, under Sipho Maseko’s new management team, Telkom’s made significant progress. But it’s still horribly preoccupied with its legacy ADSL network, preferring to roll out its 20Mbps and 40Mbps VDSL services. MyBroadband reported in January that there are probably just over 500 VDSL users across South Africa, a shockingly low number. What’s that saying about fiddling while Rome burns?
There are a handful of niche fibre-to-the-home players attempting to blanket certain areas (like Umhlanga and selected suburbs in Pretoria), but they simply lack the scale necessary to deploy these services to tens of thousands or hundreds of thousands of customers. That’s going to be left to the big guns.
Pricing of FTTH services remains a mystery. However, it’s extremely unlikely that providers will price this into the thousands of rands a month. With a decent-size estate, the economies of scale are there to get the price down to a level that’s competitive with uncapped high-speed ADSL products. Afrihost’s 40Mbps uncapped service (obviously dependent on areas where Telkom’s rolled out VDSL) is R1397 per month. I wouldn’t expect prices of middle-of-the-range fibre services to be out of line with this at all. In fact, we could very well see pricing sub-R1 000.
We’re not going to see a big bang here though. Yes, there’s a lot of fibre in the ground but we’re probably not going to see entire suburbs of sprawling complexes (where all the density is) wired up overnight. But, in a year or two’s time, fibre connectivity will probably be a factor when shopping for a place to live, especially among higher-income South Africans.
So, is this a catalyst or something that will peter out into nothing? My bet’s on the former.
* Hilton Tarrant contributes to ‘Broadband’, a column on Moneyweb covering the ICT sector in South Africa.