Fibre investment growing in southern Africa as broadband demand increases

Thursday, 02 June 2011 09:34  |  James Barton

The demand for broadband services is growing steadily in the southern African markets. For this reason, major operators and ISPs are investing in undersea fibre as well as terrestrial fibre and other infrastructure, according to new data from Research & Markets. ISPs are targeting the business segment to achieve significant average revenue per user (ARPU) margins in the short term, but the revenue potential arising from serving the consumer market is attracting investments into mobile and wireless broadband technologies. Broadband service revenues are expected to contribute significantly to operator margins.

The demand for broadband services and the decline of wholesale bandwidth prices are expected to be the main drivers for the broadband market in the southern Africa market. The demand for bandwidth intensive applications and services that are available on the internet has been growing in the southern Africa market. Enterprise users (both large, corporate and SMEs) as well as consumers have adopted the internet as a major source of information and means of conducting business and communication.

High bandwidth costs remain a major constraint to the rapid growth of the broadband market. However, the landing of additional undersea cables has resulted in the decline of international wholesale bandwidth. Moreover, this has spurred significant investments into terrestrial fibre and wireless network infrastructure aimed at boosting network capacities, remarks the analyst. Increasing competition in the market is resulting in the decline of retail bandwidth prices, contributing to the steady growth of the broadband market.

The low penetration of fixed broadband infrastructure in the southern Africa market has resulted in high retail bandwidth prices. At the same time, the high cost of maintaining fixed lines translates to high charges for ADSL services. This factor is contributing to the slow growth in the adoption of ADSL as a primary broadband connection for enterprises and consumers. Leading operators and ISPs are deploying fibre in the last mile. However, the CAPEX involved in fibre deployments is significant and requires steady revenue to ensure ROI in a given timeframe. As a result, few enterprises will be connected by this technology in the short term. It is only when the penetration of ADSL and fibre reaches significant levels that the broadband market will achieve its full growth potential.

Significant investments in fixed as well as wireless broadband will enable operators and ISPs to benefit from the revenue potential of the southern Africa broadband market. They need to leverage on the earliest available opportunity to invest in broadband infrastructure and gain an edge over competition in the market. Moreover, broadband is an enabler for the delivery of next generation services to enterprise users and consumers. The growth of the broadband market will be accompanied with growth in data traffic. This will affect fixed, wireless and mobile networks. Reliable delivery of quality broadband services will be a key differentiator in a highly competitive market that will characterise the southern Africa region.

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