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Executive Summary
Internet Access in South Africa 2010
Overview Of 2009
The year 2009 saw, only for the second time since 2002, the Internet user base grow at a double-digit rate.
Two major factors are still pushing substantial commercial investment in Internet infrastructure, namely:
- Broadband services coming of age.
- The number of Internet users with more than five years’ experience driving new demands on Internet infrastructure.
With regard to the uptake of broadband, this report delves deeper into the phenomenon known as the Experience Curve. This is a model that shows that advanced Internet applications, from online retail to social media, are only embraced after a user has been online for, on average, five years. The model has significant implications for cellphone and television access to the Internet.
The Experience Curve indicates the next boom in Internet application usage, following a mini-boom in 2006-2008, will occur from 2012/13 onward. This process is explored in detail in the course of the report.
SA Internet growth accelerates
The number of South African Internet users has passed the 5-million mark for the first time at the end of 2009, finally breaking through the 10% mark in Internet penetration for the country.This is the key finding of the Internet Access in South Africa 2010 study, conducted by World Wide Worx and jointly sponsored by Cisco. The data shows that the Internet user base grew by 15% in 2009, from 4,6-million to 5,3-million, and is expected to grow at a similar rate in 2010.
“The good news is that we will continue to see strong growth in 2010, and we should reach the 6-million mark by the end of the year,” says Arthur Goldstuck, MD of World Wide Worx
“A sustained growth in Internet penetration is a key factor that will positively influence the economy of South Africa”, says Reshaad Sha, Senior Manager for Cisco Internet Business Solutions Group. “The varied range of application services and social networking platforms used by local consumers has fuelled the uptake that we see today.”
Growth in the number of Internet users in South Africa was relatively stagnant from 2002 to 2007, when it never rose above 7%. However, this rate almost doubled in 2008, and continued accelerating in 2009.
World Wide Worx found that the landing of a new undersea cable on the South African coast was only one of a range of factors behind the growth. Of greater significance was the granting of Electronic Communications Network Service licenses to more than 400 organisations. This meant that service providers that were previously required to buy their network access from one of the major providers, could now build their own networks or choose where they wanted to buy their access.
The result was that a market previously characterised by a limited range of providers and services suddenly exploded as small providers were able to repackage the services provided by the large telecommunications corporations in any way they wished. The large providers, in turn, began to offer far more competitive packages to both customers and resellers.
World Wide Worx found that a second key factor in growth over the past two years has been the continued uptake of broadband connectivity by small and medium enterprises migrating from dial-up connectivity. Each company moving from dial-up to ADSL, for example, extended Internet access to general office staff. This process was found to add an additional one to 20 new users to the Internet user base for every small business installing ADSL.
While the headline findings examine the general numbers of users, the final Internet Access in SA 2010 report highlights the extent of new fibre-optic networks laid down across South African cities and between the cities. It also examines the impact of the range of new undersea cables that will be in place by the end of 2011, and which is expected to enhance competitiveness even further.
“In the coming year, operators will begin to leverage the combination of new undersea cable capacity and new fibre-optic networks to supply corporate clients and resellers with bigger, faster and more flexible capacity,” says Goldstuck. “Almost every large player in the communications industry has realigned its business to take advantage of this relentless change.”
“South African consumers and businesses are demanding access to online applications and services that can only be experienced via high speed connectivity, such as fibre-optic networks. The year ahead will see the proliferation of high speed connectivity materialising more widely than ever before”, concludes Sha.
A ten-year outlook
On 20 April 2010, the Minister of Communications Siphiwe Nyanda made a bold statement to Parliament. In his Departmental budget speech, he declared that South Africans will enjoy universal access to broadband by 2019:
"We have finalised the broadband policy whose vision is to ensure that South Africans have universal access and services to broadband by 2019.The benefits accruing from the policy will include the provision of multimedia and e-government throughout the country.
“The implementation of the broadband policy will impact on the growth of the economy through expanding markets, increasing business efficiency and promoting competition. South Africans will be able to see a single face of government and be able to connect with all levels of government and different departments using a single platform. ICT offers a possibility of e-government where government offers a seamless and integrated platform for interaction.”
However, he did not make clear how this vision would be achieved, beyond ensuring that all issues and regulations still before the regulator, Icasa, would be resolved in the coming year. As this report shows, a goal of universal access by 2019 is both highly admirable and deeply ambitious. It is anticipated that South Africa will enjoy around 20% penetration by 2014. Should the current rate of growth of around 15% a year continue for the next decade, it is possible penetration could approach the 50% mark. In summary, bold, ambitious strategies, backed by vigorous Government support across all Departments and by Cabinet, with clear deliverables and transparent processes, will be required to achieve anything close to universal access.
Table of contents
1.EXECUTIVE SUMMARY6
Overview Of 20096
SA Internet growth accelerates6
2.METHODOLOGY9
3.CHANGING LANDSCAPE11
The ISPs and ASPs11
How South Africa’s ISPs Connect13
The SEACOM connection20
4.THE IMPACT OF NEW UNDERSEA CABLES23
The new cables connecting Africa24
SAT3/SAFE24
Atlantis-225
SEACOM26
TEAMs (The East African Marine System)27
EASSy28
WACS (West African Cable System)33
WACS and pricing impact35
MainOne36
ACE (Africa Coast to Europe)38
GLO-1 (Globacom)40
LION optical fiber submarine cable system42
Infinity (Project West Africa)44
FLAG NGN System-245
Maroc Telecom West Africa Cable46
North African Cable Systems46
Regional Cables47
The Big Picture47
5.THE FIBER OPTIC CONNECTION49
What is Fiber optic cable?52
The Rise of Metro Fiber in South Africa53
Municipal Broadband56
Knysna58
Durban62
Johannesburg64
Cape Town67
The municipal broadband future69
6.BROADBAND IN SOUTH AFRICA70
The Broadband Operators70
The Broadband Technologies71
ADSL71
3G71
GPRS72
EDGE72
WiMAX72
LTE72
PLT73
7.THE BROADBAND PROVIDERS75
a)Telkom ADSL75
Pricing77
The Impact of ADSL on SMEs79
ADSL Penetration by Sector80
Penetration of ADSL by Company Size82
Internet Access numbers at SMEs82
b)Neotel84
Home users84
Home office84
Small business solutions85
Medium Business solutions85
Large business solutions85
Neotel|Wholesale85
c)Vodacom 3G86
Vodacom’s Data success story86
d)MTN 3G87
e)iBurst92
iBurst and ADSL-294
The Broadband totals96
Broadband Users vs Broadband Subscriptions99
Understanding the segmentation of broadband users102
Pricing of Broadband data usage102
8.THE DIAL-UP MARKET113
Dial-up Growth Trends114
Dial-up as primary form of access114
Dial-up Growth and Decline116
9.THE CORPORATE MARKET119
Overview119
Telkom’s Role in Leased Lines119
Total Leased Line Connectivity Supplied By ISPs120
10.ACADEMIC ACCESS123
Schools and University Access123
Gauteng Online123
SchoolNet South Africa123
2,010 for 2010124
Project Khanya125
Universities Access129
TENET’s move from Telkom to SEACOM129
The limitations of GEN2 (Telkom) and GEN3129
Behind GEN3131
TENET and the SEACOM cable131
The cost breakdown132
Academic User Numbers133
Academic Users and Percentage Growth134
11.TOTAL NUMBERS135
Overall Market Size135
Current Market Size136
Projected Market Size137
User Growth and The Experience Curve138
APPENDIX A: HISTORY OF THE ISP IN SA142
When It Began142
How Did It Work?142
How South Africa Came On Board144
What They Don’t Teach in Computer Science144
Open For Business148
Meanwhile, Back at the Web150
CONTACT153
ABOUT WORLD WIDE WORX154
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