IT and Telecoms: More Bandwidth, More Opportunity, More Growth
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While the prize for many in South Africa will be a lowering of broadband costs, the availability of greater broadband capacity and choice in the region will in fact have much further reaching consequences - it will create a new platform for economic growth, facilitating the establishment and
expansion of businesses, and opening up global markets.
In terms of pricing, expect a clear and sizable impact within nine to twelve months as preparation for video broadcast of the 2010 World Cup by local and international broadcasters gains momentum; the rollout of wired and wireless broadband by various operators to more Internet subscribers begins to tip the scales in terms of bulk pricing; and other, smaller players such as Wireless Internet Service Providers (WISPs) and Internet Service Providers begin to collectively negotiate better rates with wholesalers of broadband (who will in turn be driven by greater competition to lower prices).
Corporates, whose broadband bills are on average made up of least 25% international traffic, can expect a price drop of 10-30% on their total bills. For SMEs and those running home offices, the 15% of their total business cost that is usually taken up by their Internet or broadband connection may well drop to 10% or lower, increasing their ability to stay profitable.
The question is: when will we see this uptake in broadband and decrease in cost thereof? Issues such as the economic downturn have hindered uptake as well as customers that are bound by contracts with their service providers who have to wait until they can negotiate with a new supplier. In addition, the Seacom cable does not provide complete coverage of all regions (it covers most of the East coast of Africa) and the national backbones do not have the reach and capacity to extend the available bandwidth to all regions and remote areas.
A catalyst is required to spur the uptake of bandwidth which will have a knock-on effect of driving down costs. The 2010 Soccer World Cup is possibly one of the biggest events that South Africa will host and will surely create demand with the influx of international visitors. This will drive pricing down and in the wake of the event, more local businesses and individuals will start to avail of this service. Staying local but looking toward industry, the big drive by the South African government to attract BPO offshoring customers may now eventually come to fruition as one of the biggest challenges - the high price of international communications in South Africa -- fades. It will also open the BPO market to other countries in the region. However, landlocked African nations who were previously forced to route their international traffic through South Africa, and pay high prices, or use expensive satellite bandwidth, can now follow their own agenda's and attract BPO clients of their own.
With a cheaper way to communicate, there will be healthy competition and growth. This may well slowly change South Africa's status as the economic hub of sub-Saharan continent. The reputation of Africa as the 'Dark Continent' may also begin to erode as low connectivity is replaced by a hi-tech capability and a positive spiral is initiated in terms of e-commerce.
For many emerging economies, like Korea, Singapore and Malasia, hi-tech capabilities have proven the key to economic growth. In practical terms, greater bandwidth capacity at lower prices will make it easier for smaller African businesses and industries to enter, and begin to interact in global markets, representing their own direct interests for the first time.
Seacom may also stimulate the universal access ideals of government. Long standing initiatives to connect schools, clinics and government services, making them accessible to stakeholders and the public via the Internet, may well now begin to take shape anew. The greater availability and lower cost of bandwidth will also assist organisations that have been newly advantaged by the liberalisation of the telecom unications industry and those that have previously been disadvantaged by regulation and economic status. For example, organisations that have recently been granted licenses that allow them to self-provision - i.e., build out their own infrastructure -- will now be able to select who they enable, potentially assisting communities where communications infrastructure was simply not rolled out because the average revenue per user in that particular area did not merit investment by incumbent fixed and mobile operators.
Although the local market has approximately 400 new players that will have the option of building their own infrastructure, they still face the challenge of funding and skills. It is no small undertaking to roll out a network and those that have access to skills and finance will pioneer this new 'wave' of service providers. Until this happens, the situation remains the same with regards to under-serviced rural areas. In addition, there is some discussion to the effect that monies collected via the Universal Access Fund that have not been disbursed, may now be applied to enable organisations that have been granted Electronic Communication Network Services Licences (ECNS), facilitating the establishment of these service providers. Under-Serviced Area Licencees (USAL's) previously failed to get off the ground because the model on which they were built depended on the use of existing infrastructure from the incumbent fixed and mobile operators whose fees were too costly to support a viable business case.
For Spescom Telecommunications this is an exciting time. The company is able to support the growth of industry in a number of ways. It can assist existing players to roll out infrastructure to underserviced areas; help new players access funds and deploy infrastructure and services; provide consulting services; and plan the physical rollout of networks and maintenance services, facilitating the operations of service providers and enabling them to focus on their core business, serving their customers.
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