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Fibre revolution comes to townships

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The fibre-to-the-home revolution that has swept suburban South Africa is about to arrive in the country’s townships, writes ARTHUR GOLDSTUCK.

Fibre-to-the-home is this decade’s magic ingredient for high-speed, painless and unlimited Internet access. But, until now, it has been the province of the privileged. Only the more affluent suburbs of South Africa’s cities have been afforded the luxury of the dedicated optical fibre cables that typically run in trenches along leafy sidewalks.

That is about to change.

Vumatel, the company that sparked the FTTH revolution when it won a contract to supply fibre to the suburb of Parkhurst, is at it again. This time, it plans to connect the townships of South Africa. It has come up with a low-cost alternative to wiring dense suburbs, and intends to offer uncapped high-speed broadband for a mere R89 a month.

To put that in context, the average spend on a cellphone in lower socio-economic segments is typically around R100. Fibre, coupled with in-home Wi-Fi, can replace a large chunk of cellular spend by moving voice traffic from the mobile networks to voice over WhatsApp and Facebook Messenger, among other. All data use in the home would move off the expensive data services provided by the mobile operators.

With wide-scale roll-out, this could prove immensely damaging to the operators. More significantly and to the point, however, it could prove immensely beneficial to those who have previously been kept away from the largesse of high-speed, unlimited access.

The Vumatel service will offer a 100Mbps download and 10Mbps upload speed, which typically costs more than a R1000 a month in more affluent suburbs. How is it possible, then, to offer it at a mere R89 a month?

Only with a great deal of commitment to finding an affordable broadband solution for the mass-market.

“We think that the FTTH deployments as we and other operators are doing them are great for the country, because we are moving connectivity forward at a macro level,” says Vumatel CEO Niel Schoeman. “But it is clearly not addressing the information divide between the less fortunate and the leafy suburbs, and potentially exacerbates inequality in terms of information access.

“We’ve been trying to come up with a solution to address townships, to provide that abundance of information to residents of townships. We think we can do it by providing it at R89 a month for a 100Mbps uncapped service. We think that is fundamentally different to a 500MB data allocation on a prepaid service, which has been the only kind of option for connectivity.”

Vumatel will initially roll out the service in the Johannesburg township of Alexandra, with an estimated 400 000 residents in the target area.
“That is our township equivalent of the announcement that we were connecting Parkhurst. We’re going to give it a go between now and March.”

The question remains: how is such low cost possible on a business level?

On the surface, the answer lies in Vumatel’s October 2016 acquisition of Fibrehoods, a provider of aerial fibre similar to overhead telephone lines. However, that in itself would not cut the costs so radically. Until recently, Fibrehoods had also been serving wealthier suburbs.

“Clearly, to make that price point work, we need to work hard at the capital cost of deployment,” says Schoeman. “The topography of townships doesn’t lend itself to the typical buried, trenched solution, so we’ll use aerial fibre.

“The price is possible thanks to a combination of technologies , the potential number of customers per square kilometre, and the fact that it will also be potentially contended up to 20 times, meaning 20 customers will use the same 100Mbps line. So each customer is always guaranteed 5Mbps upward, but the probability of getting more like a 20Mbps service is high. Not everyone will be using the same line at the same time.”

Vumatel will also use its fibre to provide Wi-Fi in public spaces in the townships. This service will be possible, partly, thanks to corporate social investment from its 49% shareholder, Investec.
“We’ve looked at a broader Wi-Fi deployment model, but we don’t think it creates the abundance that closes the digital gap,” says Schoeman. “You can use the analogy of water: Wi-Fi hotspots create wells where people can collect water whereas, if you provide piped water to homes, you see people growing gardens and using it in an unlimited way. We want to go deep into every home, uncapped, at high speed, and see if we can make a difference.”

Unlike the suburban model, where Vumatel lays down the fibre and leaves it to Internet Service Providers to deliver access, it will initially provide access itself. It will piggyback on the Dark Fibre Africa grid that will link it to the broader Internet and undersea cables, but will acquire and distribute access and data services itself.
“We first want to see if we can make the model work rather than having to add additional margins for service providers. Our philosophy is always open access so, if it works, we will see if we can let service providers offere innovative services.”

Schoeman believes the eventual fibre market for all service providers will be as much as 35-million. He says it will be possible for Vumatel to bring fibre within reach of another 10-million people in the next couple of years, at a cost of between R2-billion and R3-billion.

“We want to see if we can kick off another catalyst event like Parkhurst, and start a storm: to see if we bring abundant connectivity to low income homes.”

  • Arthur Goldstuck is founder of World Wide Worx and editor-in-chief of Gadget.co.za. Follow him on Twitter and Instagram on @art2gee

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Gadget goes to Hollywood

Gadget visited the Netflix studios last week. In the first of a series, ARTHUR GOLDSTUCK talks to CEO Reed Hastings.

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Netflix CEO Reed Hastings is no stranger to Africa. He has travelled throughout South Africa, taught maths in Swaziland for two years with the Peace Corps, and visits close family in Maputo. As a result, he is keenly aware of the South African entertainment and connectivity landscape.

In an exclusive interview at the Netflix studios in Hollywood, Los Angeles, last week, he revealed that Netflix had no intentions of challenging MultiChoice’s dominance of live sports broadcasting on the continent.

“Other firms will do sport and news; we are trying to focus on movies and TV shows,” he said. “There are a lot of areas that are video that we are not doing: sports, news, video gaming, user-generated content. We don’t have live sport.

Reed Hastings at the Netflix studios in Hollywood last week. Pic: ADAM ROSE

“We’re not replacing MultiChoice at all. Their subscriber growth is steady in South Africa. They serve a need that’s independent of the Internet, via low-price satellite. There is no intention of capturing that audience. If they’re growing, it’s because they serve a need.”

While Reed ruled out any collaboration with MultiChoice on its satellite delivery platform, despite its collaboration with another pay-TV service, Sky TV in the United Kingdom, he did not close the door. He stressed that Netflix saw itself as an Internet-based service, and would pursue the opportunities offered by evolving broadband in Africa.

“If you look in other markets like the USA, how Comcast carries us on set-top boxes with their other services, it could happen with MultiChoice, the same as with all the pay-TV providers.

“We’re really focused on being a service over the Internet and not over satellite. Our service doesn’t work on satellite. Where we work with Sky is on Internet-connected devices. We’re happy to work on Internet-connected devices. We tend to work on smart TVs, but need broadband Internet for that.

“Broadband is getting faster in Nigeria, Tanzania, Kenya and South Africa – we can see the positive trendlines – so it’s more likely we will work with broadband Internet companies.”

Hastings is a firm believer in the idea that one content provider’s success does not depend on pushing another down.

“HBO has grown at the same time as we have, so can see our success doesn’t determine their success. What matters is amazing content with which the world falls in love.”

Click here to read on about Hastings’ views on international expansion, and how the streaming service selects content for its platform.

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Take these 5 steps to digital

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By MARK WALKER, Associate Vice President for Sub-Saharan Africa at IDC Middle East, Africa and Turkey.

Digital transformation isn’t a buzz word because it sounds nice and looks good on the business CV. It is fundamental to long-term business success. IDC anticipates that 75% of enterprises will be on the path to digital transformation by 2027. 

However, digital transformation is not a process that ticks a box and moves to the next item on the agenda – it is defined by the organisation’s shift towards a digitally empowered infrastructure and employee. It is an evolution across system, infrastructure, process, individual and leadership and should follow clear pathways to ensure sustainable success.

The nature of the enterprise has changed completely with the influence of digital, cloud and the Fourth Industrial Revolution (4IR), and success is reliant on strategic change.

There is a lot more ownership and transparency throughout the organisation and there is a responsibility that comes with that – employees want access to information, there has to be speed in knowledge, transactions and engagement. To ensure that the organisation evolves alongside digital and demand, it has to follow five very clear pathways to long-term, achievable success.

The first of these is to evaluate where the enterprise sits right now in terms of its digital journey. This will differ by organisation size and industry, as well as its reliance on technology. A smaller organisation that only needs a basic accounting function or the internet for email will have far different considerations to a small organisation that requires high-end technology to manage hedge funds or drive cloud solutions. The same comparisons apply to the enterprise-level organisation. The mining sector will have a completely different sub-set of technology requirements and infrastructure limitations to the retail or finance sectors.

Ultimately, every organisation, regardless of size or industry, is reliant on technology to grow or deliver customer service, but their digital transformation requirements are different. To ensure that investment into artificial intelligence (AI), machine learning, knowledge engines, automation and connectivity are accurately placed within the business and know exactly where the business is going.

The second step is to examine what the business wants to achieve. Again, the goals of the organisation over the long and short term will be entirely sector dependent, but it is essential that it examine what the competitive environment looks like and what influences customer expectations. This understanding will allow for the business to hone its digital requirements accordingly.

The third step is to match expectations to reality. You need to see how you can move your digital transformation strategy forward and what areas require prioritisation, what funding models will support your digital aspirations, and how this tie into what the market wants. Ultimately, every step of the process has to be prioritised to ensure it maps back to where you are and the strategic steps that will take you to where you want to go.

The fourth step is to look at the operational side of the process. This is as critical as any other aspect of the transformation strategy as it maps budget to skills to infrastructure in such a way as to ensure that any project delivers return on investment. Budget and funding are always top of mind when it comes to digital transformation – these are understandably key issues for the business. How will it benefit from the investment? How will it influence the customer experience? What impact will this have on the ongoing bottom line? These questions tie neatly into the fifth step in the process – the feedback loop.

This is often the forgotten step, but it is the most important. The feedback loop is critical to ensuring that the digital transformation process is achieving the right results, that the right metrics are in place, and that the needle is moving in the right direction. It is within this feedback loop that the organisation can consistently refine the process to ensure that it moves to each successive step with the right metrics in place.

There is also one final element that every organisation should have in place throughout its digital evolution. An element that many overlook – engagement. There must be a real desire to change, from the top of the organisation right down to the bottom, and an understanding of what it means to undertake this change and why it is essential. This is why this will be a key discussion at the 2019 IDC South Africa CIO Summit taking place in April this year. With this in place, the five steps to digital transformation will make sense and deliver the right results.

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