By Richard Cazalet
Africa is known as the continent that leapfrogged traditional landline technology to become the “mobile continent”. Today, 500 million Africans are online, mostly via mobile, at a connectivity rate of some 40%, but still far behind the global average of 70%.
Although expanding mobile coverage remains crucial, fibre networks play an important role in closing the connectivity gap. The initial investment to lay down fibre networks is significant, but fibre has excellent longevity and is less costly to upgrade and maintain over time.
Since 2009, the continent’s fibre network has expanded from 278 000km to over one million kilometres in 2019. South Africa is estimated to have more than 8.5 million broadband subscriptions at the end of September 2023, with 2.16 million of those being fibre connections.
Martin Creaner of the World Broadband Association notes: “We’ve been obsessed with mobile for the last 20 years and are now reaching the limitations of what mobile can achieve on its own. I think the focus for the next decade should be on fibre.”
For African telcos, there is a huge opportunity for growth, should the capital be available to continue to invest in rolling out this infrastructure.
In South Africa, Telkom is positioned as the backbone of the country’s digital economy with a significant national fibre footprint. Through Openserve, Telkom has a market-leading home connection rate of 49.7%, with 12% of its connected homes being in townships.
South Africa’s wholesale fixed access market is projected to grow at a 9.1% compound annual growth rate by 2027 and will soon outstrip mobile in terms of growth.
While South Africa is showing healthy progress, there is greater opportunity in the rest of the continent. Fibre to the home penetration in Africa is only 5% compared to the global average of 30%. The long-term growth potential on the continent is, therefore, immense.
Building this fibre infrastructure will help tackle some of the economic barriers for the continent and will encourage the inclusion of millions of Africans to participate in the global digital economy.
Designing a fibre network build to meet a specific price point can be massively effective in driving innovation across the value chain.
Telkom has transformed the way it rolls out fibre by reducing the fibre build costs by 30 – 40% in recent years. This has been achieved through new rollout methods, including a combination of aerial and trenched infrastructure. The improvements also came from optimised build processes, streamlined network design planning and deployment and a decrease in fibre equipment costs.
FTTH (fibre to the premises) rollout costs vary considerably. Costs are primarily influenced by property density as well as the average property size. The connectivity rate (percentage of homes connected in an area) is another key metric that influences the profitability of fibre networks.
Reducing overbuild, encouraging open-access fibre networks, and developing commercial models for infrastructure sharing are key. Overbuild leads to lower utilisation of infrastructure and lower returns on invested capital. There are valuable lessons to be learnt from Sweden, Germany, Canada and the UK, in terms of preventing overbuild both through regulation and by encouraging operator cooperation.
Africa Analysis estimates the continent needs to invest approximately $100 billion (R1.8 trillion) in core infrastructure and lay more than 500 000km of fibre cable by 2030 to support digital services.
Strategies are needed to keep more of this spend within the continent. Global fibre manufacturers could be encouraged to build plants locally, like the incentives to encourage local car manufacturing.
The success of mobile in Africa has been built on prepaid subscriptions, making up between 85-90% of all subscriptions. In addition, prepaid models have already been successful in providing electricity services.
New pricing models like prepaid or “pay-as-you-go” fibre bundles, which allow for cheaper and more flexible access, are already helping drive fixed broadband adoption. These models are expected to continue to grow.
Hybrid infrastructure solutions, which combine fibre and fixed wireless access for the last mile, are also growing in adoption and making this high-speed connectivity more accessible.
It is important to demonstrate the utility of these fibre investments. Traffic growth on fibre networks is largely driven by video traffic, such as streaming services. By leading with video-enabled digital education as an anchor use case, the benefits for fibre rollout to provide engaging education at both school level and the development of digital skills post-school, can be clearly understood by all.
Jobs
Research in South Africa shows that there is a 2.2% greater likelihood of a person being employed if they live within 500 metres of fibre networks and also finds correlations between rising broadband consumption and GDP growth.
Similar research in Kenya shows that for every million people living in a fibre-connected area, 25 000 more people tend to become employed in skilled occupations. The research illustrates how connectivity transforms not only job availability, but job quality too.
Although the scale of investment is daunting, with the World Bank confirming the estimate that $100bn will be required to achieve universal broadband access in Africa by 2030, opportunities exist to unlock significant support for investment in fibre infrastructure.
Agencies such the International Development Finance Corporation, the African Finance Corporation, and banks such as Standard Bank are prepared and willing to fund fibre projects with bankable business cases.
Achieving ubiquitous fixed broadband connectivity in Africa might be the continent’s greatest digital challenge and it may also be one of its most significant economic opportunities — and that’s certainly a prize worth pursuing.
Richard Cazalet is Executive for Strategy at Telkom and was part of panel at the AfricaCom 2024 conference discussing strategies for fibre expansion in Africa
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