Disruption. You've heard the word before. It means times, they are a'changing – just quicker than before. But how can a low-to middle-income economy like South Africa use this hastening change to prosper?
Technological advances are increasing at an exponential pace, challenging and irrevocably changing the ecosystem that national economies use to compete with one another. The World Economic Forum calls this the 'Fourth Industrial Revolution'.
Knowledge-based economies adapt to a changing world
National economies that are based on knowledge, not agriculture or labour, navigate disruption better by reacting in a more holistic manner. This lets them ride the winds of change instead of falling victim to them.
Being able to transfer knowledge or intellectual capacity as a source of economic growth requires highly-skilled people readily accessing technology platforms, which enable new business models, said Chief Strategy Officer of Dark Fibre Africa, Reshaad Sha, during an interview with me.
Efficient internet enables more business models
The effect of these models pivot on the speed and reliability of the network used, and fibre is commonly considered the best network technology to handle the quickly growing data and speed demands. Fibre networks enable pulses of light along very thin strands of glass, as thick as a human hair, to transmit data.
Watch: What is the 4th industrial revolution?
The high capacity of speed and volume means that fibre can deliver data at significantly lower prices than what can be delivered over a wireless network, explained Reshaad. "Data prices are typically set per megabits per second (Mbps) and are influenced by the initial and ongoing costs of the networks. Fibre networks involve a higher upfront cost, while wireless networks have a higher operating cost. Fibre prices are typically less than 0.2c per gig," said fibre to the home specialist Juanita Clarke, CEO of theFTTH Council Africa, in response to my questions.
Fibre networks scale more efficiently
As data demand keeps climbing, Internet service providers (ISPs) who use fibre networks keep pace by simply upgrading the transmission hardware, Juanita explained. This relatively simple hardware upgrade means that the technology is able to scale far more efficiently than a wireless network where spectrum (frequency used to transmit data through radio waves) availability and a more fine-grained network maintenance and operating environment increases the complexity and cost of upgrades, agreed Reshaad.
"Once an area has been trenched, ducts laid and fibre blown through, the passive network is able to scale up to cope with increased bandwidth demands through just equipment upgrades, and not additional builds," he explained.
Installation costs mitigated, but competition increases
The installation expenses of a fibre network are onerous. However, according to Juanita, "The long-term business case still stacks up and companies are willing to make the investment. Having said that, this is not an industry to invest in if you are very risk averse. Depending on uptake, returns on investment can take longer, but in communities where uptake is greater than 40 percent, the business model makes sense. With this in mind, ISPs and operators naturally opted for areas where there is a high demand and better returns. We now see the move to lower LSM areas."
With about 80 percent of the cost of infrastructure in the trench, infrastructure sharing becomes attractive, but it needs to fit into an operator's overall strategy, Juanita said. "We have seen a mammoth increase in sharing taking place and a more coordinated manner of deployment amongst operators.
In Cape Town, that is often because the City has strictly enforced 'one trench' policies. Having said that, one has to consider technical issues such as redundancy – if you deploy all infrastructure in a single trench on a single route, this makes the network vulnerable. In addition, one has to keep in mind that sharing in the access (last mile) is more difficult as companies are closer to their customers (and want to protect their client-base from being poached)."
The benefits of connecting rural areas to broadband internet will attract the jobs, investment and social inclusion that enables smaller, more vulnerable communities to remain intact and become stronger as they connect with the rest of the world.
Leasing open access networks help service providers compete
"The open access model promotes a cost efficient and non-duplication approach to infrastructure deployment," Reshaad said. "This enables service providers and ISPs to take advantage of our (DFA) fibre infrastructure services to build their networks and deliver services, without the need for costly network build of the physical networks. DFA follow the open access, wholesale model, allowing service providers to buy connectivity from us at a significantly reduced cost than if they were to build the infrastructure themselves. This in turn impacts on the end-user connectivity cost, especially in the highly competitive service provider market."
As market forces compete to meet the growing demand for data, wholesale provider network operators will not be exempt from looking for more cost-efficient and appropriate ways of building, deploying and managing networks, Reshaad noted. As the market converges on the internet connectivity sector, profit margins at every link of the value chain are being squeezed, and the result is cheaper fibre-supplied internet to regular users. But, only5.3 percent of South Africans have access to a physical, fixed, broadband connection. The internet is by far first experienced via smartphone, with a national access rate of just more than 40 percent.
Plans to get SA universal internet access
So, if so few people are benefitting from the scale of benefit that fibre-fuelled internet access brings, what more can be done? "Wireless access networks are far more appropriate to deliver widely available and accessible coverage in low-income and peri-urban areas," Reshaad said. "However, fibre networks which provide the wireless site backhaul connectivity, make it possible for these areas to have accessibility to higher-speed wireless broadband services."
Each year the urgency of how South Africa can keep up with the Fourth Industrial Revolution increases, leading the South African government to publish, in late 2014, the national broadband policy known asSouth Africa Connect, with the goal of providing internet access to the homes of all citizens by 2030. The benefits of connecting rural areas to broadband internet will attract the jobs, investment and social inclusion that enables smaller, more vulnerable communities to remain intact and become stronger as they connect with the rest of the world, Reshaad said.
However, despite good policy, the state has been inactive. Already a year ago,analysts suggested that this inactivity and 'business as usual' approach will harm South Africa's ability to meet the urgent milestones required to enable South African residents to compete in the Fourth Industrial Revolution, and not fall victim to the winds of change.
What happens after access?
"Let's assume that (internet) services are universally available and affordable in South Africa. Would this mean that the masses of our population can access services?" challenged Reshaad. Digital literacy is as important as digital access to enable people to use the internet and so participate in the social and economic benefits of the digital economy (currently2.5 percent of national GDP). Concurrent to internet access becoming a reality to South Africans, we should also look at relevant services that will encourage people to use it, aspects of affordability such as data and device costs. "We have policies in place that encourage the development of local content, support the availability of low-cost devices and aim to increase digital literacy and capacity. Authorities can contribute by developing the detail in plans and programs in this regard, implementing them and making policy a reality," said Reshaad.
This article was originally published on Fin24 here.