Broadband costs too much - MTN

2011-11-10 22:44

Cape Town - Cable broadband penetration to businesses in South Africa is much better than the connections to private homes, but cost is still a significant factor, MTN has said.

"I don't think it's the penetration that's a concern, I think it's the cost or the perception that's it's expensive and I think that's probably more the debate than penetration from a pure South African perspective," Justin Colyn, general manager for Fixed Mobile Convergence at MTN Business told News24.

As an internet service provider, the company has been racing to roll out fibre cables in metropolitan areas to service customers, but because of the cost, has partnered with competitors.

"Everybody is laying fibre. When you go a municipality and you start negotiating rights and servitudes, they're saying: 'Listen here guys, we don't want six or 10 of you operators digging up the road 10 times. Why don't you  get together, talk, dig one hole and drop 10 colour pipes in there.'

"It makes sense. So I think that's more the association of the fibre side," he said about their partnership with Vodacom, speaking on the sidelines of the AfricaCom conference in Cape Town.


Revenue in the South African mobile market is focussed on data because it represents a higher income curve than voice, especially as smartphone and tablet adoption grow.

Traditional competitors like MTN and Vodacom are able to partner on broadband fibre cables, because the cost savings are significant.

The City of Cape Town recently revealed to News24 that 80% of its cost to provide a fibre broadband infrastructure was in the labour required to physically install the cables.

Colyn said that in the early days of the mobile industry in SA, the competitive advantage was coverage, but that this has evolved to data and throughput.

"Competitive advantage today is not coverage any more. Fibre, to a large extent, because it’s more invasive in terms of the process to lay fibre, it makes sense to do it together. It helps with the costs, but it also doesn't take away any competitiveness."

Operators don't compromise the competition between them because they have individual strategies to create "last mile" connections from the networks to homes or business premises.

"It does cost money to lay the core fibre highway, if you want to call it that, through the major nodes and then there is a cost to connect a building or end user or their customer premises to the fibre ring," Colyn said.


He said that MTN was more concerned with services they could provide customers than only providing the data connection to the internet.

"At the end of the day, we want to add value-added services on top of that; that's where we're going to make our money."

Colyn rejected suggestions that the services were being cross-subsidised at MTN. He said that each unit operated independently and customers had a choice in how they utilised the service from MTN in order to save money.

"There’s no cross-subsidisation. We as MTN - just in the nature of our business and of who we are - do not use cross-subsidisation. One the one hand there's the mobile side deemed to be dominant to a large extent, but on the other hand we're not dominant."

MTN Business offers customers a "converged" service that includes voice and data so that particularly business customers can secure savings and the ease of use in dealing with one service provider.

"So we've got to make sure that within the regulatory framework in South Africa, we build our business and supply services to our customers. And customers do understand that to a certain extent, although sometimes it doesn't make sense."

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