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South Africa Nearing Broadband Tipping Point

BMI -TechKnoweldge has released its latest report, in which it has upwardly revised its previous forecasts for the South African broadband market. While ADSL is still expected to lead the way in terms of revenue growth, much of the new growth in terms of subscriber numbers is expected to come from wireless connectivity.

By comparison with developed nations, very few of South Africa's BSP current offerings are considered true broadband, however, BMI -T does expect the specifications of all the major players offerings to be progressively upgraded over the forecast period. The BMI -T revised outlook recognizes that a tipping point has been reached in respect of growing subscriber demand, as competition intensifies and broadband prices continue to fall.

Increased competition has come even more intensively than previously forecast from the mobile phone operators, particularly Vodacom and MTN, which have rolled out HSDPA ahead of the previously forecast schedule, and have demonstrated the huge interest that high-end customers have in their mobile internet offerings.

As Telkom continues to upgrade its DSL services to higher speeds at cheaper prices, all signs now indicate that its roll-out cannot keep up with the latent demand. BMI -T expects there to be nearly 2 million PC broadband connections by 2010, although the overall definition of 'broadband' used in this case is a generous one, including all connection speeds.

Despite this higher growth forecast, the more aggressive pricing dynamics results in revenue growth forecasts that are almost the same as the previous ones. What does this mean for South Africa in terms of its global competitiveness? A substantial improvement in broadband penetration will result, although most of this is still a process of catching up with the rest of the world.

The government's ambitious service goal of a 5 percent population penetration will not be reached at this rate, but at 2 million connections they would in fact achieve close to 4 percent of a population of 50 million people in 2010. This would be a significant achievement, especially considering South Africa had a 0.2 percent broadband penetration at the beginning of 2005.

Overall internet usage penetration within the entire population would, however, not go up significantly, because most of the growth in connections will be from the same high-end users. In fact, many will have more than one connection -- one in their notebook PC for mobility and another one at home or at the office.

BMI -T also expects that, by 2010, South Africa will have more than 40 million gross mobile subscribers, with the majority of them having Edge or higher specification phones, of which more than 11 million will be 3G technologies. Nearly 5 million GSM/3G phones could be dual-mode Wi-Fi capable by this time, thus hastening the trend towards an early form of fixed mobile convergence.

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