New and cheaper international fibre bandwidth this year and next will combine to deliver plentiful and cheap bandwidth to both business and individual users.
The key issue for the continent is whether the operators buying the bandwidth will sell it to their customers at much cheaper prices. If operators pass on these savings to their customers, then the individual user market (in the home and through mobiles) will grow rapidly, according to Balancing Acts Forecasts.
However, without this happening, growth in the broadband market will be marginal.
The biggest driver of bandwidth growth is broadband connectivity. Although voice demand is growing as prices fall, most of the new demand has been compressed, therefore using more or less the same capacity.
With only modest annual price erosion on retail broadband prices, broadband penetration will only grow marginally. With a "step-change" in broadband pricing where operators pursue a "low price, high volume" strategy, penetration in individual countries will increase by between 0.2% to 3.8%.
The difference in the overall subscriber numbers between these two scenarios is enormous: a "low price, high volume" strategy produces almost five times as many subscribers as the much more cautious approach of sticking with high prices.
One of the key drivers of broadband growth will be Pay-As-You-Go (PAYG) fixed and mobile Internet. At present, mobile broadband is still quite limited in terms of price and availability, but making higher capacity data available on a PAYG basis immediately lowers the entry barrier of a monthly subscription price and will stimulate casual and low volume usage.
The international fibre projects scheduled to land in Africa in 2009 and 2010 are as follows:
* The privately-funded Seacom and Kenyan Government-initiated TEAMS projects are scheduled for completion in Q2 of this year. These will connect Kenya, Tanzania, Uganda, Rwanda, Mozambique and South Africa with other countries following as their overland routes are completed.
* The World Bank-backed EASSy project will be completed in 2010 and will connect more inland countries to its coastal landing stations.
* On the western side of the continent, the current monopoly international fibre cable SAT3 will have new competitors later this year. The long-delayed completion of the Nigerian cable from Globacom will take place later this year with initial connections to Ghana and Nigeria.
* However, the biggest impact on prices is likely to come from another Nigerian cable called Main One being built by Mainstreet Technologies. Its planned completion date is May 2010 and it has gone from being a rank outsider to a more likely player. It has already signed a contract with its contractor Tyco and has publicly promised $200 per mbps per month to high volume buyers.
* The South African competitor to these two Nigerian cables is called the West African Cable System: It has all the large players in the telecoms sector of South Africa involved (MTN, Neotel, Telkom and Vodacom/Vodafone) and the backing of the South African government. It had hoped to be complete for the World Cup in 2010 but this looks unlikely.
* The other likely competitive contender is France Telecom's ACE cable which it will roll out with 14 other operators. This 12 000 km cable, called ACE (Africa Coast to Europe), will extend from Gabon to France, and from 2011 will connect Gabon, Cameroon, Nigeria, Benin, Togo, Ghana, Ivory Coast, Liberia, Sierra Leone, Guinea, Guinea Bissau, Senegal, Gambia, Cape Verde, Mauritania, Morocco, Spain, Portugal and France. An extension to South Africa is also being studied.
There are also a number of other projects like the Infinity cable project that are still seeking finance. In addition, a company backed by Google, HSBC and Liberty Media called O3B will launch a constellation of low-orbit satellites in late 2010. These will also provide capacity to operators at prices comparable to the new fibre cables.
According to Russell Southwood, one of the authors of the Balancing Act Voice and Data Forecasts: "Individual broadband subscribers in Africa will grow substantially in number if the operators adopt a 'low price, high volume' strategy. A combination of the reach of existing networks, existing individual communications spend and the impact of lowering barriers to use through Pay-As-Go approaches all point in this direction."