A new player in the telecommunications market promises to level the playing field for smaller ISPs, which should lead to dramatically lower data costs to South African businesses and consumers.
Launching today, Africa Independent Network Exchange (Africa.inx) is in the process of building up a competitive network that will allow it to reseller capacity to the smaller players at rates of up to 50% less than they are currently paying.
Africa.inx strategic director Mike Brierly explains that, while there are at least 350 to 400 ISPs registered to operate in South Africa, 95% of the market is still dominated by a handful of big players – or what he terms the "gorillas".
"There was just Telkom, then the cellular operators, then Neotel – it really is a boys' club," he says. "There may be about 400 licence operators, but there are only about 10 that matter."
One of the biggest challenges facing South African connectivity, he adds, is not capacity but price. In fact, he says the entire market still uses only 25% of the SAT-3 capacity.
"There's lots of capacity," Brierley says. "Currently, supply exceeds demands."
Prices have already started dropping, with Seacom already reducing its rates and preliminary pricing from EASSy promising a further 30% drop – but small operators are still constrained.
"In this market, the smalles unit an operator can buy is STM-1 – or 155Mbps – with the same capacity the only upgrade option. This is too big for a smaller ISP."
Another issue that is helping to keep small ISPs in thrall to their larger competitors is the fact that South Africa has a very poor history of peering, Brierley points out. With JINX and CINX accounting for just 5% of traffic, the balance is through direct peering agreements between the big players – once again cutting the smaller operators out of the loop.
Good news for local operators, however, is the plethora of fibre that has been installed in the country over the last 18 months, largely doing away with the need for ATM or Diginet connections at all.
Brierley believes the telecommunications market is at a tipping point now, and is poised to grow at rates of 50% per year for the forseeable future.
Africa.inx describes itself as a wholesale ISP, and believes it is the first and only independent network exchange in South Africa.
Running fibre ring networks in Johannesburg Cape Town and London, with links into the network-independent Teraco data centre, the company is committed to buying up bandwidth at the most favourable bulk prices and reselling it to smaller resellers in increments they can use at a fraction of the price they are paying now.
"We are a completely independent operator, with no links to any existing telco at all," says CEO Eduard du Plessis.
"We are trying to level the playing field and give smaller ISPs the same low cost of entry into the Internet that is currently enjoyed by the Tier One ISPs."
Not only will Africa.inx supply bandwidth at extremely competitive rates, it will also enable smaller ISPs to peer effectively, on both a local and international level.
Du Plessis has given customers a guarantee that there will be no "sweetheart" pricing deals, but that every customer will be offered the same rate – to the extent that if the price is dropped for one customer, it will drop for all.
The Africa.inx network will be ready for testing from February 2010 and will go live on 1 March 2010.