FTTH and FTTB in Africa

Fibre broadband connectivity has been much talked about in many markets in Africa over the past few years. It is touted as required infrastructure for the next generation of services both in the business and residential markets – from operating out of the cloud by small and medium sized businesses (SMEs) to eGovernment services to future household entertainment (streaming content).

Factors limiting fibre growth

Yet, with the exception of a few countries, the growth of fibre access networks has been very limited in across most of the African continent. This can be ascribed to a number of factors, including:

  • Cost of fibre infrastructure deployment – This remains quite high in many markets and makes for a difficult business case, given the service adoption rates (although aerial fibre deployment is less expensive). It is less expensive to build wireless networks.
  • Cost of infrastructure maintenance – Once a fibre network has been built, the cost of maintenance and repairs can also be quite high if the fibre cable keeps being damaged due to other infrastructure development in the same area.
  • Small target market – Socio-economic development is often still slow, with slow middle class growth, and correspondingly low affordability levels. This is coupled with comparatively high prices of fibre connectivity, paying a premium for a superior service. In the business market, and in particular small businesses, the level of maturity (and often also affordability) limits the adoption of fibre broadband.

Fibre Access Infrastructure Market

The fibre access infrastructure provider environment tends to be quite fragmented in many markets, with a number of smaller fibre network operators (FNOs) operational. It is difficult for small operators to maintain a sustainable operation with a small footprint. Hence, in most markets in Africa, operators follow a multi-technology strategy, where possible, for the provision of connectivity services. Fibre is one of the technologies used but most of the connections may be provided wirelessly. Only in a limited number of cases have we seen the evolution of a pure fibre access infrastructure provider. This is most pronounced in South Africa, where around 50 FNOs are operational. Many of them very small and unsustainable. This leads to growing consolidation in this market.

As at mid-2018, there were 136 commercial FTTH / FTTB networks operational in Africa in 40 countries (including territories) and another ten networks either planned or in deployment. The presence of fibre broadband infrastructure on the African continent and growth over the past few years are presented below. The year-on-year growth of connected premises from mid-2017 to mid-2018 was 75%.

Concentrated Market

Fibre broadband uptake is concentrated in a handful of country markets, with almost 97% of total fibre connections on the continent (top five account for 85% of total). Even at that, household penetration is very low in these countries. The notable exceptions are Mauritius (where fibre deployment is being pursued as a national strategy) and La Réunion – both small islands with small populations in the Indian Ocean. This concentration of fibre broadband in several market on the continent is illustrated in the following graphic.

Some of the key market trends observed in the fibre broadband market are:

  • Access infrastructure has been expanding and improving, underpinned by improving national long-haul and metro backhaul infrastructure.
  • Pricing of fibre-based products has seen some reduction, making the products more affordable. This is combined with increasing disposable income levels (at least in growing economies).
  • Economic improvements (not in all markets) have led to improved business climate and demand for fibre-based services.
  • Government policy direction moving towards national fibre roll-out, digital agenda, etc.
  • Access to relevant content has been improving.

Market Opportunities

The present FTTH / FTTB market landscape in Africa provides for a number of opportunities going forward. These include:

  • Lack of legacy fixed infrastructure in many markets presents an opportunity to address this shortage with fibre. However, this can also be a challenge due to, for instance, lack of duct infrastructure which could be reused to lower the cost of deployment or lack of fixed line product / service culture and understanding of such products / services within the target user base.
  • Middle class migration to gated communities / complexes and increasing concentration of businesses in office parks means that the potential users can be reached more easily at a lower cost. New residential and business developments also provide an opportunity for greenfields fibre infrastructure deployment in such premises.
  • Once the first wave of FTTH deployment and uptake is past its peak (this may take a number of years in most markets in Africa), the cost of deployment and provision of services may be suitable for a second wave to address the lower socio-economic segments.
  • The fragmented fibre infrastructure provider environment presents M&A opportunities for (typically) larger operators or non-telecoms investors.
    Future evolution of the FTTH / FTTB markets in Africa will be driven by a combination of socio-economic development and government policies.

Market Outlook

However, given the diversity of markets in Africa in terms of ICT and socio-economic development, the pace of fibre broadband deployment and adoption will also differ significantly from country to country over the next five years. The expected market evolution trends are highlighted below.

Home Market

  • Greater focus on back selling of fibre services to achieve higher connectivity rate of homes passed.
  • Geographic expansion of the FTTH footprint (although limited to main cities in most countries).
  • Introduction of new products (including smaller bundled offers) to address households with lower disposable income levels (than the top end).
  • Introduction of converged products combining fixed and mobile services.
  • Increase in relevant content (requiring fast and reliable internet access) will drive uptake.
  • Continued downward trend in retail prices of fibre products, resulting in greater affordability.

Business Market

  • Geographic expansion of the FTTB footprint (although limited to main cities).
  • Introduction of converged products combining fixed and mobile services.
  • Move towards IoT (and IoE) over time, requiring greater good quality connectivity.
  • Government policy direction aimed at expansion of broadband (including fibre) infrastructure and services to drive socio-economic development.
  • Growth in maturity of the business community, realising the benefits of IP and cloud services. Fibre will be used for delivery of these services.