David tackles Goliath in Parkhurst fibre wars

THE Johannesburg suburb of Parkhurst, one of the first in South Africa to get highspeed fibre-to-the-home broadband, looks set to be the scene of a turf war between two fixed-line telecommunications providers. It’s a David-and-Goliath battle that could help to decide which operating model for delivering home fibre in South Africa is better.

Stellenbosch-based start-up Vumatel identified Parkhurst as the first suburb for its fibre broadband network, offering blistering fast connections unheard of in South Africa until now.

For the past few months, the company has been trenching through the streets and this week connected the first homes at speeds of up to 1Gbit/s. That’s 100 times faster than the fastest copper-based ADSL broadband available from Telkom. Vumatel plans to have the entire suburb — 2 200 homes, plus businesses — wired by February and has identified a further 50 suburbs where it intends duplicating the Parkhurst model.

But Telkom, which announced earlier this year that it would deploy home fibre broadband in 22 suburbs in Johannesburg, Pretoria, Cape

Schoeman and many other players argue that open access is the best model

Town and Durban before the end of the year, in the past week began laying its own fibre in Parkhurst, duplicating Vumatel’s efforts.

Does this duplication make sense? Ryan Hawthorne, the technical adviser to the Parkhurst residents’ association, welcomes it. He says it’s the sort of competition in fixed lines that consumers have dreamt of for years.

However, Vumatel CEO Niel Schoeman says South Africa can ill afford infrastructure duplication. He says it could destroy the financial feasibility of fibre projects, which already have very long return-on-capital periods. Instead of Telkom’s wholesale arm duplicating Vumatel’s network, its retail arm should be leasing access from Vumatel to provide services to Parkhurst residents, he says.

Schoeman warns that duplication of infrastructure is hard to justify in South Africa where homes are relatively far apart. “If you really want to make the business case work, you have to share infrastructure. If another player comes into Parkhurst, they will double expenditure and halve the market, making it unfeasible.”

But for telecoms operators like Telkom, giving up control of the infrastructure — historically their bread and butter — could be a step too far. One has to ask why the company chose Parkhurst as one of its first suburbs to target with fibre broadband after it was already aware of Vumatel’s plans. The idea of a fixed-line infrastructure rival, even if it’s a small start-up, must displease a company that’s historically had an absolute monopoly.

In theory, infrastructure competition should help to bring down prices, but in the fibre market, where upfront capital costs are high and short-term returns unlikely, it may make sense to consider a different model.

Unlike the model favoured by entrenched telecoms operators such as Telkom, MTN and Vodacom — all of which, by the way, have big plans to deploy home fibre networks — Vumatel is providing its network using what’s called the open-access model.

Also, unlike the big players, who favour a model of vertical integration — they like to provide the infrastructure as well as many, if not all, of the services on top of it — Vumatel believes the better approach for it is to provide only the infrastructure. Internet service providers then lease access to the network on a wholesale basis to provide internet and other services to retail consumers.

Schoeman and many other players in the fibre industry, including metropolitan and national long-haul operators Dark Fibre Africa and FibreCo, argue that open access is the best model for building this nextgeneration infrastructure.

MTN and Vodacom take the opposing view, while Telkom, intriguingly, has vacillated on the issue in recent months and may even join the open-access camp. If it does, it will signal a significant change in approach.

In the meantime, Parkhurst looks set to be a fascinating battleground.

McLeod edits TechCentral.co.za. Find him on Twitter @mcleodd