Ofentse Dazela, Africa Analysis director: pricing research.

A price shake-up is anticipated in South Africa’s fibre-to-the-home (FTTH) market as a wave of increases introduced by internet service providers (ISPs) is coming.

Africa Analysis – an ICT and future-tech consulting firm – says this is in line with fibre network operators (FNOs) that recently confirmed wholesale price increases for the first time in two years.

The company has published an analyst note for June, emphasising that the FNOs have a massive impact on ISP pricing.

The South African fibre market is experiencing fierce competition, with most companies setting their sights on the township and smaller markets.

The pricing analysis by Africa Analysis shows that over the past two years, some ISPs have continued to increase pricing.

The analyst note presents the current price trends of the month-to-month uncapped FTTH packages, based mainly on the average prices observed in the first quarter of 2023.

It also illustrates the path these prices are anticipated to take in the short to medium term.

Africa Analysis says its study leverages its FTTH pricing database and focuses on ten biggest FNOs, and ten top ISPs in terms of customer base (active subscriber numbers) as of March 2023.

Ofentse Dazela, Africa Analysis director: pricing research, says: “To date, many households have enjoyed steady price reductions in the FTTH market in the form of price discount promotions, offered for a specific period, and in the form of free speed upgrades, where the line speed packages are temporarily or permanently upgraded.”

However, commenting on the future price trends, he says: “The general expectation is the market will probably see a wave of increases introduced by ISPs in line with FNOs that have recently confirmed wholesale prices for the first time in two years.”

Wholesale market trends

Turning to the wholesale market, Dazela says, between January and March 2023, several FNOs made price and line speed changes to their wholesale FTTH packages.

He comments: “This is the first time in the past two years that FNOs have increased their pricing. Over this time, the FNOs have generally increased line speeds.

“Frogfoot increased speeds on most of its packages. Octotel increased the wholesale prices of three of its packages while also permanently increasing the speeds of products that have been on promotion since November 2022.

“MetroFibre Networx increased line speeds on its FTTH packages. Customers who previously had symmetrical 50Mbps, 100Mbps or 200Mbps line speed packages were moved to 250Mbps, 500Mbps and 1Gbps at no extra charge from 1 March 2023. Openserve implemented speed upgrades on most of its FTTH packages from 1 April 2023.”

Dazela adds: “Herotel continued to offer the lowest monthly fees for uncapped packages in the past 2 years, but recently increased prices of its uncapped offers (50Mbps, 75Mbps and 100’Mbps) by an average of 8.3%.

“The announced wholesale price increases will have an impact on both the consumers and the ISPs. Many of these FNOs justified the price adjustments as inflationary increases.

“While the speed upgrades are mostly implemented by FNOs at no additional charge, the ISPs will have to purchase additional capacity to accommodate the higher speeds.

“Thus, speed upgrade will have a positive spin-off on FNOs from a revenue perspective.

ISPs that are not willing to absorb additional IP connection charges for extra capacity to accommodate the higher speeds are likely to pass these fees on to customers in the form of increased retail prices.”

In the ISP market, Dazela notes Afrihost, Herotel, and MWEB were among the large ISPs that were deemed to be pursuing aggressive low-pricing strategies.

Further, he says: “Even though MWEB is the largest ISP in terms of the customer base, it is also leading price-based competition in the market. Axis currently has the most expensive packages.

“Quarter-on-quarter, the average monthly prices of uncapped FTTH plans show a small decline over the years. However, during the quarter under review (January 2023 to March 2003), the monthly fees of these uncapped offers have remained relatively flat.”