Broadband pricing strategies the key to future international bandwidth growth, says third edition of BA voice and data forecasts

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The third edition of Balancing Act’s Voice and data bandwidth forecasts highlights the key role that will be played by the introduction of new, cheaper international fibre bandwidth in 2009 and 2010. If operators pass on these savings to their customers, then the individual user market will grow rapidly. Without this happening, growth in the broadband market will be marginal.

International bandwidth from Sub-Saharan Africa has increased from 11.3 Gbps in 2006 to 17.5 Gbps in 2007 to 26.1 Gbps. Overall international African bandwidth (including North Africa) was 96.3 Gbps in 2008. The use of international fibre increased as an increasing number of regional inter-connections came on-stream.

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 WCDMA, HSDPA, CDMA2000 1X available on a PAYG basis immediately lowers the entry barrier of a monthly subscription price and will stimulate casual and low volume usage.

The third edition of the Balancing Act Forecasts includes all North African countries as well as those countries from sub-Saharan Africa. A wider range of data has gone into producing this edition as Balancing Act has worked closely with a greater number of carriers on this edition.

Other findings from the forecasts include:

· Satellite bandwidth supply will increase over the forecast period (2007-2012) after and Nigcomsat-1. There will be at least 13 new satellites giving coverage over Africa by the end of 2010. However, much of this will be replacement capacity as many of the current satellites were launched in the 1990s and are reaching the end of their life. The most notable exception is 03B which will launch the first eight of sixteen satellites in 2010. It is selling bulk capacity to operators at US$750 per mbps, well below current satellite prices. . By January 2009 the operator had already advance contracts for more than 12 Gbps of capacity to African operators.

· The number of countries solely dependent on satellite has dropped and will continue to drop over the forecast period. 24 countries still get all of their international bandwidth entirely from satellite but with the arrival of the new fibre cables on the east coast of Africa in Q2, 2009, this number will decrease to 13. Total Internet bandwidth supplied by satellite has dropped from 24.1% in 1998 to 7.7% in 2008, down from 11.5% in 2006.

· Africa’s international voice traffic has consistently grown well above the world average for a number of years. In the period from 1998 to 2008, traffic grew at an above average growth rate compared to 12% seen around the world. Traffic growth has been driven by three things: an increase in fixed and mobile subscribers who are capable of making or receiving a call; the liberalisation of markets and licensing of new operators; and a decrease in international tariffs. However, this new growth has largely been absorbed by by ever higher levels of voice compression.

If as a carrier, you would like to supply data to Balancing Act for the fourth edition of the Forecasts at the back end of 2009, please send an e-mail to Russell Southwood: All data is kept in the strictest confidence and is not published except in aggregated country form.