Due to the material limitations of the business, as well as the proliferation of private estates, fibre companies have eschewed competition, and quality has begun to stagnate.
South African internet consumers are presented with a hard time when it comes to fibre connections. In 80% of cases your neighbourhood will be run as a monopoly by one of the main Fibre Network Operators (FNOs).
South Africa’s fibre internet market, once lauded for its progressive adoption of an Open Access model, now faces a growing issue: the increasing prevalence of localised monopolies in estates, complexes and business parks.
Saturating and stagnating
While the Cape FNOs were highly effective and dynamic only a few years ago, their founders have now handed over control to a managerial class, with service quality levels now comparable with Openserve, subsidiary of the national state-owned Telkom.
South African home fibre went through something of a revolution in 2014 and the local sector streaked ahead of many first-world markets, the UK included. However today the UK has 2Gbps connections, whilst our local networks have stagnated at the same 1Gbps rate we had ten years ago.
For many users, especially in the Western Cape, the promise of competition and choice in fibre services is quickly eroding, leaving them trapped in situations where there is only one provider available to deliver fibre infrastructure.
This lack of competition not only frustrates consumers but creates conditions eerily reminiscent of cartel-like behaviour. The problem is becoming increasingly urgent, yet government intervention and industry reform could still offer a path to fairer outcomes.
The core of the issue is that the majority of South Africans with fibre internet access find themselves tethered to a single FNO. A recent GIS project commissioned by the Internet Service Providers' Association (ISPA) highlights that a significant proportion of fibre customers in the Western Cape have no choice of fibre network.
This monopolistic trend is especially pronounced in residential estates and business parks, where exclusive contracts often prevent new entrants from competing.
This is not all conspiracy, rather the fear of the risk of direct competition. Bringing fibre to homes is an extraordinarily capital-intensive task. The infrastructure requires significant upfront investment including trenching, cabling and the installation of network equipment.
Given these costs it is unsurprising that fibre operators are reluctant to enter markets where a competitor has already laid the groundwork. In many areas this results in a de facto monopoly where one FNO dominates and customers are left with little recourse if service levels decline.
The lack of options forces customers to put up with a lot. In some cases the operators infrastructure lacks essential features like backhaul redundancy or sufficient backup power, exacerbating the effects of South Africa’s regular power cuts.
Even worse, some FNOs have been accused of obstructing customers trying to switch ISPs—charging exorbitant fees, delaying the process or even locking fibre lines. In extreme cases FNOs demand full installation fees just to update the customer name associated with the line, creating unnecessary friction in a system already stacked against consumers.
Passing inefficiency down the value chain
This state of affairs is leading to stagnation and a decline in service quality and it doesn’t only affect the quality of service with fibre, but is threatening to ossify the Internet Service Provider (ISP) market too.
In theory, the Open Access model—adopted early by the South African market—offers an antidote to this problem. By allowing multiple Internet Service Providers (ISPs) to operate over the same fibre infrastructure the consumers benefit from competition on pricing, service and support.
Until recently the barriers to entry as an ISP were relatively low, with FNOs charging only a few thousand for an Internet Service Provider (ISP) to register on their network, leaving enough room for a new ISP to find clientele.
But recently the ladder has been somewhat kicked away. As the number of ISPs started to grow, fibre companies began to become irritated by the process of onboarding them and setting them up, as well as attending to their complaints.
As a result they have erected massive barriers to entry, often charging a quarter of a million Rand per month to get access to their network. This service delivery bottleneck affects all fibre providers. Hundreds of ISPs exist, giving customers a wide range of choices, and the ability to change ISPs within 30 days has historically kept service levels high. But even with the competitive ISP market, the inability to switch between FNOs fundamentally undermines consumer power.
ISPs push back
The ISPA is acutely aware of the challenges posed by this monopolistic environment. Recent complaints from ISPs suggest that service levels from some FNOs have deteriorated, directly affecting end-users.
Recognising this, the ISPA has launched several initiatives aimed at addressing the problem, including a Fibre Network Operator Perception Survey, which rates FNOs based on ISP feedback. Additionally, Open Access recommendations for the industry are being developed to establish best the practices that will promote healthy competition and maintain high service standards.
The ISPA has also called on Communications Minister Solly Malatsi to introduce legislative changes to curb the proliferation of exclusive contracts in residential estates and business parks. Such contracts prevent ISPs from competing on price and service, leaving residents with only one option for fibre internet—a situation that stifles innovation and creates room for inefficiency.
The South African government has the tools to address these issues, notably the National Integrated ICT Policy White Paper of 2016, which stipulates that consumers should have the right to choose their ISP.
Unfortunately this policy has not yet been given teeth, leaving homeowners associations and body corporates free to enter into exclusive agreements with FNOs, often to the detriment of residents.
From speaking to local ISPs it seems that there are a number of complexes and estates that have established little monopolies much like those the Competition Commission seeks to address. Many property development companies even list their ISP partners on their websites, such as:
While there is nothing to indicate that these estates have any more trouble with their connectivity than any other area, the way in which these bulk contracts are signed does limit the leverage individuals have over the quality of service they will get.
The Competition Commission has launched investigations into similar arrangements before, but enforcement remains weak. Legal action is typically too costly for individual residents to pursue, even if the practices may constitute as anti-competitive behaviour.
However, consumers do have some power to address the situation. The Competition Commission generally depends on reports being filed and so complaints lodged with Commission (which can be done here) do offer a way for the residents of private complexes to get a word in edgeways in their service contracts.
However the nature and material limitations of telecoms infrastructure mean that constant leveraged renegotiation from consumers might just be the only way to discipline the sector.
