Fibre kills fixed 4G and 5G

4G and 5G fixed wireless access broadband services are only useful where fibre is unavailable, or as a backup connection, Vodacom and Maziv have told the Competition Tribunal.

A transaction that would see Vodacom acquire a 30%–40% stake in Maziv is currently before the tribunal, with weeks of hearings scheduled to gather inputs from independent experts and industry stakeholders.

Maziv is a subsidiary of Remgro-owned Community Investment Ventures Holdings (CIVH), which owns Vumatel and Dark Fibre Africa (DFA).

The Competition Commission has already recommended that the tribunal not approve the transaction.

One of the commission’s arguments was that allowing South Africa’s largest mobile network operator to buy a substantial share of the biggest fibre network operator (FNO) would eliminate crucial competitive forces from the market.

The commission said it was concerned that Vodacom could influence DFA and Vumatel to not roll out where it already offers 4G and 5G services.

It argued that 4G and 5G fixed wireless access (FWA) directly competes with fibre-to-the-home (FTTH), helping to ensure lower prices and better service.

However, Vodacom and Maziv said in their opening arguments that the Competition Commission was mistaken.

“There is no head-to-head competition between 5G FWA and FTTH,” their representative at the hearings stated.

MTN agreed with Vodacom and Maziv.

“Where FTTH is available, FWA provides little if any competition,” it said in its opening statement to the tribunal.

However, MTN said the transaction posed a different competitive threat.

It said the real issue was that, with Vodacom’s cash injection, Maziv could totally dominate the last-mile fibre industry.

“Vodacom and Maziv would have every ability and incentive, and substantial market power, to take fibre to secondary towns, townships, and rural areas more quickly and profitably than the merged entity’s FNO rivals.”

This would benefit Vodacom in two ways: It would share in Maziv’s profits and offload demand for data from its radio network to fibre, easing constraints on its cellular business.

Frogfoot founder and former CEO Abraham van der Merwe disputed Vodacom and MTN’s arguments, saying fixed wireless and fibre do compete.

He said fibre was superior, much faster, and usually more reliable than cellular technologies and that it is often referred to as an “endgame technology.”

“Therefore, last mile fibre providers would often go into a suburb and trench it regardless of what wireless connectivity exists,” Van der Merwe said.

However, he said it was important to understand that fibre operators consider 50% uptake in a neighbourhood “terminal penetration”.

In other words, on average, FNOs regard 50% as the maximum number of households they could expect to sign up for fibre in any given area.

Van der Merwe said the other 50% typically can’t afford the service and rely on mobile operators for something cheaper, albeit much more limited.

“Those subscribers are typically subscribing to entry-level fixed wireless or mobile wireless services,” he told the tribunal.

Only after an FNO has reached terminal penetration does it start creating packages that directly compete with fixed wireless access.

This is what’s currently happening in the FTTH industry. Vumatel, Openserve, Frogfoot, and Metrofibre have all launched prepaid services at price points that better compete with FWA.

However, these products are currently only available in lower-income areas.

“What’s also important to consider is the townships,” Van der Merwe said.

“As various parties have already highlighted, the majority of townships don’t have fibre today, and the customers in townships are connecting to the Internet using mobile services,” he said.

“Those mobile services — I think it’s common knowledge — are expensive and crippled.”

Van der Merwe said FNOs are looking to deploy fibre in townships, offering uncapped services to consumers living there at a much lower price than mobile operators offer.

“So, the fibre operators are looking to disrupt these markets by offering lower cost, unthrottled services,” he explained.

This directly threatens mobile operators’ market share in those suburbs.

“We can expect that once the fibre operators enter those markets, mobile operators will start reducing pricing and actively compete with the fibre operators in those markets.”