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JOHANNESBURG:- South Africa's Internet population is expected to grow as much in the next five years as it has in the 15 years since the Internet became commercially available in South Africa.
This is among the startling conclusions contained in the Internet Access in South Africa 2008 report, released today by World Wide Worx. The report shows that the number of Internet users in South Africa grew by 12.5% to 4,6-million in 2008 - the first time since 2001 it has grown by more than 8%. The increased growth rate is expected to continue for the next five years, taking the Internet user population to the 9-million mark.

"Four major factors will drive this growth," says Arthur Goldstuck, managing director of World Wide Worx.

"The first and most obvious development is the arrival of a new undersea telecommunications cable at the end of June. It will increase South Africa's maximum international bandwidth fivefold, and the actual capacity that was available until the end of last year will increase 30-fold. It will gradually bring down the cost and increase the capacity available to consumers and business - but not overnight."

The second factor is the granting of telecommunications licences to all Internet service providers who wish to upgrade existing licences, allowing them to build their own networks.
"While we won't see even a tenth of the 600 existing ISPs setting up networks, enough of them will emerge from under the radar to give consumers and business a new world of choice," says Goldstuck.
These networks will be able to take advantage of the new undersea cable, which will allow service providers to buy bandwidth capacity at wholesale prices and repackage and resell it as they wish. This means that the new generation of service providers will be able to introduce business models that were never possible before.

The third factor is the rapid rate at which small and medium enterprises (SMEs) are migrating from slow dial-up connections to faster ADSL lines.
The impact of these lines goes much further than merely the number of small businesses that connect," says Goldstuck. "Our research shows that every SME using ADSL is connecting anywhere between one and 20 additional individuals to the Internet. This means that SMEs have taken over from large businesses as the biggest driver of Internet access in South Africa."

The fourth factor is the growth of Internet access via cell phones. However, warns the report, this is not yet as big a factor as media hype suggests.
"The cell phone right now is a very crude device for accessing the Internet," says Goldstuck. "We will need to see great improvements in both usability and people's ability to use advanced features on their cell phones, and that will take another few years."
The report also covers the prospects for as many as seven new undersea cables planned for the next three years, new trends in connecting schools and universities, the dramatic evolution of wireless broadband technology, and the extent to which other African countries have overtaken South Africa.

In the past year, the Internet user base in South Africa has seen its highest rate of growth since 2001, increasing by 12.5% to 4,5-million.

This is the key finding of the Internet Access in South Africa 2008 study, released today by World Wide Worx. The study was backed by Cisco Systems, and the findings released during the Networkers at Cisco Live! conference in Johannesburg.

"The increase comes on the eve of the biggest shakeup in South African Internet access we've seen since the dawn of the commercial Internet in 1994," says Arthur Goldstuck, MD of World Wide Worx. "It is only the beginning of a dramatic turnaround, and is occurring despite numerous obstacles in the way of growth."

Among these obstacles has been a highly restrictive regulatory environment, with the Minister of Communications only deciding late in the year not to oppose a court ruling that would allow all network operators to supply their own infrastructure.

The evolution and changes in the telecommunications industry could not have come at a better time in South Africa. "We believe these changes will lead to sufficient levels of competition, increase access to Internet usage and in turn, increase global competitiveness and economic diversity," says Reshaad Ahmed, Senior Manager of Cisco's Internet Business Solutions Group.

"South Africa could, potentially, go from five major service providers to more than 300 overnight," says Ahmed. "The combination of new licencees, policy directions, and municipality networks has set the stage for a highly competitive telecommunications marketplace, with consumers and businesses leading the charge toward choice, competition, and fair market value."
Goldstuck describes the Minister's decision as a pivotal moment, but one that should have occurred four years ago.

"In that time we saw growth slow to a near standstill, and the possibility of bringing access to underserviced area becoming ever more remote," adds Goldstuck. "But the market has been anticipating this change, and numerous small, semi-legal networks have sprung up around the country in the past year. Many of these should emerge above the radar with their new licenses, along with new entrants into the market."

The Internet Access in SA 2008 report shows that growth has come largely on the back of dramatic take-up of broadband offerings by small businesses, which alone accounted for half of the growth in the market, mainly through connecting office staff to their ADSL links. At the same time, the market as a whole has seen a continued dramatic shift from dial-up connections to broadband, with growth in both ADSL and 3G at more than 50%.

"We are seeing a broadband culture emerging in South Africa, held back only by the restrictions still placed on data capacity," says Goldstuck. "These should start becoming a non-issue from the middle of 2009, as the first of the major new undersea cables enters operation. At that point, dial-up will effectively be dead as a connectivity option - it is more expensive, and utterly inappropriate to the changing nature of the Internet.

"Once everyone who is connected is on broadband or high-speed networks, the Internet will come into its own as an environment for business collaboration and personal interaction."

The Seacom undersea cable, commissioned mainly by new market entrant Neotel, will increase South Africa's international bandwidth 40-fold, and will mark the beginning of what World Wide Worx describes as a seismic shift in the Internet landscape in Africa. But it is only one of a series of new cables in the works, which will make the connectivity landscape completely unrecognisable for both South Africa and the rest of the continent by 2013.

"It spells the birth of an entirely new industry, and we are already seeing the market champing at the bit to become part of that industry," says Goldstuck.

However, Cisco warns change won't happen overnight.

"Only some of the 300-plus contenders will be in a position to manage their own networks due to their ability to raise the necessary capital," cautions Ahmed. "Those that do step up to the challenge must spend a significant amount of time building a business model that will be sustainable, innovative, and takes advantage of the strategic position with which a contender is faced, while employing the capabilities of existing service providers.

"We are therefore pleased with these findings as they indicate a positive trend for economic growth. We believe that pervasive broadband at the right price is a key enabler for economic prosperity."
"It is imperative for all relevant stakeholders to drive broadband to encourage new services: skills, education, business interaction and lowering the cost of doing business," Ahmed concludes.

Online retail in South Africa has finally turned around. By the end of this year, online spending on retail goods in South Africa is expected to have grown by more than 35%, after 33% growth in 2006.The total spent on online retail goods in South Africa in 2007 is expected to be R929-million, up from R688-million in 2006, according to a new report from World Wide Worx, "Online Retail in South Africa 2007".

These figures exclude the sale of air tickets online, which continue to dwarf the numbers for online retail. The five South African airlines selling tickets online, namely kulula.com, FlySAA.com, Mango, 1Time and Nationwide between them accounted for R2.3-billion in e-commerce in 2006, almost four times the size of conventional online retail. The figure is expected to rise above R3-billion in 2007.

These numbers indicate a dramatic turnaround in online retail in South Africa, which appeared to be stagnating in 2005. The 2006 recovery is being sustained in 2007, with all indications being of even more dramatic growth in 2008.

"There are two major factors behind this growth," says Arthur Goldstuck, MD of World Wide Worx.

"The first is the rise of broadband, which by the end of next year will see more than a million users in South Africa.

"The second is a phenomenon called the Experience Curve, which shows that only once users have been online for around six years are they comfortable with the more challenging aspects of the Internet, such as e-commerce. And the number of people who have been online for six years or more has finally reached the level where it is making a substantial impact in online retail."
Both of these factors were forecast by World Wide Worx as prerequisites for future growth as early as 2004.

The number of online retail sites has also grown substantially, from 826 in 2005 to 1014 in 2007. This growth has come despite 310 sites - more than a third of those online at the end of 2005 - closing down from 2005 to 2007. However, no less than 498 new sites came online during this time.

The online retail market is dominated by 12 sites, which between them account for more than three quarters of online retail sales in South Africa, according to "Online Retail in South Africa 2007".
"There have been many competitors to these dominant players," says Goldstuck." They tend to look at the numbers reported by a Pick 'n Pay or Netflorist, and imagine there is a big market ripe for the picking, not realising just how much infrastructure, development and market knowledge has contributed to those dominant positions. The result is that the biggest drop-off of online retailers occurs precisely where the biggest players are active."

They are the three major malls, M-Web ShopZone, the eBucks Shop and Digital Mall, the two largest online grocers, Pick 'n' Pay Home Shopping and Woolworths, the two largest online book retailers, Kalahari.net and Exclusive Books, the largest online florist NetFlorist, the largest online wine retailer Cybercellar, the largest online electronics store Digital Planet, the largest online health and beauty store, Ascot Direct, and the largest auction site, Bidorbuy.co.za.