South African VoIP Market

VoIP's Low-cost Value Proposition Pushes Service Uptake in the Price-Sensitive South African Market

The South African voice over Internet protocol (VoIP) market was set up in 2005 and is still in the growth phase of the development lifecycle. Considering market age and the relatively low penetration of broadband infrastructure - only 60,000 users of VoIP services in 2008 - there exists a large opportunity for growth. The fiscal crisis has exerted direct pressure on margins in the financial services and retail sector. "Historically, the South African telecommunications market was dogged by high pricing owing to a lack of true competition in the industry," notes the analyst of this research service. "VoIP offers a low cost alternative to traditional fixed line calls; this is the technology's most compelling feature, particularly in the light of the economic meltdown." With authorities expected to introduce regulatory measures such as geographic number portability, carrier preset and local loop unbundling that will allow users to retain their existing numbers and control costs far more effectively, greater adoption of VoIP services by corporates can be expected.

In spite of its low-cost advantage, VoIP technology has not proved to be as reliable as its analogue alternative due to the lack of bandwidth and initial experience in the market. VoIP is perceived as a bandwidth hungry technology; however, this is the case only in instances where the service provider has not utilized the means to make the technology more efficient. Significant improvements in voice quality are slowly giving VoIP the edge over traditional voice services. Circumstances such as the concerted network infrastructure roll out of tier-I operators in South Africa and the realization that VoIP services are best offered over access media such as asymmetric digital subscriber line (ADSL) as opposed to WiFi have led to a dramatic increase in the quality of these products. Thus, organizations that rely on high-quality voice communications are now able to consider VoIP as a viable option. Awareness initiatives launched by service providers have also begun to pay off, but much needs to be done. Regulatory uncertainties, in particular, are worrying participants. "It is anticipated that Independent Communications Authority of South Africa (ICASA) will introduce additional regulatory measures that will govern and impact the VoIP market specifically," says the analyst. "Participants in this space are unsure about the time frame within which these policies will be implemented, directly impacting their ability to provide services such as number portability and carrier pre-select."

Under-serviced markets also exude potential, but they are long-term prospects that are in the early rungs of the evolutionary ladder, so it will be a while before these synergies can be capitalized upon. For now, service providers are forced to differentiate in terms of the way in which they approach different market segments. While the financial services sector will most likely adopt the same services as the fast moving consumer goods (FMCG) market, the manner in which these are used can differ vastly. Increased workforce mobility is vital, and the operator that brings it to the market in the shortest period of time can expect to register significant gains. Overall, service providers must identify the best areas for the deployment and partner with suitable infrastructure vendors to facilitate business progression.

Market Sectors

Expert Frost & Sullivan analysts thoroughly examine the following market sectors in this research:

By End User Type:

• Corporate - (more than 250 users)
• SMME - (less than 250 users)
• Consumer

By Vertical:

• Financial services
• Retail
• Government
• Healthcare
• Others