What wil the future hold for Internet Service Providers in Africa and South Afirca?:

The African ISP runs the risk of becoming an endangered species. Most of them are small, undercapitalised businesses that exist in the rather tight margin between greedy incumbents and price sensitive customers.


The introduction of DSL broadband has shifted the power balance decisively against most ISPs and by the time regulators level the playing field again, there will be significant numbers of casualties. As if that were not enough, unified licences are encouraging the new incumbent – the mobile operators – to play in this space.

Like having a cyber-café, opening an ISP seemed to be the perfect business opportunity. This flourishing of small ISPs was fine when the number of users was growing but as growth has levelled off, most competitive Internet markets have more ISPs that subscriber numbers will sustain.

As a result, consolidation is already beginning to occur: the merger of ISPKenya and Wananchi is the first of what will be a number of mergers or closures. Small ISPs have almost no development capital and therefore have little or no ability to roll-out their own infrastructure, either at a local or national level.

A clear sign that scale is a problem is that a significant number of ISPs are multi-market businesses, offering many services and specialising in none: a cyber-café, PC training, selling PCs, hosting and web design. It is all too clear that many do not know exactly which business they are in. The majority are not making technical innovations that affect their business fundamentals, particularly the cost and supply of bandwidth. For all these reasons, there could be as little as a quarter to a half the number of African ISPs in competitive markets in three years time.

The introduction of broadband in one form or another in at least two-thirds of African markets represents both a strong threat and a great opportunity. The introduction of DSL broadband by incumbents has put many of the cards back in their hands. Issues of pricing and supply which had just become settled for dial-up are now all back on the table. And in many countries, the incumbents lost the dial-up round and are determined to squeeze out the troublesome ISPS.

Most are going for a “land-grabâ€