Summary

23 May 2000: -  The year 1999 saw more than half a million new users arriving on the Internet in South Africa, to bring the total number of Internet users in South Africa to 1,82-million.

This was the key finding of the 4th South African Internet Services Industry Survey 2000, the latest version of the survey conducted annually by Media Africa.com since 1997.

Overview

The 4th South African Internet Services Survey 2000 report is a comprehensive report in a series that tracks the growth of the Internet in South Africa. It is based on original research coordinated by Arthur Goldstuck, Michael Sharon and a team of researchers under the auspices of Media Africa.com (formerly Media Africa), the Internet research and content division of Acuity Internet and E-commerce. AI&E is one of four operating divisions of Acuity Group Holdings, which is listed on the Johannesburg Stock Exchange.

This is a regular survey produced to track the growth trends in the dial-up market, corporate connectivity and the academic environment. 

The primary intentions of the survey are to:
 

• track the growth of the consumer market for Internet access - specifically the size of the dial-up market.;
• assess the penetration of Internet use in the corporate environment;
• evaluate the impact of the academic environment on overall impact;
• track the strength of the Internet services industry, primarily through maintaining a set of trend lines on Internet Service Providers in South Africa.

In 1997 Media Africa's work in establishing the size of the market firmly established the Internet as an important new medium in South Africa, debunking the opinion current at the time that the promise of the Internet was only hype. 

The rapid growth over the period between October 1997 and December 1998, fuelled by the marketing campaigns of several newcomers to the Internet, resulted in the Internet reaching a critical mass of consumers in South Africa. However, for the first time since the Internet was established as a consumer-oriented industry in South Africa, the rate of growth slowed down significantly during 1999. This slow-down in the rate of growth will intensify during 2000.

The 4th South African Internet Services Survey divides the Internet access market into three categories, namely:
 

• Dial-up users accessing the Internet via modems;
• Academic users gaining access at educational and research institutions; and
• Corporate users gaining access through company networks.

Methodology

112 local Internet Service Providers (ISPs) and Internet Access Providers were contacted by the researchers and asked to complete a questionnaire containing a short series of questions. Written and verbal responses were received from 80 ISPs.

The survey was once again hampered by the fact that not all respondents answered all relevant questions put to them, often due to the fact that they do not maintain detailed information on their operations, or as a result of concerns about confidentiality. However, the database of statistics being built up by Media Africa has enabled the researchers to cross-reference and extrapolate data sufficiently to obtain meaningful results.

Figures related to dial-up market size and relative strength can be regarded as highly accurate, while those related to the corporate market must be regarded as an estimate, providing an insight into industry trends rather than exact figures.

The researchers also conducted confidential interviews with senior executives within the Internet industry and key corporate users of Internet services to gauge the size of non-responding ISPs, and were able to extrapolate their subscriber numbers from comparisons with equivalent ISPs, and from market intelligence regarding their key clients (such as Usko). It must be stressed, however, that on the dial-up side the non-respondents would not make a profound impact on the overall figures, since the extrapolation showed that the approximately 30 non-responding ISPs accounted for a small proportion of the South African user base: around 20 000 subscribers.

A survey of this nature could not have been possible without the close co-operation of all Internet Service Providers who responded, and especially those who spent time correlating their own figures from a range of sources, and giving the researchers their time for personal interviews and responses to requests for further information.

This report has been endorsed by the Internet Service Providers Association (ISPA). Media Africa.com thanks ISPA for encouraging the participation of its members.

Survival of ISP industry

A key issue debated in the marketplace since 1995 and covered, as a regular element of this research is the long-predicted collapse of the private Internet industry into two or three major ISPs. Until the first survey in 1997, no data had been available to substantiate or invalidate such forecasts, and a key aim of the survey was to gauge the health of the full range of ISPs, from the large corporate entities to the small independents and niche operators. This issue continues to be explored in the course of this report.

Another important intention of the survey was to place into perspective the six-monthly figures produced by Network Wizards in the international Domain Name Survey, which is regarded as the authoritative measure of the relative size of Internet markets in every country in the world. For instance, the January 2000 DNS report showed South Africa slipping back from 14th in July 1996 to 25th in the world. Misinterpretation of this relative position has also cast doubt on the health of the Internet industry in South Africa.

The impact of social responsibility initiatives - such as digital villages and Telecentres - on connectivity in townships, rural areas and disadvantaged communities in general has also been much debated in the past year. This survey has for the first time attempted to measure the immediate effect of such initiatives on access among disadvantaged communities. Its conclusion, however, is that these initiatives have yet to make a marked impact among such communities.

Dial-up users

One of the key findings of the research is that the total number of South Africans gaining access through dial-up modems via Internet Service Providers at the end of 1999 was found to number at least 560 000. This figure, up from 366 000 at the end December 1998, amounts to 194 000 new users, representing growth of 53% in 1999 (growth in 1998 was 86%).

After five years of existence of the South African ISP industry, at least 17 ISPs still command a strong customer base — each with more than 1000 dial?up subscribers. In total, 112 ISPs were still in operation at the end of 1999.This reaffirms the researchers’ ongoing rejection of the belief that only the large providers could survive to the end of the past decade.  It is now becoming an accepted truth that there remains room for niche and specialised ISPs.

Corporate users

The number of South Africans gaining access to the Internet through corporate networks — linked to the Internet via high?speed digital leased lines — continues to grow as large corporates accept the Internet as a crucial communications and business tool. However, growth in leased line connectivity is less rapid than in the past, indicating greater saturation of the market and slow-down of access to infrastructure.

The survey showed growth of 40% over the preceding 12 months.  This brings the number of corporate users in South Africa to 980 000 (700 000 in 1998). One again, cautious implementation of connectivity among corporate white-collar workers, brought on especially by the virus threat, and delays by Telkom in making infrastructure available, indicates that rate of growth in corporate use will slow down further during 2000.

While a significant proportion of corporate users also have access at home, research indicates that an even higher number of home dial-up accounts represent more than one user in that household. Consequently, this “double-counting” of home and corporate users is more than evened out by the multiple usage of home accounts. The dual account holder is likely to use corporate access for e-mail communication, and home access for web browsing. Other users of the home account would use it for both purposes. 

Of the ISPs that provided figures for leased line installations, the market remains dominated by the Internet Solution (IS) with its parent Dimension Data, and UUNET South Africa, with its parents Datatec and UUNet. IS remains the dominant force in that market.

The diminishing correlation with the rankings of ISPs in the dial-up market, noted in the previous survey, has now disappeared almost altogether among larger ISPs, with all now focusing on one or the other core market. As anticipated in the previous survey, the top players in the dial-up market are not leaders in the leased-line market, and vice versa.

Academic users

The total number of Internet users was boosted more strongly in 1999 than in any previous year by the growth in schools connectivity. Previously, the academic portion of this survey focused entirely on the connectivity provided to academic institutions through the research and academic network, Uninet, which provides access to most research and tertiary educational institutions in southern Africa, as well as to more than 200 schools.

However, as more and more schools go it alone, through privately funded connections via ISPs, it has become impossible to ignore them as a separate contributor to user numbers. For the first time, we include privately funded schools access as a separate total under the academic portion of this survey.

The total student population Uninet serves — and therefore potentially has access to the Internet — is more than 600 000. While a majority of these still do not use their access, e-mail has become a vital research and communications tool for more students than ever before. Based on feedback from university network administrators, the probable minimum for students actually using this access is about 250 000. Privately funded schools connectivity probably accounts for a further 30 000, bringing the total academic user base to 280 000. 

Totals

In future, community centres such as the social responsibility initiatives mentioned above and Internet cafes are expected to form a separate category of usage. In 1999, however, they did not add appreciably enough to the overall figure to merit separate categorisation. For now, the total is comprised of the three traditional categories. 
 
 

Category	1998	1999
Dial-up:	366 000	560 000
Corporate:	700 000	980 000
Academic:	200 000	280 000
Total:	1 266 000	1 820 000

New users in 1999:   554 000
Percentage growth:   44%

Taken together, these three categories amount to 1 820 000 Internet users in South Africa at the end of December 1999.  Research indicates that it would be safe to forecast the number to grow to around 2,4-million by the end of 2000.

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Other content

The report examines other salient features of the Internet industry, such as:
 

•  A brief history of the Internet in South Africa
• The growth trajectory of the Internet access industry
• Relative strength of ISPs in the dial-up market
• State of the industry reflected per size category
• Level of churn
• Factors behind subscriber loyalty
• The rate of increase in subscriber numbers per year
• Dial-up growth figures from 1994 and forecasts through to 2004
• ISP relative performance forecasts
• Analysis of academic connectivity and it’s implications
• Academic user growth figures from 1994 and forecasts through to 2004
• Total leased line connectivity supplied by ISPs/IAPs
• Corporate user growth figures from 1994 and forecasts through to 2004
• Ranking of ISPs according to connectivity supplied
• Combined table of user numbers and forecasts from 1994 to 2004
• Factors likely to influence connectivity, including:
• Satellite access
• Kiosks
• Township penetration and disadvantaged communities
• Internet Appliances
• The regulatory environment
• Changes in world ranking