n 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.