The startup, with $4.75 million in capital, believes a single network will benefit consumers with more consistent service at lower costs.
Hundreds of small wireless providers are competing to connect Internet users in South Africa, but a new player has a different vision.
Instead of starting one more competing company, HeroTel founder Alan Knott-Craig Jr. wants to connect as many existing Internet providers as possible to form a national wireless network.
HeroTel hopes to consolidate the fragmented landscape of wireless Internet providers under a single brand. Knott-Craig said this would enable more consistent service for consumers at lower costs and aid expansion of service to areas that currently do not have broadband access.
HeroTel, launched in August 2015, has raised $4.75 million in investment capital and hopes to have a national footprint by April. Knott-Craig said he hoped the company would become the “Capitec of telecoms,” referring the South African banking network.
Knott-Craig, 38, is a South African entrepreneur and former CEO of the social network Mxit. He also founded Project Isizwe, a nonprofit that wants to put free Wi-Fi within walking distance of every South African.
Over the course of two years, the Isizwe Project has successfully turned the South African city of Tshwane (Pretoria), population 2.9 million, into the continent’s largest free public Wi-Fi network.
The network has 750 sites and more than 20 percent of the buildings in Tshwane are within walking distance of Wi-Fi, Knott-Craig said. One million people were to be connected by the end of 2015 with the entire population within walking distance of free Wi-Fi by 2017.
Knott-Craig believes that municipal governments should take responsibility for providing Wi-Fi to their citizens just as the governments provide electricity, sanitation and roads.
200 wireless providers operate in South Africa
In the private sector, he said there are about 200 wireless service providers operating in South Africa and the business is profitable. Revenues total about $53 million a year with profit margins of approximately 30 percent.
The problem, Knott-Craig said, is that consumers will demand greater wireless speeds at lower prices so a network makes more economic sense than a fragmented marketplace of providers.
Currently, Knott-Craig said, Wi-Fi speeds are doubling. But the cost to the consumer stays the same when it should be decreasing, he contends.
“People want fast reliable, affordable broadband, that’s all they want, and they don’t want you to feel like you’re doing them a favor by arriving to fix it,” he said.
Knott-Craig said South consumers now pay about 600 rand ($35) a month for 10 megabytes per second. He projected they will pay the same amount for 100 megabytes by 2017.
Five million households lack broadband access
He said HeroTel would use unlicensed spectrum, which is the same as the spectrum home and office consumers use for Wi-Fi.
In addition to improving service for existing customers, Knott-Craig believes pooling the resources of existing providers will enable the network to bring Internet access into about five million households that do not have broadband. Only about 400,000 of these are reachable by fiber-optic broadband, he said.
For the rest, he said, unlicensed spectrum Wi-Fi is the obvious answer because it is inexpensive, he said. “That’s why the HeroTel strategy makes sense.”
According to the Internet Architecture Board, South Africa has approximately 33.5 million Internet users, representing 61 percent of the population as of December 31, 2014.
Getting more people connected to the Internet will be good for all of South Africa, Knott-Craig said. “The more people in South Africa that are on the grid, whether it is the poor or the rich, the faster our economy can grow,” he said.