Subscribe

Telecoms momentum builds

New opportunities have opened up in SA`s telecoms industry, and there are indications that momentum is finally building up behind market liberalisation.
By Mark Taylor, MD of Nashua Mobile.
Johannesburg, 19 Aug 2005

South African telecoms service providers and operators are positioning themselves to compete in a more deregulated environment, with the result that the benefits of cheaper and more diverse services are starting to filter through to businesses and consumers.

Although the pace of deregulation has seemed frustratingly slow to date, there are indications that momentum is finally building up behind market liberalisation.

We`re seeing a host of new players enter the market to take advantage of new opportunities such as the legalisation of voice over IP (VOIP). Already, a number of traditional data players such as Internet service providers (ISPs) have entered the voice market, while voice players such as cellular operators are looking for ways to take advantage of opportunities in the data environment.

Consumers are already benefiting from choice. No longer is Telkom the only company that can provide a broadband connection - other options such as Sentech and iBurst have come to the market to compete. We`re finally seeing progress in South African telecoms.

SA`s telecoms industry still has a long road ahead of it.

Mark Taylor, MD, Nashua Mobile

Given that government has left room in the Convergence Bill to license wireless broadband players to serve customers directly, competition is likely to become particularly fierce in the wireless market over the next year. SA`s operators are already rolling out (and in some cases have gone live with) new technologies such as WiMax and 3G, with the goal of making them as affordable as possible to end-users.

Eventually, consumers and businesses will be able to choose from a wide range of fixed-wire and wireless voice and data solutions ranging from fixed-lines from Telkom and the second national operator (SNO), to WiMax (a metropolitan area wireless network standard), WiFi and cellular technologies.

Major players such as fixed-line operators, ISPs, cellular service providers and cellular operators will most likely partner to give customers simple access to a bundle of converged products (for example, a bundle that offers WiFi, GPRS and fixed-line Internet access for mobile workers).

Meanwhile, government`s plans to introduce number portability during the course of the next year or so have already started to heat up competition in the already fiercely competitive cellular market. Number portability allows users to retain their existing phone numbers when they switch networks and service providers.

The major cellular operators are positioning themselves to compete for market share when full number portability is introduced, also recognising that the data market presents a major opportunity. As a result, they`ve already fired the opening salvos in a war for market share.

Understanding that WiFi and WiMax may present a threat to their data revenues, and also wanting to lock customers in before number portability takes effect, MTN, Cell C and Vodacom have slashed the price of their data services. More price cuts can be expected in the months to come, but the operators are also on record as saying that unique, valued-added services will be as important to compete as the costs of their services.

SA`s telecoms industry still has a long road ahead of it. Delays in licensing an SNO have given Telkom time to consolidate its position in key corporate accounts and to build up cash reserves that it can use to undermine its eventual rival in the fixed-line market.

According to a recent report from Genesis Analytics, Telkom`s control over most of SA`s international bandwidth has hamstrung the country`s telecom industry. ISPs carrying VOIP traffic need to buy international bandwidth from Telkom while most hotspot operators have to buy backhaul connectivity from the operator, which puts high mark-ups on its international bandwidth.

It will be some time before the SNO has the international links it needs to compete with Telkom in this area. Indeed, the SNO will probably need to buy bandwidth from Telkom until it builds up sufficient capacity of its own. That means international bandwidth will remain expensive in SA for some time.

Share