Telecommunications market liberalisation has allowed the entry of companies that are ready to prostitute it to meet their own ends, says Richard Came, director of Community Investment Ventures (CIV).
CIV is a venture capital firm that specialises in investing in the telecommunications and power sectors. One of its key vehicles is Dark Fibre Africa, which is building fibre-optic networks on behalf of a number of clients, including academic network Tenet, Vodacom, MTN and Neotel.
Came made his reputation as one of the founders of IT group Dimension Data, before moving into the venture capital direction from 2002.
Liberalisation of the market, including the proliferation of fully licensed operators and the pending increase in international connectivity, has created certain imbalances in the market, believes Came.
Late last year, communications group Altech took the communications minister, the Department of Communications and regulator ICASA to court. It won a ruling that has effectively allowed any value-added network service licensee to get a full individual-electronic network service licence, giving them the same rights as the incumbent operators.
Furthermore, the imminent landing of the Seacom East Coast undersea cable and at least two other such systems over the next few years has raised the prospect of international connectivity prices falling dramatically.
Outstripped ability
“We are now in the situation where the local link is the main expense for telecommunications. A link between Gauteng and Durban is about the same as the link from Durban to the UK,” Came says.
While he does not have any direct cost comparisons, Came asserts that any fall in telecoms prices has to be predicated on the local links being available and cost-effective.
“The whole issue of the dropped calls on the cellular networks is basically because subscriber growth has outstripped the ability of the backhaul systems to handle the loads.”
Came notes a number of non-traditional telco players have gained VANS (now I-ECNS) licences, allowing them to offer telecommunications services as a means to protect their core businesses and thus “prostitute” the sector.
“We saw it before with banking group Absa, which offered a very cheap ISP service to get clients and retain clients, and now FNB is doing a similar thing with their service. I will not be surprised if we see other companies doing it as well.”
Viable option
The rolling out of fibre networks by local authorities is a step in the right direction to alleviate the lack of infrastructure, but Came has his doubts as to whether government is the right entity to do it.
“There are concerns about government rolling out these networks. Firstly, do they have the expertise and, secondly, there is always a question mark over government control of these networks. However, in an ideal world, government would be rolling out such networks.”
Came says fibre to the home (FTTH) is a viable option for the future in SA and not just for the affluent areas.
“Some years ago, FTTH was not considered a viable option in the US, until Verizon said they were investing $23 billion to do so and that changed the face of the market there. We have been encouraged by the huge amount of interest shown in the fibre-optic network we have been rolling out in Soweto and this points that, in the longer run, it is viable in SA.”
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