The failure of under-serviced area licensees (USALs) to carry out their mandate could spell the end of the road for these operators, as their oversight agency is growing increasingly dissatisfied.
The Universal Service and Access Agency of SA (USAASA) has enlisted the help of established telecommunications players to provide services in under-serviced areas, after USALs failed to roll-out networks and supply services to poor areas.
"We gave USALs money; spent many years since they were licensed in December 2004 waiting for them to begin offering services; and now it's 2008 and they have not finalised interconnection agreements, they don't have networks, have challenges of liquidation and can't bring together a roll-out plan," says USAASA CEO James Theledi.
As a result, USAASA plans to provide subsidies for established communication providers to supply services in under-serviced areas.
Risky business
Since the end of 2004, 13 USALs have been licensed. The initial seven licensees were each given a three-year grant of R5 million a year to fulfil their mandate, while the six recently licensed operators have yet to receive funding.
Of the original seven, only three USALs remain viable, says Theledi. "We have assisted Amatole, in the Eastern Cape; Kingdom Communications, in KwaZulu-Natal; and Bokone Telecoms, in Limpopo, to access their universal service subsidies. These are the USALs we can bet on to go live this financial year," he says.
The rest have yet to submit their revised technical plans and audited financial statements to USAASA to access the rest of their funding. Their future hangs in the balance, says Theledi.
The newly-licensed USALs will also have to provide a business plan that proves their financial sustainability before being granted any funding.
USAASA has already met with Neotel, Cell C, Sentech, MTN and Vodacom to discuss the issue of them stepping in. USAASA has also scheduled a meeting with Telkom this week, says Theledi.
"Once we've finished defining what universal service and access is, and who the needy are, we will be able to identify gaps in communication services and allow the operators to bid for the business," he says.
Contracts will be awarded to the operator that needs the lower subsidy to supply services, he adds.
Viable solution
Theledi says the telecoms operators welcome the opportunity to provide services in under-serviced areas, as this allows them access to subsidies from the universal service fund, making the provision of services to the poor more viable.
"The operators have ideas on how to roll-out services in these areas, but their boards of directors would not approve some of the plans as they were not financially sustainable."
USAASA envisages that part of the plan to pull in telecoms operators would be to form strategic partnerships between the big players and viable USALs.
USALs already face the loss of their current operating model, with the introduction of provincial under-serviced area network operators.
"We have raised the subject with USALs and their only concern is that the judging criteria for winning bids should compel operators to work with them."
However, Theledi acknowledges the relationship between USALs and mainstream operators is turbulent, with some parties failing to establish interconnection agreements with USALs.
"Interconnection agreements with USALs are taking too long. The industry is also making USALs unviable, because it insists on onerous conditions that USALs can't meet before they agree to interconnect with them."
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