Voice over Internet Protocol (VOIP) vendor DataPro took a financial knock last year, after minister of communications Ivy Matsepe-Casaburri decided that value-added network services were not allowed to self-provision, says MD Douglas Reid.
He says DataPro had bought R5 million worth of WiMax (wide area wireless network system) equipment when the minister decided that her "ministerial determination" of September 2004 did not allow value-added network services to self-provision.
Reid says this equipment was then sold back to the original supplier "at a considerable loss".
This is the most visible sign of the financial strain caused by the regulatory malaise that has affected companies hoping to use VOIP technology to unlock the telecommunications market and bring in competition.
However, DataPro, along with other vendors such as Internet Solutions, Storm and Verizon Business Solutions (formerly UUNet), remain optimistic that this technology will provide longer-term benefits.
"It was a typical IT-type situation. The benefits [of VOIP] were over-estimated in the short-term and the longer-term benefits are still to be realised," Reid says.
DataPro`s alternative strategy of providing VOIP over ADSL lines has also proven difficult due to technical issues that impact the quality of service. This includes the lack of static IP addresses, meaning that IP addresses were re-set every night. Telkom recently announced it would start offering static IP addresses, but has not said when.
Learning curve
Dave Gale, Storm director of new business, admits his company has "learnt some valuable lessons" during this last year. Its approach is to install its own VOIP gateway equipment on customer premises free of charge and then only to charge for minutes used.
"Quality of service is very important, especially in the business arena. While a consumer may put up with dropped calls and degradation of quality, it is not acceptable in the business world," he says.
Gale says there is equipment that helps solve the lack of static IP addresses, but it is sophisticated and expensive and adds to the cost of the service.
Hillel Shrock, director of new business at Internet Solutions, says another issue is that of interconnection. This means second tier telecommunications providers (Telkom and the second national operator are considered first tier), are unable to get a fully licensed telecoms operator to give them the wholesale connections they need to offer customers.
"It is a problem. And this is directly related to the legislative and regulatory malaise we have. While the pricing colloquiums of last year tended to simplify matters, the reality is that things are a lot more complex at the ground level," he says.
Growth expected
Shrock admits that Internet Solutions doesn`t have the number of clients using VOIP services that it would like, but sees VOIP as part of the convergence paradigm and believes it will grow.
"Clients have become very educated about VOIP and the issues surrounding it," he says.
Elia Tsouros, an executive at Verizon Business SA, says his company`s VOIP services are still largely in pilot and test phases with customers.
"Interconnection is a big problem, because there are no regulations around it. However, we have signed some non-commercial agreements with the GSM service providers that help us get around the issue to a certain extent. A non-commercial agreement is not regulated," he says.
DataPro`s Reid also remains optimistic. "The small moves that have been made in the legislative process have helped grow this market from about R1 billion annually to more than R40 billion already; it can only get bigger," he says.
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