Telecommunications in SA remains a potentially dangerous market in which to participate as long as regulatory uncertainty prevails.
"While deregulation is at last descending upon the market, it has been plagued with delays as well as differing interpretations of what the final framework will allow service providers to do," says Brian Tarr, managing executive at Business Connexion`s Networks Competency.
"This leaves those that are seeking to gain competitive-edge by gearing up to provide services in a rather precarious position - many companies feel they cannot wait and see, and are establishing enabling infrastructures based on various business models, generally in accordance with their anticipated interpretation of the new regulations," he says.
Trouble is, notes Tarr, if the proposed amendments to the Telecommunications Act contained in the draft Convergence Bill turn out to be significantly different to those anticipated, some companies may find themselves without a profitable business model.
"In terms of value-added network services suppliers, for example, it was widely believed that they would be permitted to self-provision. However, the minister said that this was not an accurate interpretation of the amendments. So, companies that were gearing their business models for self-provisioning had to rethink their strategies. Until certainty is established, it is difficult for any company to plan ahead - risks are also presented to clients that are looking at adopting services that are too forward looking; they may find themselves inadvertently on the wrong side of the law," he says.
While bandwidth has been at the centre of many debates regarding the availability and quality of Internet-enabled and related services, Tarr believes that as this increasingly becomes a cheap and available resource, there will be minimal margin in bandwidth provision. "The real differentiator will be the services and applications carried by the network - and if the services and applications are sufficiently compelling, success will follow. People, especially in the business setting, are prepared to pay for the things that add value - bandwidth doesn`t intrinsically add value, it is the services that it enables that does," he explains.
Despite the fact that increased deregulation of the telecoms sector will introduce opportunities for new players in the provision of services, Tarr notes that the market cannot expect the incumbent to simply accept the status quo.
"There is a lot of room to adjust margins on most call types - international, national and local. The overall effect of deregulation will certainly benefit the consumer, but there is likely to be some level of market consolidation after an initial flurry of new entrants - the incumbent can and will compete on price to remain in the market," he says.
Tarr believes the imminent arrival of the second national operator (SNO) will be characterised by improved - and an increased range of - services. "Don`t expect the SNO to be a direct competitor with the incumbent operator. It will probably establish new revenue models that will pressurise the current market owner, but is unlikely to be putting phones in homes," he concludes.
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