M-Web flexes numbers muscle

The companies with the greater number of customers will triumph in the voice over IP (VOIP) wars expected next year, says M-Web CEO Kim Reid.

Reid spoke to ITWeb about his company`s plans going forward into the battle that is expected to erupt as the 1 February deadline for the telecommunications liberalisation draws near.

He also talked about the confusion the industry still feels over the surprise announcement made by communications minister Ivy Matsepe-Casaburri in September that effectively opens the ICT market to competition.

"The announcement was really difficult for us to analyse. We spent two days with our lawyers trying to interpret it, but it remains very vague on interconnectivity and self-provisioning. Effectively there are no rules and that leaves the incumbent in a strong position," Reid says.

M-Web is the country`s largest Internet service provider (ISP) with around 240 000 customers, most of them paying around R145 per month. It is also tying up a deal with Tiscali, a R320 million transaction that should bring in another 100 000 clients.

Most of M-Web`s customers access the Internet from home and while the company has made some strides in moving into the business world, its strategy is aimed primarily at the small and medium business segment - companies with a maximum of around 200 employees.

The switch from UUNet to Internet Solutions as the first tier Internet service provider means M-Web can now enter the leased-line market, although it does not plan to take on the traditional providers in this market head-on.

M-Web`s business is divided into three broad categories. Firstly, there is the cheap dial-up segment trading as Polka.co.za; then the premium-rate connections, which are the company`s bread-and-butter; and lastly, there are the broadband services, which aggregate the typical broadband offerings, such as movie clips, to South African connection specifications.

"We have to have Polka.co.za; we would be a fool not to be in that space. The premium-rate service is constantly being enhanced and recently we included Microsoft`s Encarta. It also has the online version of Encyclopaedia Britannica and the South African schools curriculum-based learning online," Reid says.

Broadband remains a different cup of tea for M-Web`s service offerings. Firstly, the fastest connectivity speed in SA is only 512Mbps, which makes it difficult to download movie clips and other such items. Secondly, while Telkom has improved its offerings in terms of its recently announced DSL Light, such services are still expensive for consumers.

Reid says the advent of broadband should allow for the emergence of "triple-play" - the use of telephones, PCs and TVs as a means to download content.

"Each will have its own content niche as such content will be specific to one format or another. However, to achieve that vision, we need technology and regulation to come together," he says.

The regulations must spell out the interconnectivity issues.

Kim Reid, CEO, M-Web

The effective legalisation of VOIP means M-Web has another service offering, but Reid says VOIP will not necessarily be the "nirvana" many expect it to be.

"What is needed for a VOIP home service is an un-metered connection via a DSL line. And while worldwide use of VOIP has taken off, there still needs to be a lot of work done around quality-of-service and making consumers feel comfortable with the technology," he says.

According to Reid, there are three voice connectivity models: PC-to-PC, phone-to-phone and PC-to-phone.

"The PC-to-PC model will probably remain niche as that technology is still `clunky`. Phone-to-phone calls will be a lot more intuitive to consumers as they are already comfortable with the technology," he says.

VOIP will probably find its first real applications in the business environment through leased-line connectivity. However, Reid says, there is still the interconnectivity question, which means that while international calls can be made, local calls will not be so easy because the users may not be able to break out into the local loop.

"We need the regulations to spell out the interconnectivity issues, otherwise we see a lot of action, particularly on the legal front."

M-Web`s offering for next year is still being developed, but Reid says some kind of "Big Black Box" package can be expected that may include a headset and software to create a VOIP connection.

The advent of liberalisation and the use of VOIP also open another door of opportunity for M-Web for its QQ instant messaging service.

QQ was not a great success in SA when first launched two years ago, but over 60 million Chinese people use it.

"Instant messaging is another form of communication and it complements technologies such as VOIP," Reid says. "The new version of QQ, launched late September, has an SMS service, which means we can integrate it into SMS services and VOIP and video applications."