Small step forward...

The issuing of ECNS (electronic communications network services) licences to every VANS (valued-added network service) provider and his dog has opened up the telecommunications market to the possibility of true competition for the first time. Things are never as simple, or as easy, as they sound, which in this case means licences issued do not equal operational services.

On the other hand, the local telecoms market has shown remarkable ingenuity, adaptability and innovative ability over its years in the dark ages, so the current incumbents would do well to watch their backs and their customer bases.

Every VANS provider isn't going to pick up a spade and shovel, and start digging.

Rob Lith, CEO, Connection Telecom

The mobile and wireless market, for one, is going to be well worth watching. Firstly, because as much as cellular incumbents MTN and Vodacom would have us believe the market is competitive and their broadband service is affordable, it simply isn't. If ADSL access weren't so dismal (bandwidth caps, anyone?), 3G take-up would have been significantly lower in this neck of the woods. And let's not forget to factor in the number of companies using 3G as a backup access technology. Once there is real bandwidth available (welcome, Seacom), things should get very interesting, very quickly.

Secondly, neither iBurst nor Sentech have covered themselves in glory as far as reliable and affordable wireless broadband service provision goes, and more than a few customers are looking for viable alternatives.

Before alternatives become available, there's a small matter of networks needing to be rolled out. Despite the Department of Communications' (DOC's) reservations about every VANS provider in town digging up pavements, South Africa's road infrastructure remains relatively untouched, ongoing fibre rollouts from MTN, Vodacom and Neotel notwithstanding.

As Connection Telecom CEO Rob Lith points out: “Clearly, every VANS provider isn't going to pick up a spade and shovel, and start digging. It was an idiotic argument. You need deep pockets, and then there are formalities like negotiating with the councils, and so on.”

Comments Neotel enterprise sales executive head Stefano Mattiello: “We have licences, but no spectrum. And wireless won't buy you anything. You need national and international backhaul connectivity, billing, applications, and so on. There is too much emphasis on wireless. It's like having fibre in the ground - it's there, so? What are you going to do with it?”

The significant expense of laying copper or fibre will dramatically limit the entry of new market participants, says Steve Song, Telecommunications fellow at The Shuttleworth Foundation. “Similarly, lack of available wireless spectrum limits the use of wireless to a few players, most of whom are market incumbents.”

And therein lies the problem. Or does it? As Song notes: “The lack of available spectrum is, in fact, an artificial scarcity. Current management and regulation of spectrum in South Africa dates back to a time when available spectrum exceeded demand and to an understanding of wireless technology that pre-dates the digital era.

“A glance at the spectrum charts issued by the South African regulator would appear to indicate that the useable wireless spectrum is fully allocated,” says Song. “However, actual spectrum use at any particular place, at any particular time, is likely to be less than 10%. There is a range of administrative and technological solutions being explored in the rest of the world, which could open up new possibilities for spectrum use in South Africa.

“Effective re-use and re-allocation of spectrum, as well as the expansion of the spectrum commons, could unleash a wave of competition and innovation, which could catapult South Africa into the forefront of affordable telecoms,” he states.

It goes without saying that the old kids on the block are not going to be keen to relinquish anything or do anything they don't absolutely have to, like make interconnection easy for new players. This is called sound competitive policy. It's also what has kept South Africa in the telecoms dark ages. We have the policy-maker to thank for that one.

In any event, as Neotel's Mattiello bluntly states: “The unanswered question is whether or not MTN and Vodacom are going to break their cartel and play nice.”

Certainly, as far as interconnection goes, some of the larger VANS have started acting as clearing houses for traffic from the smaller VANS.

The lack of available spectrum is, in fact, an artificial scarcity.

Steve Song, telecommunications fellow, The Shuttleworth Foundation

Says Connection Telecom's Lith: “The smaller VANS don't have the capacity to go to all the operators and negotiate interconnections with them. Larger players, like MWeb and Vox, are entering more complex contracts that allow them to transmit smaller players' traffic through their networks. Initiatives like this make it easier for smaller VANS to get connected.

“Initially, when the smaller VANS and ECNS licensees approached the mobile operators to get interconnect agreements in place, various roadblocks where put up - like 165-page legal contracts, which made it difficult for the little guy who doesn't have a fleet of lawyers on call. All the stuff telecoms companies have done for years is new to the VANS. It's a huge exercise for them. And then the operators specify minimum traffic volumes before they will interconnect.”

In between all of this is a country, and an economy, that really needs a competitive telecoms environment in order to develop fully. While many will argue that the incumbents are merely acting according to sound capitalist principles, the counter-argument is that by allowing free and fair competition, one increases the size of the pie. While MTN, Vodacom and Telkom frantically clutch onto their pieces of the current market, they could be holding onto a stake in a much larger and expanded sector. The less said about current licence costs, the better, but it's perhaps worth mentioning that many small bits add up to more than a few slightly larger bits.

It's entirely fair to say that the journey to a liberalised telecoms sector in South Africa since 1994 can be accurately described as one step forward, 10 steps back. Good intentions don't translate into good policy, as has been so clearly demonstrated. Where to next will only become clear once the regulator has finalised all the details, like the costs of the ECNS and WiMax licences. Let's hope the regulator won't have us taking yet another 10 steps back.