"VPN and Internet providers in South Africa will not survive unless they align themselves with larger telecommunication or infrastructure providers", says Stuart Hardy, MTNNS Sales and Marketing Director.
"The VPN and Internet industry is one based on scale, which means that the more clients you have, the less expensive it is deploy new services. However, it is becoming apparent that the only way VPN and Internet providers can achieve the required scale to remain competitive, is to be part of a much larger telecommications industry such as PSTN (Private Switched Telecommunications Network) license holder or a cellular operator which use the same infrastructure to deliver their services as a network or Internet provider".
The fact that all major international Internet and VPN providers are part of much larger telecommunications providers such as AT&T and Cable & Wireless proves this theory. By being able to use the same physical infrastructure and global points to distribute Internet and VPN services, they are in a position to provide competitive rates. The reason South Africa is behind in the cost race is due to the fact the South African market has several Internet and VPN networks, but only one Telecommunications provider. This makes it difficult for the vast majority of the VPN and Internet businesses to reach the economies of scale necessary to remain competitive in the future, or even provide competitive pricing now.
MTNNS, the first South African company to create a Network and Internet offering by leveraging the economies of scale and infrastructure of a cellular network in this market, has made this evident.
"The MTNNS network was built in one of the largest telecommunications infrastructures in South Africa. Without these facilities, it would have been impossible for MTNNS to enter a mature market and compete with established network providers" says Hardy. "The technical and cost benefits associated to leveraging a cellular operator with a network of this size have significantly reduced the operating cost normally associated to running a network or Internet service."
Hardy believes that the introduction of the SNO will possibly see another Network and Internet provider emerging even though that may be long term. Inevitably there will only be two or three major network and Internet providers in the Market, each one belonging to a larger Telecommunications network, the rest will find it difficult to keep up.
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