Telkom's per second billing: A tactical or strategic move?

Telkom will introduce per second billing from January 1999, thereby moving billing from per unit to per second. This certainly is good news for consumers, yet the question needs to be asked: " What is Telkom's strategy behind such a move?"

This move by Telkom is in line with many operating in competitive environments.

In this column I shall provide a brief assessment of why Telkom has announced this change. Let's start by briefly looking at international markets.

This move by Telkom is in line with many operating in competitive environments. Telkom has moved straight to per second billing whereas many other operators have moved from unit billing to per minute.

Innovative resellers of telecommunications services attempt to simulate per second billing by dividing the minute rate by 10 and strongly advertising per 6-second billing. This creates fierce competition and a study of the American market shows many resellers marketing the 6-second billing increment.

BT introduced per second billing when it faced competition from Mercury. Based on commentary from UK telecommunications market analysts, it was quite a successful strategy in forcing Mercury to adopt the per second billing tariff structure as well.

Neither Telkom nor the cellular operators offer per second billing. Telkom offers unit-based billing while the cellular operators offer time increment billing. This tariff regime offers the opportunity to the new third and fourth operators to enter the market with an innovative tariff regime based on per second billing. Telkom's proposed move would nullify this strategy somewhat as it would already have created the market awareness of per second billing.

Although the impact of this strategy is reduced, it is still a valid tariff strategy for the third and fourth operators. MTN and Vodacom have not yet reacted to the change in the tariff regime. It is probably too early given that Telkom only announced this tariff structure last week. It will be interesting to observe whether the existing cellular operators do react and introduce a tariff regime based on smaller time increments.

Where the cellular operators have a lead on Telkom is in the area of bundling products and services. This is where we should expect to see some innovative and creative offerings from Telkom over the next 12 months.

Telkom has embarked on a major drive to upgrade its network, ranging from developing a self-healing network to the implementation of IN-based services. Telkom is, comparatively speaking, in a far stronger position regarding its ability to offer customers new and innovative products and services. Per second billing not only places pressure on the existing cellular operators but will also push the new operators into adopting a similar tariff regime.

So what is Telkom's per second billing strategy? It is certainly not a tactical move! I believe it represents the first in a series of such strategic moves to create market conditions and expectations that any new operator will need to meet when entering the market.

We can expect to see many similar changes in the telecommunications markets when the additional cellular operators and the long-awaited second network operator (second fixed line licencee) enters the SA market.

In conclusion, changes such as these are brought about by competition. We can look forward to the introduction of many products and services that will benefit the consumer.