The J&J Group has announced plans to become the first black majority-owned and controlled first-tier Internet service provider (ISP) in SA.
J&J CEO Jay Naidoo said this morning that the new ISP will buy the old Rosebank premises and existing IS2 platform of Internet Solutions (IS). IS is moving into new offices at the centralised office park that parent company Dimension Data built in Northern Johannesburg.
Naidoo is the former minister of Post and Telecommunications, which is now the communications ministry.
He says the new venture is expected to "hit the ground running", with new people already being appointed to the division and a name to be announced within the next week or two.
"We expect to be operational within weeks," he says. Although Naidoo declines to comment on the size of J&J`s investment in the new venture, he is positive about its chances of success in a closely contested market.
In a statement released this morning, J&J said the company would provide basic connectivity, hosting and co-location to both the public and private sector. Several government initiatives are underway to provide Internet access to schools and rural areas, among them the GautengOnline project. Government procurement policy would favour a black empowerment company in such tenders.
Yet the move comes at a time when the ISP market is under pressure. According to a recently released study, the growth in the total number of South Africans connecting to the Internet will this year be the lowest since 1994, with only a 10% increase to 3.1 million users expected.
The study, conducted by consulting firm World Wide Worx, also showed relatively low growth of 20% expected in the market for leased-line connections used by corporate clients.
However, the entry of a second national telecommunications operator during the course of 2003 is expected to significantly lower the prices ISPs pay for basic infrastructure. Parastatals Transtel and Esi-Tel, which will form part of the new player, are already courting ISPs and have promised preferential rates and access to a wide range of services.
The consumer dial-up connectivity market could also be stimulated by lowered rates. As part of a recent settlement in a legal dispute between itself and telecommunications regulator, the Independent Communications Authority of SA (ICASA), incumbent Telkom committed to providing "Internet packages" that will make it cheaper for home users to connect to their ISP.
"This venture shows our commitment to developing black skills in the strategically important ISP sector of the market which shows huge potential for future growth as government and private sector demand grows for Internet-enabling infrastructure and support services that enable their online access and delivery of citizen and customer services," says Naidoo.
The new player will join IS, UUNet, Telkom-owned SAIX, MTN Network Solutions (formerly Citec) and AT&T as local first-tier ISPs.
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