Regulators must be pushed

SA`s telecommunications regulators must be pushed to investigate and resolve interconnection and licensing rules, as these are of utmost urgency and more litigation is expected, says Gartner analyst Will Hahn.

The international research firm`s recommendations to operators are contained in the telecoms analyst`s latest report: "South Africa`s Telecom Growth Creates Opportunities for Network Vendors and Operators".

Reports such as these give a foreigner`s snapshot view of the state of play in the South African telecoms industry. They are often used by international firms to decide how and when to enter or exit the South African market.

Hahn says fibre-optic demand will probably exceed supply in the next two years. Since most foreign and domestic providers offer South African companies applications sourced from overseas, partnerships with local players are important, he notes.

Significant growth of new fibre-optic systems is under way and this will continue through 2010. "This expansion - and the processes behind it - will bring new competition," Hahn says.

SA`s long-haul international sector will see substantial growth in the next two to three years. "This will be driven by several new projects that are either under way, or in an advanced stage of planning, as well as by widening ownership under open access principles for the first time," Hahn writes.

He says the country`s communications network is already marked by infrastructure built by several types of organisations, including mobile carriers and government agencies.

"As such, the regulatory authorities` decision to allow former value-added network services and new entrants to build networks, in addition to offering services, is a difference of degree, not kind."

This, Hahn says, would lead to a witling away of the dominance by some of the incumbents, in a process he labels as "Death by a Thousand Cuts". In this scenario, customers will continuously leave the incumbents to move to smaller more agile companies that are able to offer converged services at lower costs.

Even with increased bandwidth, capped service plans will continue.

Will Hahn, analyst, Gartner

Hahn points out that pent up demand for telecoms services will essentially remain unlimited, despite the respectable mobile penetration and the continuing difficult regulatory and competitive environment.

"Even with increased bandwidth, capped service plans will continue. But a new entrant is likely to offer a flat-rate voice and/or data package within a year. Most new entrants will pursue opportunistic network acquisitions and expansions - of fibre to densely settled areas, or new housing, for example - rather than trying to develop national networks to compete with the incumbents."

The report says the looming 2010 World Soccer Cup is providing impetus to develop telecoms infrastructure.

Hahn says that should new ECNS licence-holders try to sell their licences to foreign ownership, the regulatory authorities may impose "black economic empowerment" restrictions. Therefore, partnerships, rather than outright takeovers or mergers, may be the better route for foreign companies to follow, he explains.

He warns against the regulator (ICASA) imposing high licence fees that deter new entrants, as growth and opportunity in the market will be dramatically diminished.