http://www.moneyweb.co.za/news/tech_stocks/434250.htm
Belinda Anderson
Posted: Wed, 20 Apr 2005 13:00 | � Moneyweb Holdings Limited, 1997-2005
An independent study commissioned by the South Africa Foundation into telecommunications pricing has found the country�s international bandwidth costs to be 399% more expensive than the average country surveyed.
Affordable international bandwidth is crucial for industries such as call centres, which route calls using voice over Internet Protocol (VoIP). It is also important for multinational companies needing leased lines to link to their international subsidiaries, and for Internet Service Providers (ISPs).
Sarah Truen, analyst from G:enesis Analytics, the body that conducted the research, said the findings on international bandwidth were the �most extreme� of the product range that it had studied. But, on almost all other counts, South Africa also fared very poorly.
The report was commissioned as part of the ongoing efforts of business and government to encourage the development of the call centre market, an area that has been identified as having huge potential for the country. A McKinsey study recently found that business process outsourcing (BPO), which is predominantly the call centre industry, could generate up to 150 000 jobs in South Africa. South Africa Foundation executive director Michael Spicer said a �range of focused interventions� had to take place in order for this potential to be reached. One of the most significant barriers was found to be the high cost of telecoms, but due to the contested nature of some of the other research into this subject, it decided to commission an independent study.
In order to obtain a representative sample of countries against which to compare South Africa, Truen said G:enesis had carefully chosen countries with effective telecommunications sectors, constructing an index of telecoms competitiveness including penetration levels in internet and telephony, investment and prices. Best practice peer group countries chosen included Brazil (probably the nearest comparable country to SA), India, Malaysia, Morocco, Philippines and Thailand. Countries chosen as examples of international best practice included Canada, Hong Kong, Israel, Norway, Singapore, Sweden, South Korea and the United States.
On most fronts, South Africa was more expensive, and in most cases the most expensive, of the comparative countries. This included pricing on services like business ADSL (always on broadband), domestic leased lines, international leased lines (international bandwidth), retail ADSL (always on retail broadband), and even retail data (local ISPs, where there is competition, but the ISPs still have to buy international bandwidth from Telkom at retail, rather than wholesale prices).
On ADSL costs, Truen said G:enesis had included Telkom�s latest prices, after cuts earlier this year. But, although Telkom�s prices had come down, South Africa became less competitive over that period because other countries dropped their prices even further.
This study seems to vindicate a recent complaint by the industry laid with Icasa, and around which public hearings were held, into Telkom�s high ADSL pricing. Telkom argued that its broadband pricing was fair.
According to the G:enesis study, the only measure where South Africa stacked up well was in terms of international voice calls, coming in as the 5th cheapest location out of 15 countries sampled, and 14% cheaper than the average price. In this area of the market, Truen said, Telkom faced stiff competition from VoIP service providers and those using other business models such as callback.
G:enesis even compared South Africa�s prices to international examples using a far more competitive exchange rate. Even using a worst-case, and now highly unlikely scenario, of R9/$1, South African telecoms prices were �still overwhelming at the top end of the pricing range�, Truen said.
Although the most recent regulatory changes in telecoms were headed in the right direction, Truen said they did not deal with the problem of international bandwidth pricing. This needed to be urgently addressed, she said.
The SAT-3 undersea cable and the South African Far East (SAFE) cable systems are crucial links between SA and other countries. The projects cost $650-m, an investment that was financed jointly by African telecoms operators, including Telkom.
G:enesis estimates Telkom has the rights to about 20% of the capacity of both cable systems. Truen said according to its calculations, Telkom would need to sell just 11% of the cable�s line capacity to recover the total cost of its investment in the cables in just one year. So, at the current pricing levels and investment required, the costs did not seem justified on a comparable basis.
Stephan Malherbe, a director of G:enesis, described the SAT-3 cable as the �critical pathway� to the rest of the world and said somehow, it unfortunately seemed to have fallen through the regulatory cracks, perhaps given the involvement of other investors and that the jurisdiction for the cable spans country borders. Malherbe said satellite was an alternative for the provision of international bandwidth, but for some uses � such as the crucial call centre industry where calls are carried using VoIP and the connection must be seamless � it was not cost competitive or technology capable.
Spicer said with the report in the public domain, it would be up to the regulators and policymakers to decide to take the findings into account and how to act on them.
Belinda Anderson
Posted: Wed, 20 Apr 2005 13:00 | � Moneyweb Holdings Limited, 1997-2005
An independent study commissioned by the South Africa Foundation into telecommunications pricing has found the country�s international bandwidth costs to be 399% more expensive than the average country surveyed.
Affordable international bandwidth is crucial for industries such as call centres, which route calls using voice over Internet Protocol (VoIP). It is also important for multinational companies needing leased lines to link to their international subsidiaries, and for Internet Service Providers (ISPs).
Sarah Truen, analyst from G:enesis Analytics, the body that conducted the research, said the findings on international bandwidth were the �most extreme� of the product range that it had studied. But, on almost all other counts, South Africa also fared very poorly.
The report was commissioned as part of the ongoing efforts of business and government to encourage the development of the call centre market, an area that has been identified as having huge potential for the country. A McKinsey study recently found that business process outsourcing (BPO), which is predominantly the call centre industry, could generate up to 150 000 jobs in South Africa. South Africa Foundation executive director Michael Spicer said a �range of focused interventions� had to take place in order for this potential to be reached. One of the most significant barriers was found to be the high cost of telecoms, but due to the contested nature of some of the other research into this subject, it decided to commission an independent study.
In order to obtain a representative sample of countries against which to compare South Africa, Truen said G:enesis had carefully chosen countries with effective telecommunications sectors, constructing an index of telecoms competitiveness including penetration levels in internet and telephony, investment and prices. Best practice peer group countries chosen included Brazil (probably the nearest comparable country to SA), India, Malaysia, Morocco, Philippines and Thailand. Countries chosen as examples of international best practice included Canada, Hong Kong, Israel, Norway, Singapore, Sweden, South Korea and the United States.
On most fronts, South Africa was more expensive, and in most cases the most expensive, of the comparative countries. This included pricing on services like business ADSL (always on broadband), domestic leased lines, international leased lines (international bandwidth), retail ADSL (always on retail broadband), and even retail data (local ISPs, where there is competition, but the ISPs still have to buy international bandwidth from Telkom at retail, rather than wholesale prices).
On ADSL costs, Truen said G:enesis had included Telkom�s latest prices, after cuts earlier this year. But, although Telkom�s prices had come down, South Africa became less competitive over that period because other countries dropped their prices even further.
This study seems to vindicate a recent complaint by the industry laid with Icasa, and around which public hearings were held, into Telkom�s high ADSL pricing. Telkom argued that its broadband pricing was fair.
According to the G:enesis study, the only measure where South Africa stacked up well was in terms of international voice calls, coming in as the 5th cheapest location out of 15 countries sampled, and 14% cheaper than the average price. In this area of the market, Truen said, Telkom faced stiff competition from VoIP service providers and those using other business models such as callback.
G:enesis even compared South Africa�s prices to international examples using a far more competitive exchange rate. Even using a worst-case, and now highly unlikely scenario, of R9/$1, South African telecoms prices were �still overwhelming at the top end of the pricing range�, Truen said.
Although the most recent regulatory changes in telecoms were headed in the right direction, Truen said they did not deal with the problem of international bandwidth pricing. This needed to be urgently addressed, she said.
The SAT-3 undersea cable and the South African Far East (SAFE) cable systems are crucial links between SA and other countries. The projects cost $650-m, an investment that was financed jointly by African telecoms operators, including Telkom.
G:enesis estimates Telkom has the rights to about 20% of the capacity of both cable systems. Truen said according to its calculations, Telkom would need to sell just 11% of the cable�s line capacity to recover the total cost of its investment in the cables in just one year. So, at the current pricing levels and investment required, the costs did not seem justified on a comparable basis.
Stephan Malherbe, a director of G:enesis, described the SAT-3 cable as the �critical pathway� to the rest of the world and said somehow, it unfortunately seemed to have fallen through the regulatory cracks, perhaps given the involvement of other investors and that the jurisdiction for the cable spans country borders. Malherbe said satellite was an alternative for the provision of international bandwidth, but for some uses � such as the crucial call centre industry where calls are carried using VoIP and the connection must be seamless � it was not cost competitive or technology capable.
Spicer said with the report in the public domain, it would be up to the regulators and policymakers to decide to take the findings into account and how to act on them.
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