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Second phone operator needs to be in the loop to be competitive
- Thread starter mystic
- Start date
Good article this, but I have a few points to make:
-> Absolutely. It is the consumer who paid for Telkom's exclusivity. Telkom's exclusivity was granted with the major aim of increasing teledensity in SA. 8 years later, SA has about the same number of phone lines as we did when Telkom's exclusivity licence was granted. We have been paying out of our *ashcroft*-holes for nothing. The extra money it has cost us in tariffs was supposed to be diverted to financing the roll-out. Instead, through monumental ICASA/SATRA + DoC + MoC buggar-ups, together with Telkom's manipulations, that extra money we spent didn't go to increasing teledensity and instead it went to Telkom shareholders and executives. It amazes me how many supposed "IT/Telecoms" journalists miss this point. Thank pete this one hasn't.
I totally disagree with the view that the fixed-line market has reached saturation point. The only way that statement could possibly be true is if the aim of telecoms liberalisation in SA is to 'spread the pie' and not 'increase the pie'. In other words, I disagree with this statement if the aim is to give more companies a chance to compete in the industry without putting an emphasis on increasing the amount of money spent overall in the sector through lower tariffs and thus more customers.
The truth of the matter, to me, is that there is ample room to increase the pie. Telecoms liberalisation experiences across the world have shown that the 'pie' always increases. In fact, I cannot think of a single country where the 'pie' was simply spread without the 'pie' increasing. Furthermore, the view that liberalisation disproportionately benefits developing countries MORESO than developed countries is increasingly gaining currency. Basically, what this means is that liberalisation is good for developed countries, but it is even better for developing countries.
What I am essentially arguing here is that full and complete liberalisation in SA will lead to lower prices. Lower prices mean a decrease in ARPC (average revenue per customer). But lower prices will also mean an increase in customers. Thus although there will be less money being spent by each customer, the increase in the number of customers will counter-balance (if not overtake) such losses.
This journalist is making statements that are true only under certain circumstances. S/He is saying that there is saturation of the market. This is true ONLY IF it is assumed that liberalisation will not decrease prices significantly. And I do ask, with tears in my eyes, what is the point of liberalisation if it is not to decrease prices?
Yes, there is saturation in voice-calling so long as voice-calling costs an arm and a kidney. But there IS NOT saturation if prices come down to the point where they are internationally competitive.
There are a sh1tload of cellphones in SA, we are one of the most 'cellulaly' connected countries in the world. But the growth of the cellular industry is absolutely and unequivocably 100% due to govt's failures to roll out sustainably affordable lines, coupled with the tariff structures offered by cellphone companies. Telkom DOES NOT compete with the cellphone companies in the so-called "prepaid" market. Most cellphones in SA are prepaid cellphones.
(Yes, Telkom does have their so-called "prepaid" lines, but they are not true prepaid - there is a significant rental charge built in, a rental charge which has to be paid every month regardless of whether the phone is used or not. Prepaid cellphones, on the other hand, may have a rental charge, but this rental charge is so small that on MTN for example, R30 will buy a person 500 YEARS of connectivity to the network, as opposed to Telkom's prepaid rental charge where R30 will buy less than a month's connectivity).
Getting back to my point here- the writer of this piece partly bases her claim of saturation on the percentage of GDP that comes from GDP. By the way, this figure is around 6%. The worldwide norm is somewhere between 2-3,5% of GDP. And yes, the higher percentage of GDP that comes from telecoms is a reflection of high telecoms costs, NOT high telecoms usage. I expect full liberalisation would not change this 6% figure. I expect that, if there was full and immediate liberalisation in SA telecoms (across the board - i.e. including all subsectors) that this 6% would actually increase. As mentioned earlier, I have yet to come across a developing country where liberalisation did not increase the size of the 'pie'.
I only partly agree with the journalist's comments that the only market the SNO has to go after is current Telkom customers. I think it is too early to speculate on this, as we have yet to see what the new laws will be regarding number portability, interconnections, pre-carrier selection and any steps that the govt and/or ICASA may take to give the SNO an artificial boost. We also have no idea about licence conditions that will be imposed, or what exactly will be required from Telkom when the SNO comes into operation. We don't know if the price cap will apply to the SNO, or even if ICASA might reconsider Telkom's price cap model. Or if any of the big-ass companies who have been locked into long-term contracts with Telkom will, once the SNO becomes operational, contest the legality of such long-term contracts (perhaps via the Competition Commission).
Nevetheless, I will speculate that the SNO has a market in disgrunted Telkom customers as well as current cellphone-only users. If it is economically and legally viable, the SNO will no doubt find a huge untapped market in TRUE prepaid fixed lines. There are at least 3 million fixed lines in SA which are not connected. These lines are lying around, being useless as Telkom has failed to introduce afforable tariffs (and these are the lines which Telkom customers financed).
I think there will be a degree of churn from Telkom to the SNO, but the real companies who should look out are the cellphone companies. If the SNO can introduce packages which do not commit users to huge amounts ever month, then the cell companies will be the big losers in the SNO era. I think that people with prepaid cellphones will retain their cellphones and retain their connectivity with the cellphone networks, but they spend far less on them and instead take out fixed lines and spend on these.
Um no, not really. The old SAPO customers paid for it. Then the powers that were wanted to make the infrastructure better, so some foreigners paid for the upgrading. Then some other foreigners came along and paid the outstanding debt plus interest to the original foreigners. Then the new foreigners, in cahoots with the DoC, made the customers pay for it, along with a great deal more interest. The the second group of foreigners ran away back home from whence they planned their next "get in to a developing country, make a killing, get out" scenario. That's actually what happened.
Ok, I'm done.
The price that SA has paid for granting telecommunications group Telkom a monopoly — and then extending it by failing to license a competitor in good time — has been high tariffs. There have been benefits from the monopoly, with Telkom’s infrastructure now modernised and expanded, but it has ultimately increased the cost of doing business in SA and reduced our competitiveness.
-> Absolutely. It is the consumer who paid for Telkom's exclusivity. Telkom's exclusivity was granted with the major aim of increasing teledensity in SA. 8 years later, SA has about the same number of phone lines as we did when Telkom's exclusivity licence was granted. We have been paying out of our *ashcroft*-holes for nothing. The extra money it has cost us in tariffs was supposed to be diverted to financing the roll-out. Instead, through monumental ICASA/SATRA + DoC + MoC buggar-ups, together with Telkom's manipulations, that extra money we spent didn't go to increasing teledensity and instead it went to Telkom shareholders and executives. It amazes me how many supposed "IT/Telecoms" journalists miss this point. Thank pete this one hasn't.
The fixed-line market is approaching saturation point with SA spending more on telecoms as a percentage of gross domestic product than most European developed nations. When taken with the huge growth of cellular telephony, the market may well have reached saturation for the segments that can afford service. The only option for the new operator to create a space for itself is to take business away from Telkom.
I totally disagree with the view that the fixed-line market has reached saturation point. The only way that statement could possibly be true is if the aim of telecoms liberalisation in SA is to 'spread the pie' and not 'increase the pie'. In other words, I disagree with this statement if the aim is to give more companies a chance to compete in the industry without putting an emphasis on increasing the amount of money spent overall in the sector through lower tariffs and thus more customers.
The truth of the matter, to me, is that there is ample room to increase the pie. Telecoms liberalisation experiences across the world have shown that the 'pie' always increases. In fact, I cannot think of a single country where the 'pie' was simply spread without the 'pie' increasing. Furthermore, the view that liberalisation disproportionately benefits developing countries MORESO than developed countries is increasingly gaining currency. Basically, what this means is that liberalisation is good for developed countries, but it is even better for developing countries.
What I am essentially arguing here is that full and complete liberalisation in SA will lead to lower prices. Lower prices mean a decrease in ARPC (average revenue per customer). But lower prices will also mean an increase in customers. Thus although there will be less money being spent by each customer, the increase in the number of customers will counter-balance (if not overtake) such losses.
This journalist is making statements that are true only under certain circumstances. S/He is saying that there is saturation of the market. This is true ONLY IF it is assumed that liberalisation will not decrease prices significantly. And I do ask, with tears in my eyes, what is the point of liberalisation if it is not to decrease prices?
Yes, there is saturation in voice-calling so long as voice-calling costs an arm and a kidney. But there IS NOT saturation if prices come down to the point where they are internationally competitive.
There are a sh1tload of cellphones in SA, we are one of the most 'cellulaly' connected countries in the world. But the growth of the cellular industry is absolutely and unequivocably 100% due to govt's failures to roll out sustainably affordable lines, coupled with the tariff structures offered by cellphone companies. Telkom DOES NOT compete with the cellphone companies in the so-called "prepaid" market. Most cellphones in SA are prepaid cellphones.
(Yes, Telkom does have their so-called "prepaid" lines, but they are not true prepaid - there is a significant rental charge built in, a rental charge which has to be paid every month regardless of whether the phone is used or not. Prepaid cellphones, on the other hand, may have a rental charge, but this rental charge is so small that on MTN for example, R30 will buy a person 500 YEARS of connectivity to the network, as opposed to Telkom's prepaid rental charge where R30 will buy less than a month's connectivity).
Getting back to my point here- the writer of this piece partly bases her claim of saturation on the percentage of GDP that comes from GDP. By the way, this figure is around 6%. The worldwide norm is somewhere between 2-3,5% of GDP. And yes, the higher percentage of GDP that comes from telecoms is a reflection of high telecoms costs, NOT high telecoms usage. I expect full liberalisation would not change this 6% figure. I expect that, if there was full and immediate liberalisation in SA telecoms (across the board - i.e. including all subsectors) that this 6% would actually increase. As mentioned earlier, I have yet to come across a developing country where liberalisation did not increase the size of the 'pie'.
I only partly agree with the journalist's comments that the only market the SNO has to go after is current Telkom customers. I think it is too early to speculate on this, as we have yet to see what the new laws will be regarding number portability, interconnections, pre-carrier selection and any steps that the govt and/or ICASA may take to give the SNO an artificial boost. We also have no idea about licence conditions that will be imposed, or what exactly will be required from Telkom when the SNO comes into operation. We don't know if the price cap will apply to the SNO, or even if ICASA might reconsider Telkom's price cap model. Or if any of the big-ass companies who have been locked into long-term contracts with Telkom will, once the SNO becomes operational, contest the legality of such long-term contracts (perhaps via the Competition Commission).
Nevetheless, I will speculate that the SNO has a market in disgrunted Telkom customers as well as current cellphone-only users. If it is economically and legally viable, the SNO will no doubt find a huge untapped market in TRUE prepaid fixed lines. There are at least 3 million fixed lines in SA which are not connected. These lines are lying around, being useless as Telkom has failed to introduce afforable tariffs (and these are the lines which Telkom customers financed).
I think there will be a degree of churn from Telkom to the SNO, but the real companies who should look out are the cellphone companies. If the SNO can introduce packages which do not commit users to huge amounts ever month, then the cell companies will be the big losers in the SNO era. I think that people with prepaid cellphones will retain their cellphones and retain their connectivity with the cellphone networks, but they spend far less on them and instead take out fixed lines and spend on these.
The telecommunications utility has in the past vehemently opposed the concept, and for good reason. Telkom built and paid for this infrastructure, which is a key factor in allowing it to keep its dominance, even in a liberalised market.
Um no, not really. The old SAPO customers paid for it. Then the powers that were wanted to make the infrastructure better, so some foreigners paid for the upgrading. Then some other foreigners came along and paid the outstanding debt plus interest to the original foreigners. Then the new foreigners, in cahoots with the DoC, made the customers pay for it, along with a great deal more interest. The the second group of foreigners ran away back home from whence they planned their next "get in to a developing country, make a killing, get out" scenario. That's actually what happened.
Ok, I'm done.
Quote:
"If it is unbundled, other operators and internet service providers are given access to Telkom’s telephone exchanges, which means anyone can offer services on the lines now controlled by Telkom. The telecommunications utility has in the past vehemently opposed the concept, and for good reason. Telkom built and paid for this infrastructure, which is a key factor in allowing it to keep its dominance, even in a liberalised market. The move will hurt Telkom."
Yes they built and paid for it using taxpayers' money Robyn Chalmers.
"If it is unbundled, other operators and internet service providers are given access to Telkom’s telephone exchanges, which means anyone can offer services on the lines now controlled by Telkom. The telecommunications utility has in the past vehemently opposed the concept, and for good reason. Telkom built and paid for this infrastructure, which is a key factor in allowing it to keep its dominance, even in a liberalised market. The move will hurt Telkom."
Yes they built and paid for it using taxpayers' money Robyn Chalmers.
<Q>The move shows that government is serious about reducing telecoms costs. It’s a bold decision, and not an uncomplicated one. But, taken together with the launch of the second phone operator, opening up the telecoms market earlier this year, and a tighter pricing regime for Telkom, it holds out real prospects of prices falling sharply.
‖Chalmers is deputy editor.</Q>
What move Deputy Editor ?
I have absolutely no idea what this last paragraph is about.
‖Chalmers is deputy editor.</Q>
What move Deputy Editor ?
I have absolutely no idea what this last paragraph is about.
CyberMatix
Well-Known Member
- Joined
- Dec 12, 2004
- Messages
- 405
India also has a thriving call-centre business, which SA is trying to replicate. This is, in many ways, the ultimate small business, with low barriers to entry, and it holds out the promise of significant job creation.
Oh please Thabo, please stop showing off your stupidity. Just imagine someone from New York or London call and get hold of a call centre such as implemented by Sentech, WBS or Telkom. If it was WBS they would have to wait about 20 minutes before anyone bothers to pick up the phone and answer, and after that, it's just downhill all the way.
I remember when dealing with Sentech, they made a mistake with my 9 digit bank account number. After a lot of hassle it was fixed, but then they made a mistake with another of the digits. After a lot of hassle that was fixed, but then they left the last digit off. It took all in all 2 months to fix this problem. How can you expect to deal with international customers in this way?
CyberMatix
Well-Known Member
- Joined
- Dec 12, 2004
- Messages
- 405
Government has moved to liberalise the telecommunications market, but the issue is complex. The state continues to own a hefty 38% stake in Telkom, and will own a portion of the second operator.
Who are we trying to fool here? How can you possibly have any "fair" competition with the state owning significant portions of the competitors.
Oh I forgot, the concept of "fair" is different here that in the rest of the universe.
I guess we should be thankful. If it was up to Zuma's ANC they both would be nationalised.