SNO or Telkom Whipping Post?

[JustinHarrison]

OK, so we all know about the SNO. A “colourful” company with a diverse shareholding aggg ha (excuse me while I clear my throat).

My question is this:

• Do you think the SNO will beneficially impact our telecommunications sector, or
• Do you think that we might be heading for a duopoly? (Dis twee F@@en BLIK#@@ that have control)

What is your opinion?

 

[MaD]

It would be pure speculation.. prolly a bit too early to say - but one thing is certain, the SNO has huge potential to make Telkom sweat like a fat oke in a sauna. Hopefully they do, nothing will be more pleasurable than watching Telkom squirm and beg for their customers back.

 

[rsd]

I'm too lazy to go look for the quote now, but Karl Socikwa said they will do anything to avoid getting into a price war with Telkom.

I don't think we, as consumers, are going to see any impact from the SNO in terms of broadband/voice call pricing. LLU, VANS self provisioning and declaring undersea cables an essential service will, in my opinion, be more effective in reducing prices for consumers.

 

[Turtle]

I'm too lazy to go look for the quote now, but Karl Socikwa said they will do anything to avoid getting into a price war with Telkom.

I'm not, here it is:

http://www.mybroadband.co.za/nephp/?m=show&id=759

"Socikwa demurs when asked if the SNO would engage in a price war with Telkom.

"I don't believe the SNO would be well advised to get into a price war. Issues around price will come up, especially in the early stages but, certainly from initial shareholder discussions, the approach will be to try to avoid any situation where there is a price war. We'd rather focus on service," he says.

I like to dream as much the next guy, but let's be realistic: There is absolutely no doubt at all that there will be no price war here. Why should there be, when there is no threat of any newcomers entering the market? Telkom and the SNO will for certain have a kind of 'mutual understanding' that they can BOTH can make truckloads of money if they leave prices untouched, just like the cellphone cartels (heck, the new Telkom CEO is practically buddies with the Transtel CEO - he just came from being a director there!) Thing is, just look at this economically: Price margins are currently so incredibly inflated, that triggering a price war to gain market share will cause the *margins* to fall so far, that the gain in profits from increased market share CANNOT offset the loss from lower prices. And hence, it's a no-brainer: you WILL make more money by simply matching the currently inflated prices, and even a first year economics student would not make such a stupid mistake as to start a pointless price war in such a protected, non-free market. What a joke, we even have the Transtel CEO quoted on record as explicitly stated he will do everything possible to avoid a price war. The only potential hope for resolving the current telecommunications crisis in South Africa is the convergence bill (as let's face it, a comfy two-fixed-line-providers situation will NEVER, EVER result in competition), but as I recall even the convergence bill (which already years late still could not even be passed *today* because it relies on a new ICASA regulations bill still being drafted) will eventually then grant Telkom another two years monopoly on the local loop (!), and anyway, it will take at least that long before the SNO could even start offering retail telecomms voice/broadband services - this whole situation would probably be funny if it wasn't so sickening and causing so much damage to South Africa. The government clearly intends to keep fighting tooth and nail to prevent a free market situation; there will not be true competition before at least 2008, and if it will even improve beyond that is anybody's guess. This is not pessimism, this is just looking at facts.

 

[JustinHarrison]

I tend to share sentiments with Turtle, and I am sure that the logic of the situation will have many a member of this forum in agreement; we are without a doubt heading for a duopoly in my opinion.

In many instances (myself included) we tend to have a go at Telkom, and perhaps in the future then SNO, but is it in fact not government who should be held accountable?

If the players in a game are not playing to the rules or the rules are less than adequate, then the referee needs to step in and set the playing field and uphold the rules.

I mean let’s think about this for a second, you and I both break our backs to pay taxes, we kill ourselves building the South African economy and we are rewarded with deplorable governance, which extends to every sector of our economy.

Our own president is quoted as having said “Are we just employing our friends or do we have the expertise to get the job done” - fair enough this statement was not targeted at the telecommunications sector, but if you go into any government department, you get an overwhelming sense that this is true….

Are the lawmakers doing the job we have employed them to do, or have they forgotten that they are civil servants employed by the people.

The problem we have in South Africa is that the lawmakers are INDEED above the law, and this luxury allows them to govern our country as they see fit, with little accountability.

Our problem in South Africa is that of the +_ 66% that voted the current government into power, only a mere 3% (maybe) understands economics. We treat our politicians like Gods in this country… for F@@K SAKES…. they are civil F@@KING servants… not tribal kings.

Somewhere we need to shift the focus of this problem to our government, Telkom is doing what they are being allowed to do by government and the SNO will do the same.

Does government benefit from the current telecommunications setup in South Africa? In every short term economic sense, you are damn sure they do… and that’s African politics… take today and F@CK tomorrow.

Do they understand sustainable development “a term they so loosely throw around” hell no…. if they did Telkom would not have millions of rands worth of technology sitting on the shelf because they earn more by strangling new services to capitalize on old services.

Bottom line here guys, we need to start applying pressure on these idiots we are paying to make sure the law is upheld. In any business environment, if you don’t do your job, you get fired.

I guess what I am saying here is this, if we don’t give our government a conscience then things will never improve!

 

[LoneGunman]

I think its all going to be about Public Image and Marketing, should the SNO's prices not be any different from Telkom.

Look at washing powder or petrol, as examples of almost exactly the same product, being sold with 'new' or 'different' labels and advertising, to make the consumers think they're participating in something different (or 'special') by choosing one petrol brand over another.

(My favourite laughing point is any product that suggests a 'status' can be gained by buying it. Gee, now you and 15 million other people are part of a 'special' and 'elite' club. Yeah right. Total bullsh-t.)

I think it'll become very important - to continually focus on the only thing that might matter - namely WHY are they no cheaper than Telkom. (If this is the case)

There's going to be a LOT of image marketing coming, to sell this new petrol brand as being 'better' or 'different' - but if there's no PRICE difference - then I think people shouldn't get bamboozled by the upcoming floods of TV ads, billboards and print adverts, trying to lock into various beliefs and ideas you as a consumer may have.

If there's no substantial difference in price, there's no reason to go with them - unless they perhaps offer extra services of some kind for the lazy consumer.

I think for each person, the practical benefit will have to be weighed up. For myself, if I can shave off at least R100-R150+ bux off my current monthly telecom bill, I'll be switching immediately. (just on phone rental alone with telkom, that's R1000 each year thats being thrown away currently by all of us)

If there's no price difference - then this forum needs to go to war with the SNO to demand that a practical economic 'difference' be presented and shown, to justify the SNO's existence in the market.

Its very simple: IF THERE'S NO PRICE DIFFERENCE - THERE'S NO PRACTICAL 'CHOICE' BEING OFFERED IN REALITY.

ITS NOT 'CHOICE' WHEN TWO (OR MORE) THINGS WITH DIFFERENT NAMES COST THE SAME PRICE.

This is the core issue, which I think the Forum should keep focused on, in the months to come.

 

[morebroadband]

My question is this:

• Do you think the SNO will beneficially impact our telecommunications sector, or

• Do you think that we might be heading for a duopoly? (Dis twee F@@en BLIK#@@ that have control)

The answers to both questions = YES

We are already seeing a little change from Telkom, due to the fact that SNO are on the way. In addition Telkom have not raised their prices as much as they could have.

There is no doubt that we will have a duopoly, but in light of new technologies and hopefully some pressure from Gov/DOC we will see a natural decrease in prices. The SNO are at a distinctive advantage in that they can kick off with all the new technologies, whereas Telkom have to change all their old technologies and legacy equipment.

I think the greatest influence on price reductions will be whether the SNO have access to the local loop, because if they don't, they will have an uphill battle snatching up residential customers.

The second largest factor is VOIP. I believe this will have the greatest influence on call costs, as anyone can compete with Telkom and SNO here, and even though we may have a Duopoly the added pressure from the likes of Skype, IS (VOIS) and MWEB future product will have the desired effect.

Yes the marketing strategy is an interesting discussion, but that does not answer JUSTINHARRISON's questions!

 

[doobiwan]

I agree totally.

If we don't get what we want, why hte hell should we switch. Think about it, which is worse the old Capitalist pig scum monopoly that treats it's customers like sh!te because it always has, or the new capitalistpig pig scum that just wants to pretend to be like the old scum.

 

[JustinHarrison]

The one thing I appreciate about this forum is the different opinions and perspectives that each member brings to the table. From the obvious aptitude of our members here it is clear that there is a new breed of South African consumer.

Does anyone know (hard facts) to what extent the SNO will be reliant on the Telkom in its initial service offering and for how long?

 

[morebroadband]

Does anyone know (hard facts) to what extent the SNO will be reliant on the Telkom in its initial service offering and for how long?

This really boils down to whether they gain access to the local loop! Without the access they would have to run new copper into the residential houses to compete. The SNO has said they will go after the corporate business first, as it is more lucrative, and easier to sign up than a normal house.

The SNO (Eskom and Transtel specifically) have already spent a lot of money running fiber around the country, so they have quite a bit of infrastructure.

 

[Darth Garth]

Telkom has most of it's juiciest top tier business customers locked up in long term contracts at preferential rates ... SNO is going to struggle a bit initially and will not worry about the home user for some time.

 

[JustinHarrison]

It seems to me (just digging around the facts) that the SNO to some degree will remain reliant on Telkom for some time to come, all be it that there are some alternatives (through Transtel and Eskom).

Additionally the so called independent bodies that govern our telecommunications still report directly on all major decisions to the minister of communications – who indirectly represents a share holder in government.

Now to extend my earlier questions:

1. If the SNO does ever manage run somewhat “independently” – all logic points to the fact the general public will be the last to benefit from any competition as lucrative corporate contracts stand first in line… How long will it take for the benefit - if any to work its way into the home of every day people?

2.Wireless communications are without a shadow of a doubt the future and a definite alternative solution especially in a country such as South Africa, will the current wireless broadcasting restrictions be extended to the SNO thus keeping Telkom in the drivers seat to strangle the opportunity of wireless networks?

What do you think?