Sign up with GoogleThe editorial opinion piece below was published in the 14 November 1997 edition of the Financial Mail. It related to Telkom's attempts at the time, driven by SBC, to have the South African courts declare the Internet Protocol a monopoly PSTN service in terms of the Telecommunications Act.
We have progressed in some respects, but many of the issues raised in this editorial are still with us, eight year later.
Please excuse me if I have posted this in the wrong forum (this is more history than news), but the news section seemed the most appropriate place.
Duncan
The Faustian tradegy at Telkom
Soon after Margaret Thatcher came to power in the UK in 1982, her government was confronted with the pressing need to spend a great deal of money upgrading Britain's then antiquated telephone service. For practical rather than ideological reasons, it was decided to privatise what subsequently became British Telecom. The hope was that BT would be able to modernise itself through funds raised on the capital markets.
But BT never had to go to the markets for money. Faced with competition, free to manage itself without State interference, and confronted by a vigorous and independent regulator, the company funded its hugely expensive modernisation with its own resources.
What is happening at Telkom in SA bears little resemblance to that success story. Here a sophisticated foreign management team, granted carte blanche by government to monopolise local voice telecoms under a friendly licence agreement for five years, appears to be trying to ride roughshod over local entrepreneurs who are attempting to provide new services to customers on the Internet.
Telkom's American chief operating officer Mac Geschwind recently took out large newspaper advertisements to decry an important ruling by SA telecoms regulator Satra that local Internet service providers (ISPs) (the companies that provide users with access into and routing through the Web) should continue to be allowed to do so.
Telkom now wants the courts to quash Satra's ruling.
As a result, our New Age Telkom is beginning to take on Luddite trappings, raging against new technologies which promise to deliver great benefits to our society as a whole, but which quickly render its licence obsolete.
The licence under which SBC of the US and Telekom Malaysia agreed to buy 30% of Telkom for R5,6bn earlier this year was always a Faustian bargain. Government offered bidders monopoly conditions if they in turn agreed to supply the country with 2,8m new telephone lines, primarily in an effort to bring telephone services to the poor and disadvantaged. Such a "roll-out" would bring political honours on the ANC.
But the deal looks unworkable and threatens instead to bring ridicule upon foreign investors and government alike.
Information technologies are developing so quickly that conventional telephone usage seems likely to be turned on its head in the next three to four years. Asking SA business and individuals to sit still and allow new opportunities to pass them by in the cause of basically wider rural telephone distribution is simply not on. South African infotech companies are dynamic, inovative and creative and it would be foolish to try to suffocate them.
In his advertisement Geschwind says "five years ... for basic telephone service was the commitment made to us." But conventional voice telecommunications is under severe strain. In the current turbulence in world equity markets, many of the billions of rand lost has been between communicating computer programs. Worse, Dayton Semerjian, a US industry expert, has recently warned that Internet Protocol packet switched networks of the kind SA ISPs employ will have largely replaced the public switched telephone networks (of the kind written into Telkom's monopoly) within three years. International Data Corporation reckons Internet telephony, still bedevilled by poor quality, will account for around 12,5bn minutes of use by the year 2001.
Internet telephony will enable customers to make international calls at local rates and there is nothing any ISP will be able to do to stop people actually talking to each other on the Web. No wonder court papers filed by Telkom against Satra say the ISP ruling could cost the monopoly R1bn a year.
But, with the best will in the world, and recognising that the extension of basic telephony here is key to economic development and social stability, South Africa cannot hide from global infotech innovation. The State can compete on the Web, but it would be madness if it were allowed any form of control over it.
Telkom is asking the public for five years of little or no technological competition in order for political promises made to lure a foreign investor here to be fulfilled. It is too much. Telkom must learn to fight for revenues out in the marketplace, unprotected from the velocity of change in its industry. For the New South African managers now being groomed at Telkom by the Americans and Malaysians, protection from the real business effects of technological change will be a betrayal of the national interest. The courts should reject Telkom's appeal.
We have progressed in some respects, but many of the issues raised in this editorial are still with us, eight year later.
Please excuse me if I have posted this in the wrong forum (this is more history than news), but the news section seemed the most appropriate place.
Duncan
The Faustian tradegy at Telkom
Soon after Margaret Thatcher came to power in the UK in 1982, her government was confronted with the pressing need to spend a great deal of money upgrading Britain's then antiquated telephone service. For practical rather than ideological reasons, it was decided to privatise what subsequently became British Telecom. The hope was that BT would be able to modernise itself through funds raised on the capital markets.
But BT never had to go to the markets for money. Faced with competition, free to manage itself without State interference, and confronted by a vigorous and independent regulator, the company funded its hugely expensive modernisation with its own resources.
What is happening at Telkom in SA bears little resemblance to that success story. Here a sophisticated foreign management team, granted carte blanche by government to monopolise local voice telecoms under a friendly licence agreement for five years, appears to be trying to ride roughshod over local entrepreneurs who are attempting to provide new services to customers on the Internet.
Telkom's American chief operating officer Mac Geschwind recently took out large newspaper advertisements to decry an important ruling by SA telecoms regulator Satra that local Internet service providers (ISPs) (the companies that provide users with access into and routing through the Web) should continue to be allowed to do so.
Telkom now wants the courts to quash Satra's ruling.
As a result, our New Age Telkom is beginning to take on Luddite trappings, raging against new technologies which promise to deliver great benefits to our society as a whole, but which quickly render its licence obsolete.
The licence under which SBC of the US and Telekom Malaysia agreed to buy 30% of Telkom for R5,6bn earlier this year was always a Faustian bargain. Government offered bidders monopoly conditions if they in turn agreed to supply the country with 2,8m new telephone lines, primarily in an effort to bring telephone services to the poor and disadvantaged. Such a "roll-out" would bring political honours on the ANC.
But the deal looks unworkable and threatens instead to bring ridicule upon foreign investors and government alike.
Information technologies are developing so quickly that conventional telephone usage seems likely to be turned on its head in the next three to four years. Asking SA business and individuals to sit still and allow new opportunities to pass them by in the cause of basically wider rural telephone distribution is simply not on. South African infotech companies are dynamic, inovative and creative and it would be foolish to try to suffocate them.
In his advertisement Geschwind says "five years ... for basic telephone service was the commitment made to us." But conventional voice telecommunications is under severe strain. In the current turbulence in world equity markets, many of the billions of rand lost has been between communicating computer programs. Worse, Dayton Semerjian, a US industry expert, has recently warned that Internet Protocol packet switched networks of the kind SA ISPs employ will have largely replaced the public switched telephone networks (of the kind written into Telkom's monopoly) within three years. International Data Corporation reckons Internet telephony, still bedevilled by poor quality, will account for around 12,5bn minutes of use by the year 2001.
Internet telephony will enable customers to make international calls at local rates and there is nothing any ISP will be able to do to stop people actually talking to each other on the Web. No wonder court papers filed by Telkom against Satra say the ISP ruling could cost the monopoly R1bn a year.
But, with the best will in the world, and recognising that the extension of basic telephony here is key to economic development and social stability, South Africa cannot hide from global infotech innovation. The State can compete on the Web, but it would be madness if it were allowed any form of control over it.
Telkom is asking the public for five years of little or no technological competition in order for political promises made to lure a foreign investor here to be fulfilled. It is too much. Telkom must learn to fight for revenues out in the marketplace, unprotected from the velocity of change in its industry. For the New South African managers now being groomed at Telkom by the Americans and Malaysians, protection from the real business effects of technological change will be a betrayal of the national interest. The courts should reject Telkom's appeal.
