Breakthrough nears

Dramatic changes are taking place in SA’s telecommunications industry, changes that will bring down prices, improve consumer choice and service levels, and finally help drive the widespread take-up of broadband.

Something remarkable is happening in SA’s telecom industry. After more than a decade of stubborn resistance to change, government has dramatically stepped up the pace of liberalisation of the sector. This, coupled with a regulator that finally seems to be getting its act together, is great news for consumers and the economy. Let’s take a look at what’s happening:

* Communications minister Ivy Matsepe-Casaburri has said that the fixed-line local loop must be fully unbundled by November 2011. This so-called “last mile” of copper cables connects consumers to their nearest telephone exchange. Within 18 months, other phone companies and Internet service providers (ISPs) will begin offering services directly to consumers using that infrastructure. Newspaper reports criticised Matsepe-Casaburri for setting a November 2011 deadline for the unbundling process to be concluded but the criticism, I believe, was misplaced. The minister ought to be lauded for setting what is a fairly aggressive deadline.

* Several large ISPs should soon be given the right to build their own networks using both wireless and wireline systems. Dimension Data subsidiary Internet Solutions (IS) has already said it has plans to build a “new-age telco”. IS could in effect become SA’s third network operator, after Telkom and Neotel.

* ISPs already have the right to carry voice traffic on their networks and some voice over Internet Protocol (VoIP) providers, including DataPro, IS and Storm, are starting to gain good traction in the market. High interconnection fees set by Telkom and the cellular operators remain a challenge for VoIP players, however.

* Then there are the municipalities, which are also keen to build their own networks. Knysna blazed a trail in this regard but the big metros, including Johannesburg, Cape Town, eThekwini (Durban) and Tshwane (Pretoria) are also keen to provide telecom services to their residents. Not everyone is convinced that local government should be competing with commercial operators – isn’t there enough government involvement in the sector already? – but their plans will, if nothing else, exert further downward pressure on prices.

* New projects could see the construction of as many as four new submarine cables to link SA and other parts of Africa with the rest of the world. For years, Telkom has engaged in obscene price gouging on the Sat-3 cable that links SA with Europe. This has kept bandwidth prices in the stratosphere. But now proposed new systems — they include Eassy, Seacom, an expansion of Flag, and a possible cable system to be built by state-owned InfraCo — will drive down international bandwidth prices in the next few years. Also, new regulations will soon give other operators, including Neotel, access to Sat-3.

* Icasa, which has been deeply troubled by leadership challenges and skills shortages, has appeared in recent months to be getting its act together. The Electronic Communications Act, which governs the sector, places enormous pressure on the regulator’s chairman, Paris Mashile, and his council. They have to give effect to the new law. But Icasa seems to be coping well, so far at least, with converting licences from the old regime to the new and introducing new regulations that should keep prices, such as interconnection fees, in check.

All of the above initiatives should have a dramatic impact on prices — and soon. A few bullish industry executives say SA telecoms is close to a tipping point, after which we’ll be awash in cheap bandwidth. I think they may just be right.

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Breakthrough nears