PRICES UNDER PRESSURE
The Independent Communications Authority of SA (Icasa) says it plans to draft new regulations that will forbid the monopoly fixed-line operator from charging its broadband subscribers a separate monthly line rental.
This is one of a range of punitive regulatory measures proposed by Icasa which, taken together, could cost Telkom hundreds of millions of rand in revenue annually. It says it will draft the new regulations within the next four weeks.
Icasa’s proposals, contained in a "findings document" published last week, have drawn strong fire from Telkom, which says the document is riddled with errors. "The report has a lot of inaccuracies," says Telkom spokesman Xolisa Vapi.
Steven White, executive for new product development, says that should Icasa press ahead and scrap broadband line rental, Telkom will contest the matter in the courts.
The publication of the document follows public hearings, held earlier this year. Icasa called the hearings after receiving complaints from consumer lobby groups.
Telkom, Icasa has determined, should be entitled to charge a one-off access charge for broadband but thereafter it may charge for normal telephone line rental only. At present, Telkom’s broadband subscribers are required to pay a monthly telephone line rental of R87. On top of this, they have to cough up a broadband line rental fee, which costs anything between R270/month and R477/month, depending on the access speed of the service they subscribe to. They still have to buy Internet access from an Internet service provider (ISP).
The FM estimates Telkom stands to lose at least R250m/year in revenue if it is forced to abandon broadband line rental.
Telkom’s regulatory problems don’t end there, though. Icasa also says:
* The bandwidth cap imposed by Telkom on its broadband customers – set at between 2 GB and 4 GB a month – should be increased significantly. At the moment, broadband subscribers who use more than their allotted bandwidth in a given month are disconnected from the Internet or their access to international websites and other offshore content is severely curtailed. Icasa does not say whether it will impose regulations on other ISPs that enforce similar bandwidth capping.
* Telkom may not prioritise different types of broadband network traffic. The operator uses various techniques to give priority to e-mail and Web traffic over, for example, the peer-to-peer file sharing protocols used to download movies and music. Again, it’s not clear whether Icasa will impose this rule on Telkom only or apply it to all operators . Other network infrastructure providers, such as Vodacom (with 3G), Sentech (MyWireless) and Wireless Business Solutions (iBurst), also shape network traffic, as do many ISPs.
Whatever form the final regulations take, it is clear that Icasa is determined to exercise more oversight over Telkom’s broadband services. This is despite Telkom facing robust competition in broadband services. Wireless Business Solutions (WBS) and Sentech, which operate wireless networks, are introducing new products that they hope will tempt new users into broadband and lure away Telkom’s broadband and dial-up users. SA has about 100 000 broadband users. Operators estimate the potential market at 1m.
Sentech wants a slice of that action. The state-owned telecom operator and broadcast signal distributor is negotiating with "various parties" to raise funding for network expansion. It says it is seeking as much as R1,5bn. To date, it has spent R300m on its network.
MyWireless portfolio manager Winston Smith says Sentech eventually wants to cover 70% of SA’s "economically viable" population. "We are looking at private-sector funding or, possibly, a combination of government and private-sector funding," he says.
The company will build more base stations in the big cities to fill holes in its coverage, Smith says. Funding permitting, it will also put up base stations in the smaller cities, including Bloemfontein, Port Elizabeth, East London and Polokwane.
Smith says Sentech’s new products, called MyWireless Flexi, will grow its user base. Eighteen months after switching on its network commercially, Sentech’s subscriber base has stalled while rivals WBS and Vodacom have raced ahead of it. The company blames its previous pricing policies and its poor coverage for this. "We lost market share through our failure to properly react to market requirements," Smith says.
Sentech expects its new products – priced from R199/month – will drive demand. Smith expects Sentech to have between 12 000 and 15 000 subscribers – three times more than it has now – within the next six months.
But its rivals aren’t sitting still, either. WBS is to introduce a R299/month package later this month. For that price (plus the cost of a modem), subscribers will have access to 500 MB of bandwidth at high speeds before they are moved on to a slower link. WBS chief operating officer Thami Mtshali denies the new product is a response to Sentech’s new offering.
WBS, which has spent R80m on its network, is also building new base stations. It will add another 10 towers to its network this month, Mtshali says.
Telkom is feeling the competitive heat. It has cut the price of its broadband access products and this week introduced PC/Internet bundles in an effort to expand PC penetration in SA homes. It is estimated that only 8% of homes have PCs.
With competition intensifying (there is talk that government will ask Icasa to license new broadband operators), the need to regulate Telkom’s broadband products may simply fade away.
(c) Financial Mail
Reproduced with the permission of the Financial Mail
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