The cracks widen
In Johannesburg, it takes an average of eight weeks to get a broadband line installed by Telkom. Some unlucky consumers have to wait nine months. If Telkom had a real competitor in the fixed-line market, it would have been in big trouble. But it doesn’t have much competition so it’s been able to subject people to service expected from a government department, not a listed business.
Telkom introduced ADSL in SA long after its peers in Europe, Asia and the US. It had no reason to rush. With no competition, it had little incentive to make available a service that would eat into its lucrative dial-up and corporate leased-line businesses. Eventually, in August 2002, with the threat of a second network operator (SNO) looming, it began offering a commercial ADSL service. This came with many restrictions, though, most of which are still in place.
While operators elsewhere in the world were pumping billions of dollars into new infrastructure, especially high-speed fibre-optic networks, Telkom was slashing costs to boost profits by reducing investment in its network and retrenching thousands of employees. Evidence suggests it went too far. It doesn’t have the technicians to address demand, faulty services take weeks to fix, and its last-mile infrastructure — the part of its network that connects consumers to the network — is creaking with old age. This lack of investment could end up costing Telkom dearly in the next few years as government finally accelerates liberalisation.
Here’s where the competition is going to come from:
Neotel — the second network operator has a strong equity partner in VSNL, the Indian telecom operator. It also has a substantial core network (that’s the bit that connects everything together). It should help bring down bandwidth prices for Internet service providers (ISPs). Its access network, the one that will allow it to provide services to you and me, will come later.
iBurst — this wireless operator has been doing good things under Alan Knott-Craig, its new CEO (the son of the Vodacom CEO). iBurst already has more than 100 base stations. More are promised. iBurst is running rings around Sentech, the state-owned broadcasting company.
Vodacom and MTN — these cellular operators’ 3G networks provide a compelling alternative to ADSL, with the added bonus of mobility, but only for people who don’t use a lot of bandwidth. Despite hefty price cuts, both companies’ bandwidth charges per megabyte are still far too high.
Municipalities — the Electronic Communications Act allows local authorities to use their infrastructure to provide telecom services to their residents. Expect third-party service providers to piggyback on these licences to provide services. So far, the most exciting development in this area is a plan by Goal Technology Solutions (GTS) to provide a triple-play of broadband, subscription TV and Internet telephony to consumers using broadband-over-powerline technology.
ISPs — companies such as Internet Solutions and Verizon Business hope to be granted licences to build their own networks using broadband wireless technology called WiMax. They’ll probably focus on the business market first, but benefits for consumers are sure to follow.
Telkom CEO Papi Molotsane is aware of the threat these challengers represent. Telkom has said it will increase capital expenditure to ensure it’s capable of meeting demand. Molotsane had better move fast.
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