SAT-3 for all?
Its dominance of the SAT-3 WASC/SAFE submarine cable system (SAT-3) has for some time been a bugbear of both Government and industry, who are keen to see telecommunications prices come down to trigger competition and help the economy. As one of the biggest investors in the multinational project, Telkom also manages the cable system and operates the landing station bringing SAT-3 traffic to and out of SA.
Even though Neotel shareholder VSNL is another of the biggest investors, and has access to bandwidth, it doesn’t own the gateway and pays Telkom rates widely considered to be inflated and out of kilter with those worldwide for that privilege.
However, with Telkom’s exclusivity expiring – against the backdrop of new telecoms legislation that empowers regulator Icasa to declare submarine cables (along with other electronic communications) essential facilities and disallows any operator from signing exclusive international agreements concerning facilities such as undersea cables – that’s about to change.
Neotel says it intends to make a "real difference" to SA’s telecoms customers and the economy as a whole, and is pursuing multiple channels to ensure cheaper international services as part of that. A key element is to leverage the position and global capabilities of shareholder VSNL. Though the process leading to Telkom’s exclusive rights over SAT-3 coming to an end was one avenue, Neotel also intends to participate in the East Africa Submarine System (EASSy).
"Termination of exclusivity on landing station rights of existing cable systems, or by the creation of newer submarine cables in the region, will inevitably result in better pricing for the customer," says Neotel.
The new operator said it would keep the market updated on developments regarding the new cable system but qualified that that process was being decided by the EASSy secretariat, with the goal of ensuring that monopolistic tendencies were avoided.
All operators who access EASSy’s capacity will be charged on a cost basis – whether they’ve invested in the project or not.
Some shareholders in SAT-3 are widely believed to have displayed monopolistic tendencies – hence the emphasis of avoiding that with EASSy – and the shareholders’ agreement that governs it is shrouded in confidentiality.
Not even Government can get its hands on a copy of the document, despite the fact that the agreement apparently acknowledges the primacy of national law, according to Balancing Act’s Russel Southwood, who late last year acquired a seemingly legitimate early copy of the agreement.
Questions posed to Telkom met with its standard SAT-3 reply repertoire: "The terms and conditions of the SAT-3/WASC/SAFE construction and maintenance agreement, which includes 35 owners, are confidential. As such, Telkom does not have the right to disclose detailed content of the agreement."
Broadband activist Rudolph Muller, the founder of website MyADSL, says the price of carrying traffic from SA using SAT-3 – the alternative is satellite through Sentech’s gateway – is many times more expensive than carrying traffic back into SA. That’s because Telkom has exclusivity on the outgoing portion, also known as a half-circuit (two half-circuits, an incoming and an outgoing one, are required to obtain international connectivity).
Says Muller: "The cost of international bandwidth remains the single most inhibiting factor when it comes to affordable broadband provisioning in SA. Without affordable SAT-3 access it’s unlikely that we’ll see world-class broadband services here any time soon."
Neotel MD Ajay Pandey said recently that Telkom charged three to five times more per outgoing half-circuit than the incoming portion cost from an operator bringing traffic into SA.
BMI-Tech research director Brian Neilson says, given that nobody has had sight of the contract, it’s difficult to know for certain what the outcome of the contract renegotiations would be.
However, Neilson says it’s highly likely that Telkom’s exclusivity over landing rights on the SAT-3 cable system will be relaxed. It’s just a question of how drastically. The best outcome would be parity in pricing between consortium members Telkom and Neotel (through VSNL), immediately making international bandwidth more affordable. Second tier players could also see a lowering in prices.
If that relaxation doesn’t happen commercially, it’s likely that Government wouldn’t tolerate it and would take action in terms of the Electronic Communications Act (ECA), which was promulgated last year, Neilson says.
An Icasa spokesman said it was currently finalising the project plan – due to start in first quarter 2007 and planned for completion by the second quarter – to prescribe a list of essential facilities in terms of Section 43 of the ECA, which would include the undersea cable. The process would also include formulating regulations.
In addition to competition on SAT-3, there should be other cables to choose from, including the anticipated completion of EASSy by early 2008 and the possibility that Government’s Department of Public Enterprises could lay additional undersea cables through Infraco (though some believe that "threat" is merely a lobbying tool to put pressure on Telkom).
Africa Analysis telecoms analyst Dobek Pater says that Telkom’s exclusivity should expire when it realises a return on its SAT-3 investment. That would be an important step towards cheaper international bandwidth, as players could then compete at the retail level when infrastructure capacity was no longer an issue.
Pater says Telkom would have to allow wholesale access to other providers. Operators have to submit data to Icasa concerning what it cost them to provide services – called COA/CAM – and it will use that to determine what the wholesale price should be. There could also be more players than Telkom and Sentech, with international gateway licences lowering tariffs through competition.
Neotel says it’s currently rolling out its network throughout SA and is on track to introduce its initial retail services in the early part of the second quarter this year.
Finweek
Loading ...