A new age
A CHANGING regulatory landscape is opening up a wealth of opportunities for Internet Solutions (IS), which is positioning itself as a new age telecommunications operator that offers its customers a full range of converged communications products and services.
IS has traditionally competed with dozens of other service providers for a slice of SA’s value-added network services market, worth about R6bn/year.
But a set of policy directives issued recently by communications minister Ivy Matsepe Casaburri could soon allow the company to compete with the incumbent operators for a piece of the larger R80bn telecom market.
The policy directives could result in selected large Internet service providers (ISPs) such as IS gaining the right to build their own network infrastructure rather than needing to source all their infrastructure from Telkom. “IS started out as an ISP 14 years ago, but we have had the goal of becoming a new-age telco for the past three years. We’re in a good position to take advantage of a deregulation of the market,” says IS CEO Angus MacRobert.
Over the past five years, IS has grown from a provider of connectivity into a supplier of a range of IP-based converged communications services, says Hillel Shrock, business solutions director at IS.
Through its multiprotocol label switching (MPLS) network, IS already offers its customers access to a complete set of converged communications services that allow them to access information using a range of access devices and mediums. More than 80% of the top 250 listed SA companies use the IS network every day.
Clients can seamlessly access data, voice and video services using devices such as PCs, PDAs, laptops, and cellular phones across communications media such as cellular, wireless, satellite, fixed cable, ADSL, Diginet, fibre, or GSM technologies. But the new regulations should make it possible for IS to offer fixed-line and mobile services at lower prices.
Opportunities
Should IS be awarded an infrastructure licence by the Independent Communications Authority of SA, it will have similar rights to operators such as Telkom and Neotel. IS will, for example, be able to lay fibre-optic cables where it makes sense to do so and use wireless technologies for last mile connectivity.
The service provider already has a licence to trial WiMax and is confident that it will be allocated spectrum for a commercial roll-out of the wireless broadband technology.
However, IS does not plan to build a national network that rivals Telkom’s in size and reach says MacRobert.
The company will continue to source most of its infrastructure from Telkom and Neotel, but having the ability to build its own network infrastructure should give it more power in negotiations than it had in the past.
IS will also be able to provide lines for clients quickly using wireless technologies rather than needing to wait for Telkom to lay cable.
IS is also considering investing in the construction of a submarine cable to gain access to more and cheaper international bandwidth. The service provider holds a telecom licence in Kenya that allows it to become a signatory to the East African Submarine Cable System (Eassy).
Telkom still has a stranglehold on SA’s international bandwidth, which has led to artificially high prices.
IS believes that most of the action will be at the service level of the telecom market rather than the infrastructure level. But the regulatory changes will ensure that IS can build or source infrastructure at the best price, and pass this on to its customers.
Unlike the incumbent operators, IS is not trying to protect legacy voice and data revenues, says MacRobert. It will use least-cost routing in fixed lines and mobile to drive down the price of voice calls, for example. Cellular operators and service providers are also moving into the data market because they recognise the looming threat to their businesses. “It’s a purely defensive move,” says MacRobert.
MacRobert expects the market for telecom services to narrow over the next few years as consolidation inevitably takes place. IS believes that there will be space for four or five telecom players of its nature and is positioning itself to be one of them.
The company’s differentiation will come from its high service levels and from the value-added services it wraps around connectivity, hosting and other basic ISP services, he adds. “We don’t believe that Internet access is a commodity. When e-mail goes down, it is not a commodity,” says MacRobert.
Over the next few years, IS will be expanding into new segments of the SA market and looking to the rest of the continent for growth. It has successfully expanded from the high-end corporate market into the small and medium business segment over the past three years. The service provider is now looking at playing in the consumer market more aggressively as well.
“We’ve also played in the wholesale consumer market—we have the country’s largest dial-up network, for example. Now, we’re looking to play in the consumer fixed line and mobile broadband markets, too,” says MacRobert. IS will initially approach the consumer market cautiously and work alongside business partners. It may work with other companies to deliver quad-play services (voice, video, broadband Internet, and wireless) to the consumer market.
IS is also stepping up investment in the rest of Africa, where it already serves a number of SA clients. Apart from a subsidiary in Kenya, formed by the acquisition of ISP Interconnet, IS is also looking to move into Nigeria.
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