Fibre to the rescue
With the latest in fixed-line, wireless and satellite communication, SA has the most advanced digital telecommunications network in Africa and is the fourth fastest growing mobile market in the world. But, it is also the most expensive.
Speaking at a recent forum event hosted by the University of Pretoria’s Gordon Institute of Business Science (GIBS), Cell C’s chief corporate officer, Zeona Motshabi, said revenue per minute is the highest in the world.
A Q4 2006 Merrill Lynch Global Wireless Matrix study found that at US$49, purchasing power parity (PPP) adjusted revenue per minute (RPM) is more than double the world average.
Moreover, mobile termination rates (MTRs) increased by 515% before the introduction of Cell C, said Motshabi, adding that "industry regulator ICASA should not let this happen again". High MTRs limit Cell C’s ability to compete on price.
However, licence conversion changes the game. Now that different licensees may offer technology neutral, comprehensive fixed and mobile products and services, competition becomes service-based.
Telkom SA’s Steven Hayward said the SA telecommunications industry and authorities are finally moving toward giving customers what they want: reliability; availability; end-to-end solutions and cost effectiveness.
While the regulatory changes help, "prices still need to come down," he noted.
Telkom reduced the price of international bandwidth dramatically in recent years. In 2006, Telkom reduced bandwidth costs by between 9,3% and 31,8%. In 2007, the average DSL price reduction was 18,2%. This year, Telkom’s data product prices decreased on average by 7%.
Hayward said interconnection pricing will also likely reduce to close to cost levels.
Capacity also needs to be increased dramatically, he added. This is where the concept of "self-provisioning" – an industry-enabling and investment encouraging characteristic of 90% of international operators – becomes important.
As part of a planned spend of R7,1bn on increasing network capacity and coverage this year, MTN’s self-provisioning strategy is expected to save it more than R9bn over 10 years.
MTN’s MD Tim Lowry said, "We are moving away from our reliance on Telkom." Almost 50% to 60% of our down time is related to Telkom issues, he said. Telkom’s network, which already serves about 15-million users in SA, only supports 19,5-million active subscribers.
Under its mobile licence, MTN may self-provide the telecommunication facilities used to build its mobile converged telecommunications services, while also leasing out excess capacity on its fixed infrastructure.
The solution? A fibre-optic network, which will cost between R1,2bn and R1,5bn, freeing MTN from Telkom’s networks.
The fibre network offers MTN almost infinite capacity and carries far more information at higher speeds over much greater distances, using far less power than copper cables.
MTN has completed a 6km pilot project to roll out a Gauteng metro fibre ring, which will total 180km and cost R150 million. In addition, it plans a 5 000km national fibre optic backbone.
Telkom, which has traditionally used copper networks, has also turned to fibre as a result of cable theft.
"Fibre networks offer more bandwidth capacity than any other technology by far," said Neotel’s chief technology officer Angus Hey. As SA’s second national operator, Neotel is licensed to provide the entire range of telecommunications services, but not full mobility.
Vodacom’s move into the fixed-line market means it is competing directly against shareholder Telkom. Vodacom Business’ Ermano Quartero said the rationale is twofold: to ensure there is enough infrastructure for the transmission of data, as available spectrum is limited, and because it could ill afford depending on one provider.
Despite wider access to broadband, ADSL and 3G access, bandwidth remains limited and expensive. This hampers economic growth.
While the SA government is committed to increasing accessibility and reducing costs, Motshabi noted that ICASA is under-resourced and less independent than its more effective global counterparts.
Moreover, the government’s relationship with ICASA conflicts with its telecommunications enterprise ownership. It has clout over telecoms regulation, while also being the largest shareholder in state-owned broadband provider Sentech, and broadband infrastructure company Infaco.
Motshabi said SA’s telecommunications industry needs:
* A government strategy for the information, communications and technology (ICT) sector, including a policy on government ownership and the efficient use of current licences
* A financially and structurally independent regulator, which cooperates closely with the competition authority.
A level playing field:
Standard licences
* Clear regulations
* A dispute resolution process
"Cable, spectrum and space are scarce industry resources. ICASA must therefore be prudent in allocating licenses," said Quartero.
Finweek
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