BEE hurdle for new internet hopefuls
SIX new licences are being created to let companies offer fast and affordable internet access, but bidding criteria mean that anyone with the skills and the cash to do the job is unable to apply.
The main hurdle is a demand that winning bidders are 51% black owned. The only companies with the right black profile are small entrepreneurs with no chance of raising the cash to roll out a national network.
Far from increasing competition in the internet industry, the Independent Communications Authority of SA has issued rules preventing anyone from doing anything, industry players believe. Companies that were qualified to win a licence were nowhere near qualified to use it, one source said.
Nor can a licence winner use that asset to negotiate a merger with a larger player, as the rules prohibit such corporate activity for five years. Instead, they must survive alone, trying to raise hundreds of millions of rands to build a network and compete with existing internet providers.
“I’m stunned,” said Denis Smit, MD of research house BMI-TechKnowledge.
“Companies like Internet Solutions will be devastated. There’s going to be a queue of people challenging this.”
Smit said that once black ownership became the main criterion, the crucial issues of the cash and skills to succeed fell away.
The licences allocate scarce spectrum for WiMax, a technology that covers large areas and handles high volumes of traffic relatively cheaply.
MWeb, Altech, Internet Solutions, Verizon, MTN and Vodacom have all conducted tests, but do not have a hope of winning licences as their black profiles fall way short of 51%.
“The only guys in a position to bid won’t be able to raise the finance to roll out a national network costing at least R200m,” said Internet Solutions’s chief regulatory officer, Siyabonga Madyibi.
“They don’t have the technical know-how either to give the incumbents any real run for their money.” He said the rules would be contested by practically the whole industry.
BEE & WiMax spectrum discussion
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