BCX not waiting for Telkom
Speaking at a background presentation on why telecommunications companies around the world are buying ICT (information and communication technology) companies, Business Connexion CEO Peter Watt said the group planned to invest an additional R85m over the next six to nine months as part of building a next generation network (NGN) for itself and remained serious about moving ahead – whether the Telkom deal happened or not.
Watt said its timing into the world of convergence had to be pretty good; not too far ahead of the legislation (the Electronic Communications Act has been passed, but not yet enacted), without missing the boat when it finally started to happen – as it is now.
The presentation came perhaps fortuitously – the day after Communications Minister Ivy Matsepe-Casaburri made a number of far-reaching promises about further liberalising the market, as part of the department of communications’ (DoC) budget vote in parliament.
Collaboration best
Group executive for strategy and telecommunications at Business Connexion Willem van Rensburg said the NGN would enable it to carry additional capacity and to handle interconnection with other operators.
Because the new Act enables service providers to self provide their own infrastructure (the extent of which is still not yet clear, however) Van Rensburg said Business Connexion has already applied to Icasa for the right to do so.
Given the expense of laying new cables under the ground, self provision for most new operators will mean utilising wireless technologies, and this will depend on the availability of spectrum (the radio frequency, or airwaves).
Chief technology officer Andy Brauer said given the uncertainties around the self-supply of network infrastructure, collaboration was probably the best model for new and emerging players.
Van Rensburg believes telcos are buying IT companies because, whereas the latter understand how to manage infrastructure, IT companies understand how to manage the applications on top of that. They also understand connectivity and how to aggregate services.
Alternative to Telkom
He says Business Connexion is already passing some of the benefits of being able to reduce costs by routing voice over IP (internet protocol) networks on to its corporate customers. But, the real kicker in terms of cost reduction will come when companies have an alternative to Telkom from which to secure their international bandwidth.
Van Rensburg said about two thirds of the cost of international bandwidth was incurred merely in getting out of the country.
Matsepe-Casaburri said on Thursday that all individual licensees would be able to self provide their own international traffic within twelve months of the EC Act being promulgated.
It is not quite clear yet what this will mean for new operators, given the impossibility – cost-wise – of laying their own undersea cables. Satellite is, however, an alternative, and the DoC is also backing the Eastern Africa Submarine System (EASSy) project, to ensure that the same restrictions that apply to existing system SAT-3 do not apply to the new cable infrastructure.
Another key towards bringing down costs is making the last mile (or local loop) infrastructure available at affordable rates. Matsepe-Casaburri announced the formation of a local loop unbundling committee and said she would shortly issue a policy directive setting a time-frame within which all licensees would be able to interconnect with Telkom’s last mile network.
Many players against merger
There has been some concern expressed by rivals in the broader ICT space that the deal between Telkom and Business Connexion will enable Telkom to cross-subsidise, and deliver an offering that no one else can compete with. Many players plan to lay complaints with the competition authority on the deal.
But even in the event of the deal happening, Van Rensburg said Business Connexion would have no more beneficial a right to the last mile than any other player, as Icasa would rule on the cost of access. It saw Telkom not as a single player, but in terms of its lines of business, he said.
Watt said given that a deal of this nature between Business Connexion and Telkom had been on the table a number of times already, most people would like to know for once and for all if it would get through the Competition Commission or not.
In the meantime, "we’re getting on with it", he said. Telkom has given itself until mid-December for all the conditions precedent to be fulfilled.
It has been Watt’s intention for some time to retire during the course of next year, but if the Telkom deal went ahead, it would only be fair of him to remain and oversee the integration process, he said.
Business Connexion shareholders will get to vote on the Telkom deal on June 12.
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