Telkom rival live at end-August
The second network operator (SNO) is “on track to switch on international wholesale services at the end of August”, it said in a statement on Friday.
Corporate customers and consumers still have to wait until the end of the year and the first quarter of 2007 respectively for the SNO to provide specific services for them.
Nonetheless, the initial move could result in cheaper services, especially on the high-speed internet front. South Africa’s services are around 800% pricier than those available in the UK says broadband commentator and MyADSL founder Rudolph Muller.
This is because other telecommunications companies such as value-added network service (Vans) operators (like Dimension Data subsidiary Internet Solutions and MWeb), internet service providers (ISPs) and mobile operators could approach the SNO for international bandwidth, obtain a better price and then pass savings on to customers.
Telkom is currently the only provider of these services in SA, and is able to charge retail-type rates for the services.
On Friday, shares in AltX-listed internet and telecoms firm Datapro jumped 8,5% to close at 77c on the news.
“This is going to have a very positive effect on the international prices,” Muller told Moneyweb Radio. “There have been complaints about international bandwidth prices for a long time, and this competition may just trigger a price war between Telkom and the SNO that will make it possible to provide cheaper services, should it be voice, ADSL or other internet services to end consumers.”
Asked to quantify the impact on people’s pockets, Muller said this was difficult to do: “It’s uncertain whether [the SNO will be providing international bandwidth services] on the SAT3 [cable, which runs along the west coast of Africa] specifically, or whether it will involve international connectivity via satellite.”
This is an important distinction to make, as Telkom still controls the South African landing station for the cable, based in Melkbosrand, Cape Town, and the arrangement between Telkom and the SNO regarding the stations is not known.
“Until April 19 next year, Telkom still has exclusivity on the landing station, so it remains to be seen what sort of a difference this will make,” says Geoff Rehmet, Internet Solutions’ consultant on new business development.
Rehmet says there may be a small reduction in price if the SNO buys bandwidth on a wholesale basis from Telkom, but he does not expect the difference to be dramatic.
For South Africa to see a difference, there needs to be strong competition in the provision of international bandwidth.
Rehmet says the alternative submarine cable running down Africa’s eastern coast, known as Eassy, will make a big difference. However, it is still in the process of being built.
Another good development is the imminent expiry of Telkom’s exclusivity on landing stations. This still has to be coupled with regulatory intervention, says Rehmet, and telecoms regulator Icasa may have to declare the landing stations essential facilities.
South African operators currently buy half of their Sat 3 bandwidth from Telkom, and the other half from foreign investors, such as British Telecom, Cable & Wireless and the telecoms arm of Indian business conglomerate Videsh Sanchar Nigam Ltd (VSNL), which has a 26% stake in the SNO.
Eskom on board
Meanwhile, the SNO says it now has “access to an inter-city, high-capacity full services network”, which was created by public enterprises’ parastatals Eskom and Transnet, via a heads of agreement it signed with the Department of Public Enterprises last week.
The SNO bought the Transnet stake in the network for R256m in July and was expected to buy Eskom’s part of the network too.
Last week, it was reported that instead of buying the network, the SNO would lease it from Eskom at cost plus 4%. However, the Department of Public Enterprises labelled the report inaccurate, although it didn’t say what state of play was.
The SNO did not provide any clarity on how it would obtain access to the Eskom infrastructure in Friday’s announcement; a spokesperson for the SNO said this information would be revealed at the SNO’s launch at the end of the month.
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