Switchboard lights up
The second national operator, Neotel, will finally begin offering services to residential and corporate consumers in 2007, and, aided by municipalities and Internet service providers (ISPs), there will be further competition in the provision of both wireless and wireline telecom infrastructure.
The Electronic Communications Act, which was recently introduced into law, provides a good framework for liberalizing SA’s telecom industry. Unlike the Telecommunications Act that it replaces, the Electronic Communications Act is carefully worded to ensure that no monopoly or exclusive rights are afforded to any player in the industry.
The Independent Communications Authority of SA (Icasa), which regulates the sector, has until July 2008 (and the option of a six-month extension) to reissue licenses to players, including Telkom, Neotel, the mobile operators, iBurst, Sentech and the ISPs.
There are concerns that Icasa does not have the capacity to cope with the volume of work it’s required to deal with under the Electronic Communications Act. The organization has lost many of its senior managers to the private sector in the past year and is struggling to attract new talent. Take the example of Andrew Barendse. The respected telecom expert, who had been nominated to Icasa’s powerful decision-making council, recently elected not to take up the post, spurning the Icasa job for a higher-paid position at Telkom.
Industry executives are worried about that impact that Icasa’s inability to attract and retain quality skills will have on the sector. The Electronic Communications Act demands a powerful regulator. Companies with vested interests are likely to use every trick in the book to defend their turf.
Assuming Icasa can give meaning to the new legislation, it will have a big impact on competition, industry analysts say.
Here’s what to watch out for in 2007:
— Neotel, which is already offering bandwidth to ISPs, should begin offering its first services to corporate clients by the end of 2006. The residential market will follow in the first quarter of 2007.
— iBurst, a small but feisty wireless broadband provider, is rapidly expanding its network coverage and could become a significant player in the telecom access market in the next couple of years. There is speculation that Vodacom is eyeing iBurst with a view to an acquisition. iBurst is headed by Alan Knott-Craig jnr, son of the Vodacom Group CEO.
— Sentech, which is trying to raise money from the state to set up a national broadband wireless network, is looking increasingly marginalized. Its reliance on government for funding has placed it at a significant disadvantage to private-sector operators. Though government is unlikely to privatize the company, there could be corporate action of some kind to raise the money it needs to compate effectively. A public-private partnership is one of the options that has been mooted.
— MTN and Vodacom will continue their aggressive deployment of next-generation 3G data networks. HSDPA (high-speed downlink packet access), a type of 3G network which initially offers download speeds of up to 1,8 Mbit/s, will be followed in 2007 with HSUPA (high-speed uplink packet access), which allows similar transmission speeds when sending data.
— ISPs such as Internet Solution (IS) and Verizon Business hope to begin offering wireless alternatives to Telkom. Both have test licenses for WiMax, a promising new wireless broadband standard being developed by some of the world’s leading technology companies. Expect IS and Verizon to focus on the corporate market.
— Telkom is also expected to deploy WiMax commercially soon in areas where it has inadequate or no fixed-line coverage.
— Broadband InfraCo, a new company founded at the behest of public enterprises minister Alec Erwin, could also have a dramatic impact on the sector, though not everyone agrees it will be positive. Reports suggest that Erwin wants to build a submarine telecom to rival the Telkom-controlled Sat-3 system that links SA with Europe along Africa’s west coast. Critics say Erwin’s plans could undermine the investment case for a proposed alternative cable system which will connect SA with the Middle East. Finance minister Trevor Manuel announced last month that Broadband InfraCo would receive an initial capital injection of R627m.
— Municipalities could soon be providing telecom services to their residents. Tshwane and Knysna are the most advanced in this regard. Most cities are expected to allow third-party service providers to use their infrastructure to provide services, rather than doing it themselves. A number of companies have already expressed interest, chief among them Goal Technology Solutions (GTS), which wants to piggyback on municipal electricity infrastructure to provide triple-play of broadband, subscription television and Internet telephony.
— Convergence between media companies and telecom operators will start to make its impact felt in 2007. Already, Telkom plans to offer pay-TV services across its broadband lines.
Other developments, such as mobile number portability and regulations governing interconnection between operators will have a big impact next year.
All in all, 2007 looks set to be a landmark year for the sector.
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