Licence to disagree
Andile Ngcaba, former director-general in the department of communications, recalls that in the early 1990s, ahead of the issuing of SA’s first two mobile phone network licences, he had an intense discussion with Vodacom Group CEO Alan Knott-Craig The two men couldn’t agree on the most effective way of providing universal access to telecommunications.
Knott Craig, Ngcaba says, argued vociferously that mobile telephony would provide the universal access wanted by the then government-in waiting. Ngcaba, an ANC man who specialised in communications technology when in exile in the 1980s, insisted that it was SA’s fixed-line infrastructure that had to be expanded to provide universal service. Only Telkom, he said, was in a position to provide all South Africans with a phone line. “I accept now that Alan was right and I was wrong,” Ngcaba says.
Many people, even those in the telecom industry, did not expect the number of cellphones in use in SA to exceed about 200000. In fact, it is estimated that more than three in four South Africans now own a cellphone.
So when Knott-Craig predicts that it is mobile technology, and not fixed lines, that will take broadband Internet access to the masses, Ngcaba says he finds little reason to argue.
In fact, it is in the provision of broadband that some of the most exciting developments in the sector are taking place. The voice business is mature and operators see few growth opportunities in basic voice telephony. In broadband, however, subscriber numbers are growing fast — and predicted to continue to do so — thanks to growing competition and aggressive price cuts.
It is ironic that in SA it is the mobile operators that are driving take-up of broadband services. In most other markets, the cost of accessing the Internet using a cellphone is significantly higher than it is using fixed lines. But in SA, where the incumbent fixed-line operator has been able to keep its prices high because of its protected monopoly status, it is the cellphone operators that have become the price setters in broadband, despite their reliance — until now — on Telkom for bandwidth.
Telkom has been forced on a number of occasions to reduce its ADSL prices in response to price cuts by both MTN and Vodacom, whose data access charges have fallen as much as 96% in the past two years.
And prices look set to fall further, thanks to new legislation — the Electronic Communications Act — which allows the industry regulator, the Independent Communications Authority of SA, to accelerate liberalisation of the sector.
Policy and regulatory changes have been a boon for Vodacom and its cellular rivals. Importantly, they can now:
Construct their own fixed-line networks and provide their own telecom facilities independently of Telkom. Vodacom wants to build a national fibre optic network to link its base stations to cater to the rapid growth in its broadband customer base and also to provide high-speed Internet access to businesses in direct competition with Telkom.
Knott-Craig says that if Vodacom were to “self-provide” its entire network, it would have to invest about R7bn in infrastructure. But the company will initially be cautious in its approach to spending. MTN, also cautious, plans to build a test fibre-optic network in the Sandton and Rosebank business hub, north of Johannesburg, and will expand this network based on how it’s received.
Resell capacity on their networks, allowing them to make more efficient use of their infrastructure by providing spare bandwidth to Internet service providers and other operators.
Invest in or build new submarine cable systems. Until recently, cellphone companies were precluded from owning international telecom gateway licences. Now they have them, thanks to a recent policy decision by communications minister Ivy Matsepe-Casaburri, and are actively involved in projects to build new cable systems that link SA with the world. Their participation should help drive down broadband prices; until now, Telkom has exploited its monopoly over international bandwidth by keeping prices high.
Knott-Craig believes data services, including the provision of broadband Internet access, represent the next big growth opportunity for Vodacom. In the group’s 2007 annual report, released recently, he says: “National and international bandwidth is required for data services to operate properly. The improvement of data infrastructure will be Vodacom’s biggest challenge and growth opportunity in the next three to five years.”
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