The South African government’s ambitious plan to launch a wireless open-access network (WOAN) is doomed to failure unless it allows a company that knows what it’s doing to operate it.
Government’s intentions behind the WOAN are ostensibly good. It wants to create a way for smaller players to offer mobile networking services and compete with Vodacom and MTN.
It is difficult for smaller service providers to enter the mobile networking arena because the industry is simultaneously resource-constrained and resource-intensive.
Before you can build a cellular network, you need precious radio frequency spectrum for the wireless connections between towers and cellphones.
Regulators can’t allow network operators to use whatever spectrum they want because this would cause interference that degrades the network performance.
For this reason, access to most spectrum is constrained through licenses. (There are exceptions to this, such as the small blocks of spectrum set aside for Wi-Fi and Bluetooth.)
Once you have a spectrum licence you still have to build towers, which is resource-intensive — it needs lots of human resources and money.
A WOAN aims to solve these problems for smaller operators by having one big wholesale operator that builds and manages the physical network infrastructure.
Service providers can then buy wholesale access on the WOAN, package it into products, and resell it to subscribers.
This model has worked well in South Africa’s fixed-line broadband market.
Making it work for wireless networks is not as simple as copying the model over, though, mainly because bandwidth in wireless networks is much more constrained than in fixed-line networks.
Aside from the physical realities of wireless networking, another major criticism of the WOAN model is that it is unproven. It has not yet succeeded anywhere in the world.
Proponents of the WOAN have pointed to Mexico’s Altan Redes, which was established to curb the dominance of America Movil.
Altan Redes filed for bankruptcy in July.
Though it promised to continue its network deployment while it renegotiates its debts, the fact is that Mexico’s WOAN could not sustain itself.
Add to this the South African government’s shocking track record with failed telecommunications projects, and it does not bode well for the WOAN:
- Sentech’s MyWireless broadband service, launched in 2004, suffered from poor service levels and ultimately shut down on 30 November 2009.
- Insidious corruption ruined the City of Johannesburg’s broadband network project.
- The Eastern Cape broadband project, which is supposed to connect local government departments and offer Wi-Fi access, is now marred by infighting between National Treasury executives, SITA, and the Eastern Cape government.
There is hope for the WOAN to avoid going the way of Mexico’s Altan Redes. Government must allow a serious investor with the necessary experience to run it.
One such investor that has thrown its hat in the ring is Community Investment Ventures Holdings (CIVH), which owns Vumatel and DFA.
CIVH has the deep pockets of Remgro behind it, and the skills of people like former Vodacom CEO Pieter Uys and former Vodacom CTO Andries Delport. Uys serves as chair of CIVH and Delport as CTO.
The biggest risk to the WOAN is government interference. Not trusting the free market to drive down prices and provide quality services.
Unfortunately, government has a bad track record here too — even causing a former Telkom CEO and members of her board to resign in disgust due to its incessant meddling.
For the WOAN to work, something must happen that has never happened before in South Africa.
Government must give a company like CIVH the freedom to run the WOAN as a commercial entity, like Vumatel, without political interference.
Otherwise, it will just be another Sentech MyWireless or Altan Redes.