MTN has lifted the lid on plans to build a national fibre-optic network. Rival Vodacom has similar plans. Both want to provide for their own expansion needs. But they also want to offer high-speed access to corporate customers. Telkom ought to be worried.<\/p>\n
Communication Users\u2019 Association of SA (Cuasa) chairman Edwin Thompson recently launched a broadside against Telkom. He accused the fixed-line operator of profiteering on national, long-distance telecommunications routes by charging more for links between Johannesburg and Cape Town than for those between Cape Town and Europe.<\/p>\n
\u201cThe cost of Telkom\u2019s Johannesburg-to-Cape Town link is a national embarrassment which will increasingly have serious consequences for the economic health and growth of the country,\u201d Thompson said.<\/p>\n
Fortunately, Telkom\u2019s monopoly over these routes looks set to end soon, thanks to new investments by mobile operators MTN and Vodacom.<\/p>\n
MTN last week provided details of its plans to build a national, fibre-optic network connecting Johannesburg, Durban and Cape Town as well as other cities and smaller towns. The company will spend about R1,3bn on the network, which should be live in 2009.<\/p>\n
It\u2019s no surprise that MTN wants to build its own network: it is waiting for Telkom to supply it with 2 000 data lines to meet growing demand for high-speed Internet access. By building its own backhaul fibre network it will be better able to manage growth as it battles rivals for a share of the booming market for broadband services. \u201cThe lead time to get fibre from Telkom is 12 months,\u201d says MTN Network Solutions CEO Mike Brierley. \u201cIt is completely unacceptable.\u201d<\/p>\n
MTN says the business case for the network can be made on its own bandwidth needs alone, but the company also plans to resell access to its fibre network to corporate customers.<\/p>\n
Indeed, MTN\u2019s fibre plans don\u2019t end with the national network. It has invested about R10m in a pilot fibre network in Johannesburg\u2019s northern suburbs that will provide corporate customers with data access from 2 Mbit\/s to a blisteringly fast 1 Gbit\/s. If the pilot is successful, the company will expand the network to other suburbs.<\/p>\n
MTN\u2019s fixed-line plans follow similar moves by rival Vodacom. Group CEO Alan Knott-Craig announced in June that Vodacom would build fibre-optic rings around SA cities. Like MTN, Vodacom is not happy with the speed with which Telkom supplies it with data lines.<\/p>\n
Ironically, Telkom owns 50% of Vodacom. But poor relations between the two companies have led Telkom to consider selling its stake. MTN is now in talks with Telkom with a view potentially to buying the company\u2019s fixed-line assets. The talks, if successful, would appear to negate the need for MTN to build its own fixed-line infrastructure. But, says MTN SA CEO Tim Lowry: \u201cUntil something changes, it\u2019s business as usual\u2026 We are not going to sit back and go into deep freeze while these discussions go on.\u201d<\/p>\n
MTN and Vodacom are not the only companies building fibre-optic networks. Telkom has been actively laying fibre in metropolitan areas in recent months. It has to do this to provide the sort of high-speed connections necessary to deliver Internet Protocol television and other bandwidth-intensive applications. Second network operator Neotel has also been digging up city streets recently. It will, however, rely on state-owned company Broadband InfraCo for its inter-city links.<\/p>\n
With Telkom facing serious competition for the first time in its core business of fixed lines, it is inevitable that it will be forced to reduce its prices dramatically. Thompson and Cuasa will then have fewer reasons to complain.<\/p>\n