Government’s got liberalisation wrong. Sure, our telecoms prices are too high, but licensing (or trying to licence) new operators is not going to solve anything.<\/p>\n
In late May government’s Khutso Khumalo announced he wanted to licence a fourth mobile operator and a third fixed-line operator in 2009. The remarks were made on the sidelines of a conference and seemed to catch industry players off-guard.<\/p>\n
Aside from the fact that there is very little, if any, distinction between mobile and fixed carriers in the new Electronic Communications Act (a new electronic communications network service (ECNS) versus the old national mobile cellular telecommunications service licence), don’t we already have enough operators?<\/p>\n
On the fixed-line front, Neotel is starting to challenge Telkom. A large number of consumers are bypassing fixed-line altogether and using mobile services from Vodacom, MTN, Cell C, iBurst and (to a much lesser extent) Sentech. Throw in a multitude of service providers like Vox Telecom and Internet Solutions; and suddenly the market is quite contested.<\/p>\n
Rather than embarking on (yet another) multi-year licensing process, fraught with legal challenges, here are five real ways for government to help cut the costs of telecoms in South Africa:<\/p>\n
1. Fund Sentech<\/strong><\/p>\n Government has (or should that be had?) serious plans for Sentech. The goal is for Sentech to provide and operate a wireless broadband network. It needs over R4bn to accomplish this, and to date has only received R500m. Whether or not R4bn is enough to roll out infrastructure to link rural communities, public facilities (schools, clinic, courts) and other government offices remains to be seen.<\/p>\n Thankfully at the end of last month, the Presidency got involved, in an attempt to unblock funding for Sentech and gave it R5bn. Why not also sell a minority stake in the Sentech subsidiary which will be operating the broadband network? Surely the private sector would jump at the chance to get involved and actually build a credible competitor?<\/p>\n 2. Divest from Telkom<\/strong><\/p>\n Thankfully this might actually happen within our lifetime. Telkom has received two approaches (one from an Mvela-led consortium, the other from Vodafone), and if the board (and shareholders) accept these proposals, we may just see government removing itself from direct involvement in telecoms. Being a 39% shareholder in our fixed-line (virtual) monopoly, any decisions government makes about telecommunications issues will necessarily be biased. In what interests is it acting? In the interests of a competitive landscape? Or in the interests of a major shareholder in what has become a serious cash cow?<\/p>\n 3. Give the regulator all the support it needs<\/strong><\/p>\n Icasa (Independent Communications Authority of South Africa) received just less than R200m of government funding in the 2007 financial year. On paper the regulator seems to be doing just fine financially. But the reality is that the shortage of skills in the ICT sector, plus the invaluable experience which Icasa staff have in regulatory and legal matters means that they are literally poached away by telecoms and communications companies.<\/p>\n For example, Zolisa Masiza joined Telkom’s regulatory team; Mamodupi Mohlala who left in 2007, took over as Pension Funds Adjudicator; and Nadia Bulbulia joined Vodacom after leaving in 2006 and has since moved to Cell C where she heads up its regulatory team. Tracy Cohen, who left this year, hasn’t yet decided what she’ll be doing. Can you blame them? Who wouldn’t settle for a much better salary?<\/p>\n Icasa’s staff costs (the bulk of its expenditure) for 2007 were around R94m for 300 employees. Government should double or even triple its funding to Icasa so that top talent is retained (and even attracted). An efficient regulator will translate into a much more competitive landscape.<\/p>\n 4. Solve the interconnect issue<\/strong><\/p>\n Interconnect charges (the prices an operator charges another operator to terminate a call on its network) are simply too high. The current mobile interconnect fee is R1,25, vastly different to the 20c in 1994. When government indicated it wanted to licence a third mobile operator in that year, Vodacom and MTN successfully managed to lobby for this 500% increase in the interconnection rate. Now we’re in a situation where smaller competitors like Cell C and Virgin Mobile are at a major disadvantage (they have vastly more calls to other networks, than calls from other networks to their subscribers). The solution? Force operators to interconnect at cost price. This will slash about 35-50% from current mobile call costs.<\/p>\n 5. Build undersea capacity and solve the self-provision dilemma<\/strong><\/p>\n The $650m Seacom submarine cable system (linking southern and eastern Africa to India and Europe) is finally being built (it will go live next year). Eassy (Eastern Africa Submarine Cable System) is also under construction on the east coast, but not many people are sure when it will be finished. The quickest way to drop prices? Keep on building capacity – don’t stop now. Let whoever wants to build a submarine cable, build one. The SAT-3 monopoly should’ve ended a decade ago. Give incentives. We need another cable up the west coast, and another linking us to South America. Build! Build! Build!<\/p>\n At the same time, solve the self-provision dilemma facing VANS (value-added network services) providers. The debacle stems from the licence conversion process (from VANS licences to ECNS or individual-ECNS (I-ECNS) licences). VANS want to be able to self-provide (they want I-ECNS licences). Operators want to be allowed to legally connect customers to their infrastructure without using third parties like Telkom or Neotel. Khumalo (while making his pronouncements on new licences) also said that government wanted “VANS to be allowed to self-provide and that the frequency spectrum allocation would be made more efficient”.<\/p>\n However, the position adopted by both the regulator and the minister of communications is that VANS should not be allowed to self-provide. So which is it? Thankfully the matter is before the courts (credit to Altech), and the Transvaal High Court will hear the case at the end of the month.<\/p>\n