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SA telecom users start to reap the benefits of true competition

29 June 2005 News

South African telecom service providers and operators are positioning themselves to compete in a more deregulated environment, with the result that the benefits of cheaper and more diverse services are starting to filter through to businesses and consumers.

This is according to Mark Taylor, managing director of Nashua Mobile, who says that although the pace of deregulation has seemed frustratingly slow to date, there are indications that momentum is finally building up behind market liberalisation.

"We are seeing a host of new players enter the market to take advantage of new opportunities such as the legalisation of voice-over-IP (VOIP). Already, a number of traditional data players such as Internet service providers have entered the voice market, while voice players such as cellular operators are looking for ways to take advantage of opportunities in the data environment," says Taylor. "Consumers are already benefiting from choice. No longer is Telkom the only company that can provide a broadband connection - other options such as Sentech and iBurst have come to the market to compete. We are finally seeing progress in South African telecoms."

Given that government has left room in the Convergence Bill to license wireless broadband players to serve customers directly, competition is likely to become particularly fierce in the wireless market over the next year. South Africa's operators are already rolling out (and in some cases have gone live with) new technologies such as WiMax and 3G, with the goal of making them as affordable as possible to end-users.

Eventually, consumers and businesses will be able to choose from a wide range of fixed-wire and wireless voice and data solutions ranging from fixed-lines from Telkom and the second network operator, through to WiMax (the metropolitan area wireless network standard), WiFi and cellular technologies.

Taylor says that major players such as fixed-line operators, Internet service providers, cellular service providers and cellular operators will most likely partner to give customers simple access to a bundle of converged products (for example, a bundle that offers WiFi, GPRS and fixed-line Internet access for mobile workers).

Meanwhile, government's plans to introduce number portability during the course of the next year or so, has already started to heat up competition in the already fiercely competitive cellular market. Number portability allows users to retain their existing numbers when they switch networks and service providers.

Says Taylor: "The major cellular operators are positioning themselves to compete for market share when number portability is introduced, and have also recognised that the data market presents them with a major opportunity. As a result, they have already fired the opening salvos in a war for market share."

Understanding that WiFi and WiMax may present a threat to their data revenues, and also wanting to lock customers in before number portability takes effect, MTN and Cell C and Vodacom have both aggressively slashed the price of their data services. More price cuts can be expected in the months to come, but the operators are also on record as saying that unique, value-added services will be as important to compete as the costs of their services.

Taylor warns that South Africa's telecom industry still has a long road ahead of it. Delays in licensing a second network operator have given Telkom time to consolidate its position in key corporate accounts and to build up cash-reserves that it can use to undermine its eventual rival in the fixed-line market.

According to a recent report from Genesis Analytics, Telkom's control over most of South Africa's international bandwidth has hamstrung South Africa's telecom industry. ISPs carrying VOIP traffic need to buy international bandwidth from Telkom while most hotspot operators have to buy backhaul connectivity from the operator, which puts high mark-ups on its international bandwidth.

"It will be some time before the SNO has the international links it needs to compete with Telkom in this area - indeed, the SNO will itself probably need to buy bandwidth from Telkom until it builds up sufficient capacity of its own. That means international bandwidth will remain expensive in South Africa for some time," says Taylor.

www.nashuamobile.com





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