The Way Business Is Moving published by
Issue Date: May 2008

Hurry up and wait

May 2008

What lies in store for South Africa’s much-abused telecoms market?

So Telkom wants to refocus and sellout. Or maybe it wants to get a windfall profit by selling Vodacom to Vodafone and then buying Cell C so it can offer wired and wireless services. Or maybe it will rely on the mythical WiMax. Or maybe it will sell Vodacom to Vodafone, buy Cell C and then sell the new bundle to Oger? Or someone in China?
MTN and Vodacom have decided they need to extend their luxurious profit margins to the wired world and are laying fibre all around very small areas of South Africa where they think a market exists for them to milk. Their advertising war (as opposed to a price war one might find in a competitive market) has reaped the benefits and lined plenty of pockets and they need a next step.
Neotel is also ripping up every pavement it can find in Joburg and laying fibre and harvesting selected customers, such as the Government's NGN. Word has it there is also a consumer offering in the works - which could mean the next week or decade (By the grace of God, by the time you read this something will have been announced - it is the age of miracles.)
Meanwhile undersea cables remain elusive as certain parties wait to get their palms greased with oil - silver is cheap in comparison these days. Never mind what might benefit the country.
And, of course, the VoIP (or, if you want to sound trendy, the convergence) vendors are cashing in merrily as Rome burns. Some are consolidating and buying up companies in the LCR, VoIP and ISP space in the hope that a big international player will buy them. They assume South Africa's market will one day be a part of the global network and not a global bottleneck.
So what will SA telecoms look like in future? Network Times took 2010 as an important date in the South African calendar and asked Arthur Goldstuck, MD of World Wide Worx for his take on the future of South African telecommunications.
Arthur Goldstuck
Arthur Goldstuck
NT: Can you offer a brief prediction of the telecommunications landscape in 2010?
Goldstuck: The sad truth is that Government just cannot seem to let go. Of the 10 licensed or approved national telecommunications providers we are able to identify, nine have some form of government shareholding - either directly or through the Public Investment Commission. That is a recipe for foot-dragging, political patronage, and a generally uncompetitive landscape - even where we appear to be awash with competition. Icasa has made it clear that is in no hurry to issue new licences.
To get a WiMAX licence, for example, you need first an ECS licence, and then an ECNS licence. But you cannot get an ECNS licence if you do not have a spectrum allocation, and you cannot get spectrum allocation if you do nnot have an ECNS licence. Icasa argues that there is only limited spectrum available for allocation, and it appears this will go to existing licensees.
Not that our spectrum is fully utilised. One of the issues we can expect to appear on the public agenda in the coming year or two is the matter of idle spectrum - allocated to Telkom but unused. So the answers are all available, but it will take political will and muscle to turn them into solutions.
So the main characteristic of the telecommunications landscape in 2010 will not be the technological nature of that landscape, but the debates and issues that swirl about the landscape. It will be a time of hand-wringing and finger-pointing. It is not about FIFA World Cup readiness - huge financial injections from government should look after that. It is about readiness for the needs of South Africans - consumers and business. And in that context, it will be all about what-ifs and if-onlys.
NT: Will the concept of convergence fade away to become the norm in telecommunications?
Goldstuck: Convergence is real and it is hype. Technologically, we are seeing not convergence, but divergence, as different technology platforms are embraced for purposes best suited to those platforms, and as proprietary systems are rolled out to lock in customers, such as with 3G cards that are not interchangeable between networks, even though to the consumer it seems logical that they should be. On a telecommunications level, convergence is represented by unified communications, which itself is still very much in an evolutionary phase. Once it is seamless at the enterprise level, it will filter down to the rest of the market.
NT: Go wild. Sketch the South African communications landscape in 2015!
Goldstuck: Probably by 2018, but the pieces will be in place by 2015, we will have three all-encompassing telecoms operators, with fixed, mobile, broadcast, broadband, IP and IT capabilities.
There will be a DiData-Telkom-IS-SABC conglomerate under Andile Ngcaba (called Elecom?). An MTN-Naspers-Multichoice-MWEB-Verizon conglomerate under Koos Bekker (coming out of retirement to spearhead their conquest of broadband Africa). And a Vodafone-Altech-Johnnic-eTV conglomerate.
The government-owned Infraco-Sentech-Nepad network will have enough capacity, according to new Minister Without Direction, Alec Irwin, to meet all the needs of the continent for the next 50 years, but it will be down for maintenance and upgrading at the time, with no clear timeframe for going into active service again.
And then there will be numerous niche providers, both licensed by Icasa to operate in specific areas, and piggybacking off mainstream licensees as virtual telcos, able to operate on low margins and therefore pass on the discount to their customers without the big brother having to lower its own margins and value proposition. The regulator will be fighting the majors to keep pricing down, while struggling to reign in the niche players who will be exploiting loopholes in the regulation that resulted from pressure on the regulator to encourage competition.
In short, competition will be as unpopular in official circles in 2015 as it is in 2008, but the bastions of protectionism will be crumbling under the onslaught of new technological possibilities and the demands of new business models.

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