Dobek Pater, senior telecoms analyst at BMI-T, says that the introduction of the SNO will impact heavily on the SA business sector, since businesses will then have access to more competitively priced services, thus making the local commercial market more competitive internationally by bringing down operational costs in the form of telecommunications expenses.
Pater is confident that the SNO will bring with it a host of opportunities for both local vendors and end-users alike.
“The changing South African telecoms landscape provides opportunities for vendors in the hardware and software market. The SNO is estimated to spend up to R10-billion, with Cell C and Sentech estimated to spend over R6-billion and R2-3-billion respectively over the next several years,” he says.
“This also means expansion of the local telecoms market over the medium term (next four to five years),” states Pater. BMI-T research states that the fixed line voice market is predicted to grow at about six percent a year in revenue, while the data market is predicted to expand at a much larger 17% a year in revenue. Additionally, mobile is exhibiting seemingly relentless growth and is predicted to expand at about 15% a year in revenue.
Notably, with the SNO launch and Sentech’s designation as the “carrier of carriers”, the three major competitors in the international gateway market (Telkom, Sentech and the SNO) will again drive competition in the local market.
“Competition in the international gateway arena means that telcos, which currently do not have an international gateway, will be able to choose between these three major operators as providers of these services. Again, this should lead to an increase in quality of service provision and decrease in prices. In addition, with such an expanded international gateway capacity, South African operators may also provide international gateway services to telcos from other countries in the region, such as Zimbabwe, Botswana and Zambia. This would represent an additional revenue stream for the South African operators and a step in integrating regional telecoms services,” explains Pater.
However, BMI-T states that the greatest issue flying in the face of successful competition is regulation. The concurrent launch of an SNO and the IPO of Telkom is creating major difficulties for the regulator, the Independent Communications Authority of South Africa (ICASA). Amongst these issues is infrastructure-sharing.
Telkom has to allow the SNO to share its infrastructure for a period of two years, after which time the SNO should have its own local access network in place. In its efforts to stifle competition in the market, Telkom may consider “creating difficulties” for the SNO in using its infrastructure, and this would definitely be a stumbling block for competition in its initial stages in the South African fixed line market.
Additionally, BMI-T believes that interconnect agreements will have to be put in place between all the old and new players in the market, them being the three mobile operators, the three major national carriers, and the rural telecoms operators (initially up to 10).
Furthermore, some of the current and future competitors have certain rights of way, which they can use to their advantage in rolling out infrastructure networks, for example: Transtel can use Spoornet railway lines, Esitel can use the power grid infrastructure. Securing of the rights of way (either their own or from other players or municipalities and companies.) will be an important factor in the cost of rolling out infrastructure and thus creating a truly competitive environment.
BMI-T also states that possible anti-competitive behaviour by Telkom is noteworthy, based on Telkom's past behaviour against VANs and the recent disconnection of Transnet lines. Telkom still remains a giant monopoly in the local market and may feel tempted to use less-than-ethical methods in the future to compete.
“Lastly, VoIP regulation faces increasing pressure from VANs, although this should be resolved by about 2005. At present service providers, such as VANs, are disadvantaged against the major telcos, who are permitted to carry VoIP traffic. These are all very complex issues and must be executed properly by ICASA in order to facilitate the opportunities of future competition,” concludes Pater.