Telkom likely to oppose Sentech licence

By Phillip de Wet for Telkom
Johannesburg, 09 Apr 2001

Telkom says it will address several issues it has with the telecommunications policy directions published two weeks ago. Its submission on the directions is due this week.

Interested parties have until 2 May to make submissions on the new policy, which will determine the state of the telecommunications market for the next eight years.

Victor Moche, head of regulatory affairs at Telkom, says the company`s submission will focus on the international gateway licence granted to Sentech and the initial period of services-based competition for the second national operator (SNO). Also of interest to Telkom is the proposal for number portability and the provision which will allow value-added network services (VANS) providers to establish full virtual private networks (VPNs).

The Sentech provision is seen as an attempt by government to significantly up the value of the parastatal, which is expected to form part of its ongoing privatisation drive. Sentech, which distributes broadcast signals, is to use digital television technology to provide international access directly to the consumer.

But Moche says the international gateway provision is "cream skinning".

"Right now it looks like Sentech will have the best licence of all of them," he says. "Their licence devalues the second operator, and it devalues Telkom."

Telkom believes Sentech will be able to establish a foothold in one of its most lucrative businesses, international voice provision, for less than R3 million, a paltry investment when compared to the capital required for a full network roll-out.

Telkom has not determined what likely impact Sentech will have on its revenues but expects it to be significant. Potential second licence bidders have also expressed reservations on the Sentech issue.

Moche describes the three-year period in which the SNO will be allowed to share the Telkom network as a vacation, although the government`s Department of Communications justifies it as a measure to help the new player get on its feet.

"In my mind, you are not going to have network growth for at least two years in this situation," he says, adding that only 90 days is needed to establish an entire national network. "Six months ought to be enough to build the second network. Anything more than that is simply cannibalisation."

Another issue likely to be addressed in the Telkom submission is the proposed number portability to be introduced in April 2003. "Number portability is generally seen as a panacea for competition, and that is partly true," he says. "What nobody says is that it is terribly expensive." He notes that the advanced technology required for number portability is contradictory to the goal of affordable telephony, and that a needs assessment should be done before the policy is finalised.

As for VPNs, Telkom sees such services as simple resale of its infrastructure and will object to the provision which will give VANS operators the right to create such systems. But industry watchers believe it unlikely that the government will back down from the VPN provision, as VANS providers have been denied the right to provide voice over Internet Protocol services.