General feelings of jubilation over government`s announcement yesterday on liberalising the telecommunications market were tempered by caution as market players and observers digested the news.
This follows the communication minister`s surprise announcement yesterday afternoon that voice over Internet Protocol (VOIP) would be legalised in February next year, as well as a number of other deregulatory issues.
Reaction has poured in from international and local analysts, Internet service providers (ISPs), industry watchdogs, corporations and political parties as they grapple with the implications of the most significant telecommunications event in the country`s recent history.
Pushing liberalisation
Bill Hahn, an analyst with international research group Gartner, says cutting loose the strings holding back VOIP deployment in this fashion is "quite striking and certainly has the potential to push liberalisation and competition in the market".
Provisions to not only provide telephony via VOIP, but also to resell it through another network, are also welcome developments.
"Armed with this, the second national operator (SNO) in particular has the potential to cobble together a coalition of its own facilities and those leased from private networks to approach customers immediately with voice as well as data offerings," he says.
Hahn says smaller entrepreneurs could also presumably utilise VOIP to expand service in the underserved areas, though it seems doubtful that these provisions alone could suffice to overcome the barriers there.
Hahn warns that Telkom remains a formidable force in the marketplace - the principal effect of the new rules on VOIP could be that early next year we could see a truer test of whether the incumbent`s rates have indeed been fully rebalanced or whether there is still some "play" in the tariffs.
In other markets, VOIP service has brought margins down to the minimum, as well as eliminating costs due to distance.
"But Telkom`s power over international access will still loom large in the international sector. The interconnection regime is still, to my knowledge, completely un-revealed and these factors will form substantial barriers to entry by the SNO or any private players until resolved," he says.
Brian Neilson, director at local research firm BMI-TechKnowledge, says VOIP takes many different forms and he questions if the minister implies that VANS providers and ISPs can offer totally toll-free voice services, without any restrictions on breaking in or out of the public switched telephone networks.
"There are a lot of specifics that must be discussed and elaborated on. Whatever the case, it will have the immediate impact of opening up the market for managed IP VPN services in cases where voice is carried over the corporate data network," he says.
Neilson points out that cession of facilities by VANS providers is also a major concession, as is that of private networks reselling spare capacity.
"This means they (VANS providers and players like Transtel and Eskom - with or without an SNO being licensed) can buy bulk bandwidth at a fraction of the cost per Mbps of that of smaller circuits, and justify this by selling off the spare capacity.
"This would have the immediate impact of bringing competition into the international Internet bandwidth supply chain, thus cutting to the core of the single biggest cost component (about 80% according to local ISPs) of providing an Internet service to the end-user," Neilson says.
Industry 'ecstatic`
Storm MD Tim Wyatt-Gunning says the announcement opens new business avenues for his company, which was built on the back of callback telephony and being an ISP.
"The announcement allows us to continue to do so, at last unimpeded by regulatory restraint with the eradication of any lingering doubt of illegality once and for all.
"We can extend our range of services from international and cell calls to include low-cost national calls and very low-cost inter-branch calls for companies with several offices," he says.
"We expect to be able to offer those companies with permanent connectivity to us (Diginet, Wireless and maybe ADSL) savings of up to 70% on international calls and 30% on national calls. With reduction in cost, we expect to see an increase in minute volumes," he says.
Hillel Schrock, new business development manager at Internet Solutions, says the minister`s announcement should have positive ramifications for business and the general economy.
"The artificial regulatory inhibitors have now been eliminated, and regulation is finally catching up with the available technology and its ability to provide business-critical communication services.
"Important benefits include pricing becoming more market-related and globally competitive. Businesses will now be able to utilise their existing infrastructure more efficiently, and their return on investment decisions will be favourably impacted," he says.
"From February next year, the inefficiencies that businesses had to endure by being forced to keep data and voice traffic separate will finally fall away."
"It`s taken SA a long time to get in line with the rest of the world, but we will now witness a massive boom in the ICT industry," says Robert Sussman, joint-MD of Integr8 IT. "If I were buying stocks right now, I`d be buying in telecoms and IT."
Watchdogs more cautious
Vincent Gore, communications spokesman for the Independent Democratic Party, says his party welcomes the announcement.
"However, much needs to be done in order to bridge the digital divide, and to make the ICT sector a true driver of the South African economy."
Gore says many aspects of the policy announcement, if implemented, will have a major impact on the roll-out of telephony and data services. "However, as usual with ANC-government policy announcements, the devil is in the detail."
He says the possibility of VANS providers being able to offer voice over any protocol implies VOIP, which will mean a greater degree of competition and will have a positive impact on the cost of calls and the roll-out of services.
"The only restriction is obviously the fact that this provision will only be allowed by VANS providers; between 300-400 of them. This rider to the announcement creates an unnecessary barrier for the provision of VOIP to the consumer and is questionable whether it can be effectively monitored and policed."
The Communication Users Association of SA (CUASA) claims this is what it has been after for years.
"As users, it is great news, since it gives us choice and allows us to do all the things we have wanted to for ages, although we do question the timing of the announcement in light of the ongoing SNO process, and wonder what effect this will have on the viability of an SNO," says CUASA spokesman Ray Webber.
"The announcement caught us completely by surprise, but at least for a change it was a pleasant surprise."
Ant Brooks of the Internet Service Providers Association (ISPA) says it is a welcome step, as consumers will benefit, with prices of services expected to plummet from February next year.
"Although it is still subject to analysis, there is a provision in the minister`s announcement that appears to offer the potential for ISPs to begin providing legal broadband wireless services, which could see SA have a vibrant broadband industry within a year.
"Since the minister has now opened up all the provisions she had the power to sign into law, she must be given credit for taking so many brave steps at once, and kudos to her for taking such a strong stance," says Brooks.
"This is an extremely positive step and, coupled with the forthcoming Convergence Bill, we believe we will be able to look forward to a totally deregulated market very soon."
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