Government's plan to use Sentech to bring down the cost of telecoms has industry players questioning if the state-owned broadband network service provider will in effect become a third national operator. However, the newly-licensed second national operator (SNO) says it is not concerned.
The confusion follows the news that the roll-out of Sentech's wireless broadband network will be one of government's three major public infrastructure programmes this year.
Speaking to ITWeb after a parliamentary media briefing last week, trade and industry minister Mandisi Mpahlwa could not confirm exactly how much money government had earmarked for the Sentech project, but said: "The number of about R400 million has been floating around."
Sentech says the fact that it will be used to roll-out broadband services to rural areas means it will effectively be a major player in the consumer telecommunications market. Some analysts feel the new plan makes it unclear "which players fit in where in the local market".
De facto national operator
Brian Neilsen, director of BMI-TechKnowledge, notes that the scale of Sentech's investment from combined government and private sector sources is likely to be much lower than that of the SNO.
"In addition, the scope of their current VANS, international gateway and multimedia licences is narrower than that of the full PSTS licences of Telkom and the SNO."
He says even though all telecoms service providers will be re-licensed in terms of the Electronic Communications Act, the licences are likely to be significantly based on the same terms as the old licences, at least initially.
"Nevertheless, due to Sentech's emphasis on building infrastructure rather than being a purely services-based player, and with a billion-rand investment that is hoped for, the concept of a de facto third national operator could be applied to Sentech."
Raven Naidoo, CEO of telecommunications consultancy Radian, says as far as he is concerned, the confusion lies in the fact that government has stated it wants to liberalise the market, "yet it gives one player a lot of taxpayers' money to be a competitor".
"Essentially, this means the introduction of competition through subsidies, which can be a fool's paradise," he says.
A telecommunications analyst at the local office of a large US bank, who prefers not to be named, says there was always an impression that the SNO would eventually be a direct competitor to Telkom in the consumer space.
"[Government's] initiative seems to pull that rug from under the SNO. What we need is clarity on who fits where in the market and who is allowed to do what," the analyst says.
However, the SNO seems unfazed by the news.
A spokesman for the SNO says: "Firstly, this is a government initiative and so we won't comment directly on it. Secondly, we view Sentech as a potential wholesale customer for us."
Multiple alternatives
"With the market opening up in future, perhaps a more apt description could be that of Sentech being one of a multiplicity of 'alternative operators' - a term often used in Europe to describe all players other than the original monopoly incumbent," says Neilsen.
"Other players that could be included in this category are the SNO, Internet Solutions and the mobile cellular operators, who are also moving into fixed-line service provisioning such as VPN and ISP services.
"These players are powerful, by virtue of the large scale that they already enjoy in their respective sectors, and the SNO is also likely to be advantaged because of the scale of its planned investment."
Planning stage
Johan Raath, an executive in the office of Sentech's COO, says the plans and funding have still to be finalised between Sentech and the Department of Communications, but this should happen within the next week.
Raath says the project would complement the digitisation of the broadcasting service that Sentech is responsible for. This is scheduled for completion by the end of 2009 - one year before the 2010 Soccer World Cup.
"We will have a very powerful network to offer customers. The digital broadcasting signal can be used by a consumer to receive information and the broadband network can be used to send information out," he says.
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