Infraco contrary to telecoms trend

The creation of government's broadband infrastructure provider Infraco is a "novel idea" because it runs contrary to the international telecommunications trend, says Gartner analyst Will Hahn.

"Historically, telecoms carriers have divested from their networks. For instance, BT (formerly British Telecom) is now pushing itself as a solutions provider rather than a telecoms operator," says Hahn, who is principal telecoms analyst for the international research firm.

Speaking during the Gartner Symposium 2007 conference, in Cape Town yesterday, Hahn said telecoms companies generally face a "grim" future as they find their margins under pressure as telecoms prices continue to fall globally.

On a global scale, these carriers will lose $53 billion in fixed-voice revenue, $6.5 billion in wholesale carrier revenue, and the fixed-line market will remain flat, he predicted. The largest incumbents will lose market share, he added.

"Telecoms operators are not just looking to maintain their margins, rather they are looking at getting revenue from any source they can."

According to Hahn, who keeps a close eye on South African events, there are two possible scenarios for telecoms operators.

The first is they find new revenue streams by offering a number of other services and maintain ownership of their customers.

"This was exactly what Telkom wanted to do with their attempted purchase of Business Connexion and they were right. The Competition Commission was also right in refusing to allow them to do this," he said.

The second future scenario is that telecoms operators focus entirely on their core networks. Hahn terms this the "smart utility ownership model".

"This means the customer is then owned by someone else and the carrier disappears from the client's radar screen. Every telecoms executive I have spoken to doesn't want to go this route."

Department of Public Enterprises director-general Portia Molefe yesterday told the Parliamentary Committee on Public Enterprises that Infraco would not go directly to end-users. It would instead deal with "seven or eight companies that do".

The committee is conducting public hearings into the draft law that will eventually govern Infraco as a state-owned enterprise to roll-out broadband throughout the country. One of the major issues raised during the hearings is that Infraco will sign a four-year exclusivity deal with second national operator Neotel.

"What I want to know is that if Infraco is being kept out of Neotel, then why is Telkom being allowed to keep its wholesale and retail operations under one umbrella?" Hahn asked.

He said there is no cheap way to increase broadband access.

"One of the factors to increase access is to open up backbone (backhaul) capacity. However, it is not a magic wand."