Deregulation creates market disruption

Johannesburg, 04 Nov 2004

The key question that needs to be answered in terms of all the deregulation hyperbole is whether players will be allowed to provide their own infrastructure, says telecoms analyst Andre Wills, of Africa Analysis.

Speaking at a recent round table discussion on deregulation, hosted by Tellumat, Wills said that if the answer is yes, then we will see massive growth in the industry, but if it is determined to be no, we will likely see a rise in grey market services and the current infrastructure providers - like Telkom - will in effect still control the price of telecoms services.

"The idea of monopoly exploitation is not something that is unique to SA. There are many other areas of the world where they have a monopoly that acts similarly to ours, although if you have a monopoly in an industry, you can`t expect them to act like anything other than one."

Wills says there are natural and artificial disruptors in a market, which affect it in totally different manners.

"Natural disruptors are things like a new technology - such as when GSM was first introduced - which change the market dynamics, but do it slowly and steadily.

"Artificial disruptors cause sudden change in a market, without the opportunity for users to slowly adapt to it. The deregulation of the industry is one of these, as effectively with a sweep of the minister`s pen, the entire telecoms environment has changed."

He believes that facing such change is a huge challenge, as the South African regulatory environment has been like a dam wall which has hampered the development of technology, which has built up like flood water behind it. Now that the regulations have been changed, we can expect an explosion of new technology.

"As the market gets used to the regulatory changes and its effects, we will see the number of technologies and offerings far outstripping the uptake at first, because while they have built up behind the `wall` of regulations, the people who will use them first have to get used to the idea.

"As the market develops, particularly in terms of voice over IP (VOIP), I expect to see the prices of services collapse, and volume becoming what it is all about."

Wills says once the industry reaches that stage, many smaller players will struggle to compete and the industry will probably go through a period of specialisation and consolidation, which will see the creation of a new VOIP map for the sector.

"For a company to survive in the long-term in a deregulated market it will need to be strong, robust and have a carefully thought out business plan, because while we can predict how the market will develop, we have no idea where it will end up," says Wills.