More choice, please

Competition, and the lack thereof, has always been something of a sore point for the country`s telecommunications users. Governmental and regulatory efforts to change this situation have been slow, to say the least. Ultimately, what industry players and consumers alike want is choice, and decent broadband.

Last year, the regulator set its sights on the cellular industry as a whole, and handset subsidies in particular. Believing that consumers were being tied into long contracts, forced to pay heavy penalties to get out of said contracts and being compelled to subscribe to certain services (like handset insurance or caller identity) that were unrelated to the contract, ICASA launched an investigation.

Handset subsidies, argue some of the mobile operators, have encouraged the growth of the market by enabling anyone to afford a cellular phone. Other providers argue that, in fact, the expense of acquiring customers by offering subsidised handsets is too high.

ICASA, in a release publishing its findings, said the matter was a question of choice: "Currently there are no real choices to consumers with regard to price and contract periods less than 24 months for contract subscribers."

The regulator ruled that, among other things, it will be making regulations that "require the network operators to ensure that their agents and service providers provide customers with all relevant information to enable them to make informed choices". It also requires that operators and providers offer equally beneficial terms for post-paid customers, whether they chose a handset or not. Regulations will also be made requiring transparency on where the financing of the free handsets comes from and the value of the various offerings.

Furthermore, it stipulates that contract terms must be explained verbally to potential customers and that the printing on contracts must be clear, conspicuous and include complete information about rates, terms and conditions. Lastly, it said there should be more choice for contract periods and similar terms and conditions must be offered.

On the last point, it is worth noting that Cell C has offered month-to-month contracts since it launched nearly five years ago. Vodacom has had month-to-month packages available since October 2001. On the other hand, MTN still doesn`t offer anything less than a 24-month contract, so perhaps the regulator has a point.

ICASA`s findings raise at least one issue: why should the operators and providers be solely responsible for educating consumers? As Storm Telecommunications` business development director Dave Gale notes: "One of the things ICASA should get involved in is educating the public, and helping people make informed choices. Look at the Ofcom [the UK regulator] Web site. It has pictures and cartoons helping people to understand the telecommunications industry and the options and choices they have."

Furthermore, shouldn`t the regulator be more concerned with pricing and how to lower call costs? Says Jitesh Huri, manager for Base Station System (BSS) engineering at Cell C: "I don`t think we will ever get to a situation where we get away from subsidies completely. Who can afford a R12 000 handset? What concerns me is greater access to telephony - how do we encourage that? Most customers are prepaid customers, but they don`t make many calls. Why not? And shouldn`t we rather be focusing on that and encouraging them to call more? There are certainly enough handsets out there, but prepaid users aren`t making many calls with them."

Despite all the fuss, it doesn`t seem likely that the handset rulings will have much impact. Says managing executive for Vodacom products and services Chris Ross: "I believe it is business as usual."

"ICASA should get involved in educating the public."

Dave Gale, business development director, Storm

Taking the subsidy away completely, as it was feared ICASA would do at one point, would potentially damage the industry. As Ross notes: "I don`t believe we would have had the growth we`ve seen in the cellular market without subsidies. We would have had to look at other means to target people."

Ross refers to a newspaper article, printed when Vodacom`s licence was issued, estimating that the cost of a handset would be about R4 000. That`s a substantial amount today, let alone in 1994 when Vodacom and MTN started operating.

In other words, were it not for the handset subsidies, local consumers would not have had the choice that they have today. With take-up of cellular services far outstripping initial market estimates of 250 000 users, the market is highly competitive, the regulators and others` concerns about pricing notwithstanding.

"Instant gratification is a really big advantage."

Anthony McKechnie, product development head, iBurst

Another segment that`s hotly contested at present is the broadband arena, although some users may argue that there is a complete lack of choice in the market. The truth of the matter is that users have alternatives to Telkom in this space - not for ADSL offerings, but certainly for wireless or mobile broadband.

Sentech, iBurst, Vodacom and MTN all provide services that are comparable to Telkom`s ADSL offerings. It is often speculated that the mobile broadband market is growing largely because of the limited offerings Telkom has chosen to make available to date.

Cell C has elected not to roll-out 3G services at this point as it doesn`t believe the potential market size justifies the expense in terms of upgrading the network. Vodacom`s Ross is quick to point out, however, that the cellular market was estimated to be a fraction of the size it has turned out to be and is still growing.

"It`s about creating a market," he says. "Data is a luxury most South Africans have lacked. Now that they can get it, they will keep wanting it."

Says Storm`s Gale: "I believe there is a huge window of opportunity for HSDPA with Telkom lacking on the broadband side. Telkom is getting its act together and rolling out a lot of fibre and making plans to provide much faster ADSL. But we have customers who have been waiting for six months for an ADSL line. Are you going to wait six months or buy a small card/modem, plug it in and be able to use it immediately? It`s a no-brainer."

The burning issue in this sector, of course, is whether mobile/wireless broadband is a true fixed broadband alternative. Says iBurst product development head Anthony McKechnie: "We position ourselves as an ADSL alternative. Even though the technology supports mobility and is mobile in terms of handing over data sessions from cell to cell, we don`t have national coverage so we haven`t positioned ourselves to compete head-on with HSDPA. Our value propositioning against ADSL is a lot more convincing, and the backlog is a huge competitive advantage. We commit to delivering services within 48 hours, but typically do so within 24 hours. Instant gratification is a really big advantage," he says.

"With people desperate for cost-effective, always-on Internet access, we find our customers will try to use the service even if the signal is too weak to allow a reasonable connection," McKechnie adds.

Says Vodacom`s Ross: "HSDPA is awesome. Once you`ve used it, how can you live without it?" And while one would expect a Vodacom employee to say as much, other users report the same enthusiasm for their connections.

"There`s place in the market for both fixed and mobile broadband," he states. "It is very difficult to roll-out fibre to every sector of a country where people are as geographically dispersed as we are in SA. In Japan, you get 100Mb connectivity in every building, but it`s easier because everyone lives in high-rises so you merely run a cable up. Here, mobile wireless is the way to go because it is far easier to roll-out."

Again, to use fixed or mobile is a matter of choice and preference. With the market at last opening up locally, and Neotel commenting at its launch that it`s entitled to use wireless, and that it is in discussions with ICASA about the 800MHz frequency spectrum, it looks like mobile broadband is the way to go. For consumers and small businesses, it is definitely a viable home or small office option. For corporations, it enables them to connect users remotely, irrespective of where they are. Increased competition will drive prices down further, making the mobile offering even more compelling in the future.