Neotel under no obligations

Arguments that Neotel is under obligation to focus on the consumer segment have been quashed. Instead, licences under which the company operates make no provision for pre-defined consumer reach targets.

“Neotel's converted I-ECNS (individual electronic communications network service) and I-ECS (individual electronic communications service) licences do not have split in terms of enterprise, wholesale and retail.

“The licensee is entitled to construct, maintain and operate an electronic communications network, and provide electronic communication services on a national scale,” says the Independent Communications Authority of SA (ICASA).

“The I-ECNS licence only contains minimum coverage obligations that need to be met and universal service obligations to be implemented at specified timeframes, but is not specific in terms of the market split,” explains the authority.

“Neotel's obligations pertain to network roll out targets and remain on track,” confirms Dr Tracy Cohen, managing executive of regulatory affairs at Neotel.

Neotel was initially positioned as a second national operator for SA, driving expectations that the company would open up the telecoms market and provide much-needed relief for local consumers, who have been burdened with high telecoms costs.

However, the company recently stated that, although it had been positioned as a second national operator, upon its entry to market, it has instead been focused on being SA's first converged communications solutions provider.

Neotel also stated its consumer segment was not a priority. Ideally, Neotel's revenue mix would be divided as: 60% in the enterprise segment, 30% in the wholesale segment and 10% in the consumer market.

Analysts concede Neotel maybe within its regulatory obligations, but argue that the lack of consequence for the company's abandonment of the consumer segment leaves the country hoodwinked following its initial expectations of the operator.

“Neotel has made a conscious business decision to go where the most logical and profitable areas in telecommunications are currently. As a business decision, it is probably a good one for Neotel and its shareholders. ICASA correctly states that their licence is business neutral and there is no technical requirement to address the consumer market,” notes WWW Strategy MD Steven Ambrose.

Frost & Sullivan industry analyst Protea Hirschel agrees: “I am not surprised that licence conditions make no reference to any obligation to focus on consumer retail, apart from universal service obligations. They also, of course, have roll-out and coverage targets, which they need to meet.

“I would surmise that the universal service obligations are also pretty open-ended, and were likely part of the bidding process for the second licence. In terms of a lack of consequences, it depends on how much one wants the regulator to interfere in the telecommunications market by obligating a company to service certain target segments, over and above universal service obligations,” she continues.

Hirschel argues that linking retail service provision to licence conditions may well be too prescriptive, but ICASA is not necessarily a champion of the South African consumer either, given how long some processes have taken.

Therein lies the crux of the issue, concurs Ambrose.

“The main issue, which we all understand, is that the second national operator licence was to offer a choice to consumers in SA, all consumers from the man in the street to the largest corporation. This choice was an alternative to Telkom and all their offerings,” he argues.

“In this, Neotel has failed. They have not in any way proved to be an alternative to Telkom and have, in fact, hoodwinked the country and the people of SA as this is what they promised initially,” he continues.

“Once again, the regulator and the government have allowed a company to escape their initially agreed mandate, and profit from the naivety and trusting nature of South Africans. We can only hope that competition and a revitalised Telkom offer us the choice and services we deserve.”

Meanwhile, Neotel has forged ahead with its plans to strengthen its enterprise offering.

Executive head of technology Angus Hay says Neotel is now gearing up to launch value-added products, such as outsourced call centre facilities at a per-seat price, tele-presence video conferencing, and a content delivery network to offer live video streaming.

Neotel is leveraging the cables that have landed in SA and its global network access through Tata, to “dip a toe” into offering cloud computing, Hay notes. The telecoms operator will shortly launch a virtual service environment in its data centre with a view to providing full cloud offerings later, he explains.

Neotel's first tele-presence room has also gone live at its Midrand-based head office. Hay says companies can rent it per hour, or choose to have Neotel build their own private room.