The minister of communications` announcement that 17 September will see the second national operator (SNO) licensed brings to a head the political problems that have bedevilled the telecommunications liberalisation process in SA.
The award is subject to the business plan, which the members will supposedly submit; and this, in fact, begs the question whether they can cooperate in the first place.
Given the objections of all the parties to some portion of the process in the last year, this announcement is in effect the government calling the consortium members` bluff: either pull together or pull out now.
The SNO could probably survive without Two Consortium or CommuniTel, and might be able to answer black economic empowerment objectives even without Nexus. Only the withdrawal of Esi-Tel or Transtel would deal a fatal blow to the viability of the entity, and as they are still government controlled, this seems unlikely.
Looming over the entire process is the fact that the one-quarter "warehoused" stake remains to be assigned, the largest single shareholder in the SNO is still the South African government, and this contributes to the uncertainty for both the partners and their potential customers.
Substantial economic difficulties
Beyond the purely political sphere, there are also substantial economic difficulties ahead for the SNO. SA`s economy is unparalleled in the region, with plenty of opportunity for new telecoms entrants to catalyse real growth while realising handsome profits.
The SNO, if licensed, will start out with a significant facilities-based network and will be immediately able to approach business customers in urban areas that adjoin that network. Look for this to be the first target. Do not expect the SNO to contribute significantly to raising overall teledensity or extend service to underserved regions without much greater certainty about the regime.
But it is difficult to expect quick or easy progress in regimes like this with a dominant incumbent and a regulator whose independence is not established and whose powers have not been tested.
Such a situation exists in Mexico, where the former monopoly carrier maintains an ironclad grip on the local market and has managed to contain damages even in broadband data services. The regulator`s efforts to force down prices, or clarify the interconnection regime, have been consistently whittled down, defeated in litigation, or even ignored.
Empower the regulator
The first thing that the South African government can do to reinforce the liberalisation effort is simply to empower its regulator.
William Hahn, principal telecoms analyst, Gartner
The first thing that the South African government can do to reinforce the liberalisation effort is simply to empower its regulator, the Independent Communications Authority of SA (ICASA), or more precisely, make it clear that ICASA will be unleashed to enforce the letter and the spirit of its telecoms law. Without that force to counterbalance the monopoly power, it will never be clear whether, for example, Telkom`s tariffs have truly been rebalanced to competitive levels.
Another ugly possibility surrounds interconnection between the players: the original telecoms law envisioned a two-year period of regulated resale by the SNO, to allow the entrant time to approach customers in areas where it did not yet have facilities.
A strict interpretation of the liberalisation process could argue that this period has already begun (despite the lack of a licence) and that Telkom will have no obligation to allow resale beyond spring of 2005.
These and other important issues must be clarified before the SNO consortium will know where it stands (and before any investor could be convinced to take the remaining stake). Only the independent regulator is in a position to provide that assurance, and it must be allowed to take the steps needed. The sooner, the better.
* William Hahn is principal analyst for telecoms strategies and directions for worldwide Gartner research.
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