Regulator 'has telecoms market in its hands`

By Paul Vecchiatto for Gartner
Cape Town, 20 Sep 2004

The communications ministry has washed its hands of the telecommunications issue in SA and it is now up to the regulator, the Independent Communications Authority of SA (ICASA), to make it all worthwhile, says Gartner.

Gartner analyst Bill Hahn says the two main issues at hand in the recent communications announcements are closely entwined, but unfortunately appear to be on separate paths in the foreseeable future.

Hahn was speaking to ITWeb in connection with communications minister Ivy Matsepe-Casaburri granting the second national operator (SNO) licence late last week.

He says that opening the value-added network service (VANS) licences to utilise voice over Internet Protocol (VOIP), offer voice and go to other players for capacity, interconnection, billing and so forth has to be considered a positive step for liberalisation and competition.

Hahn says that of the more than 300 VANS operators in the market now, there are probably two- or three-score with the size and capability to enter the voice sector soon.

"Individually, those would be mere pinpricks to the market power of the incumbent Telkom; but gathered behind a nationwide catalysing force, which could offer them capacity, hosting, billing, international access and the other elements needed to create a full service portfolio, they could be much greater than the sum of their parts."

Hahn says the SNO "is surely the leading candidate to serve in that role of a full service operator". But before it can head up this potential coalition of smaller providers, the leadership of this new entrant needs to overcome substantial internal and external hurdles, he says.

The "grant" by the ministry is dependent on agreement among the five entities about the SNO shareholding structure as well as a business plan. Given that each of the five has voiced differing objections to some stage of the process to date, it`s hard to see how this can be accomplished soon, he notes.

"And beyond that, there is the lurking uncertainty represented by the unnamed sixth partner, scheduled to hold 51% of the holding agency (worth roughly a quarter of the SNO). What could the government, or the five already in the SNO, be looking for in this partner? How long will they wait before finding a taker? And who would take the stake under these uncertain conditions?"

He says the potential to offer telephony services through new entrants utilising VOIP is exciting, and the February 2005 deadline announced by the ministry will soon be here.

The prospects for a solid market entry by the SNO, by contrast, seem almost as distant as ever, says Hahn, and without a viable alternative supplier to Telkom, it`s doubtful whether a scattering of small companies can move the mountain of monopoly pricing and service levels.

ICASA must now try to forge an agreement among five quarrelling "partners", prepare for the myriad issues that will attend VOIP services, and somehow still keep an eye on the incumbent through what promises to be an arduous interconnection fight where nearly nothing has been said and nothing will be easy, says Hahn.

"The ministry seems to have disposed of the issue, as a political matter, and can now point at others in case of failure. If it indeed unleashes its regulator to arbitrate these important issues ahead, without further interference, the game may be worth the candle*."

* Editor`s note: From the informal "(the game`s) not worth the candle": the potential advantages to be gained from doing something do not justify the cost or trouble involved. (South African Concise Oxford Dictionary)