SAT3 hopes dashed

By Damaria Senne, ITWeb senior journalist

Johannesburg, 24 May 2007

Declaring the SAT3 undersea cable an essential facility will not solve SA's problem of high telecommunications costs, says Verizon Business.

Industry is again eyeing the SAT3 cable, as Telkom's exclusivity contract with government for access to the landing station expires within the next few weeks. Under current legislation, no future monopolistic contracts may be entered into between government and a telecoms provider.

It is expected that government and industry will negotiate new terms for access to the landing station.

Edwin Thompson, Verizon's regulatory and operations executive, says access to the landing station to SAT3 is not the highest cost base for local telecoms operators when they facilitate international access. Verizon holds a share in the SAT3 cable.

The cost to facilitate a national backhaul connection from the landing station to Johannesburg, where about 90% of telecoms companies are based, is the largest cost.

Telkom's excessive pricing

For the past couple of years, the local ICT industry has called for the SAT3 undersea cable to be declared an essential facility, citing access charges as a major contributor to the cost of international bandwidth.

Sentech said last year that 60% of the total cost of its MyWireless service to consumers consisted of the international bandwidth portion.

MyADSL founder Rudolph Muller also points out Telkom charges about four times for half circuit access than international partners charge for their half circuit to international destinations.

Thompson says Telkom has reduced SAT3 access charges in the past two years to the extent that government intervention is no longer needed on that score. "Even if government declared SAT3 an essential facility today, the cost of communications would still be unreasonably high."

Facts and figures

An anonymous source says the cost to connect to London, including the national backhaul cost, is almost the same as national backhaul costs, excluding the international connection. There are even instances where the national backhaul costs more than the international connection, the source says.

"On a two-year contract, a link between Johannesburg and London, which includes national backhaul access, costs R1.7 million, while the national backhaul from the landing station to Johannesburg costs R1.8 million," she says.

Another anonymous source proposes the focus on SAT3 access charges may have been used as a diversion for other problems plaguing the South African telecoms industry. However, he would not elaborate on these problems.

Competition

BMI-TechKnowledge analyst Richard Hurst says anything that will alleviate bottlenecks for telecoms prices to come down, such as fair access to the SAT3 undersea cable, is a good thing.

"Neotel needs to come to the party quickly and provide clarity on how it will provide competition in the national backhaul space," he adds.

Last year, public enterprises minister Alec Erwin announced the Infrastructure Company (Infraco) would play a strong role lowering national backhaul costs. Infraco later leased its infrastructure to Neotel, under a four-year exclusivity contract.

This infrastructure allows Neotel to compete with Telkom in providing national backhaul, MyADSL's Muller notes. Declaring SAT3 an essential facility will also allow Neotel to go through the landing station, thus allowing Neotel to create further competition in providing international access, he says.

Neotel previously declared its intention to provide international connectivity, and Angus Hay, the company's director of strategy, says he expects SAT3 to be declared an essential facility this year.

Verizon's Thompson is, however, sceptical of Neotel's willingness to aggressively compete with Telkom on price. "From what we have seen, Neotel seems to be taking a 'Telkom minor' strategy, looking at what Telkom charges and then taking a few points off the charge."