The problem with telecomms in SA

Posted by greenwitch
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on Tuesday, 12 June 2007
in Digital Blogs

Along with the weather and sport, telecommunications has to rate up there as every South African's favourite complaint point. We moan and groan endlessly about Telkom, or the mobile operators, none of which have any concept of service, or any desire to offer fair pricing for their respective products.

Is there light at the end of the tunnel, however? Well, yes, maybe. We have VoIP, we have the SNO, and we have interconnects. But - and there are a lot of buts here.

Firstly, interconnect rates (ie the fee a provider charges to route a call from its network to another network eg Cell C to Vodacom) decreed by Telkom have made local call costs via VoIP higher than that charged by Telkom, but Icasa is expected to fix this when it rules on interconnect tarrifs this year.

All of the VANs (like IS, Storm, Verizon, Orion/Vox Telecom) and the mobile operators and Telkom and the SNO will be interconnecting now that agreements have been put inplace. All the major players have number allocations (ie can allocate a telephone number to a client) and can route traffic between their networks (for an interconnect fee). This means that, further down the line as all of the VANs interconnect, it will be possible to bypass Telkom.

Once interconnect fees drop to a reasonable level it will be cheaper to call VoIP to any other number, so the need to route provider to same provider (what is know as an on-net call) to get the lowest possible rate, will fall away, and result in the end of the need for LCR in SA, and Telkom going hunting for a new market. 

Another issue here is geographic number portability. This will allow fixed line customers to move from Telkom to the SNO or a VAN without losing their number. This is important because although the VANs have numbers, corporates will not incur the cost of changing their numbers and having to change all marketing and collateral. Icasa is due to publish specs sometime soon. What this means is that almost no-one is getting the benefit of making inbound calls to a VoIP customer. Once this changes you will be able to call VoIP to VoIP, or landline/cell to VoIP and vice versa, the VANs will get lots more traffic (and money) and rates will no doubt drop again and critical mass is reached. 

As for the SNO - Neotel - it is currently being used predominantly as a redundancy option for corporates and the VANs. More impact will be seen later this year as it hits the consumer space - not because of huge call cost drops but because of the increased awareness of the company and the fact that it is actually providing working solutions.

All of the above is a very brief, and extremely simplified explanation - so please don't hang me for being overly simplistic, or not including 20 million lines of ifs, buts and technical details. 

 My point, of course, is that developments in the telecomms market are happening at quite a pace, although this is not evident on the surface, and that things are not as bleak as they seem. There is indeed light at the end of the telecomms tunnel, and it's not the Telkom train.

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BRE! Tuesday, 12 June 2007

its so descriptive :)

greenwitch Tuesday, 12 June 2007

thanks - and here i thought I was overly brief. ;-)

Shaz Tuesday, 12 June 2007

I am glad you optimistic but I am still not a fan of the SNO. The SA telecoms industry got its strategy wrong. They should have followed the UK model in the first place. Keep Telkom as the only operator but reduce it to a bit pipe provider only and unbundle the industry allowing anybody to be a service provider instead of having a SNO who plans to have most of its own infrastructure. Due to unbundling in the UK anybody can offer fixed line services although BT is main player that provides the pipes. Imagine a customer walks into a Virgin Media store in the UK take out a quadruple play package, where he or she gets his cellphone, fixed line, Digital TV and Broadband from one provider. There is no need to deal with no one else besides Virgin and you get one bill at the end of the month from one supplier. Extreme customer convenience. And there are many competitors offering either triple play or quadruple play which drives price down. I wonder will SA ever get to this stage. We can only hope. But allowing a SNO to build another network was a mistake I personally think.

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