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Implications of the Big Bang on telecommunications and

the SNO

Dr Angus HayChief Technology Officer, Transtel

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The Information Society

“An enabling environment at national and international levels is essential for the Information Society … The rule of law, accompanied by a supportive, transparent, pro-competitive, technologically neutral and predictable policy and regulatory framework reflecting national realities, is essential for building a people-centred Information Society. Governments should intervene, as appropriate, to correct market failures, to maintain fair competition, to attract investment, to enhance the development of the ICT infrastructure and applications, to maximize economic and social benefits, and to serve national priorities.”

The Declaration of Principles of the World Summit on the Information Society, Geneva, 2003

              

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The Big Bang

Mobile: Self-provision of backhaul infrastructure by mobile operators

Payphones: Full de-regulation of the public payphone voice re-sale market

VANS: Provision of voice by Value Added Network Services providers

VANS: Provision of VANS over facilities other than those of public carriers

VANS: Simple re-sale of telecommunication facilities by VANS providers

PTNs: Re-sale of the facilities of Private Telecommunications Networks

Edu-rate: 50% discount to education

              

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Some facts…

Apart from SNO, there is not a vast pool of underutilised telecommunications facilities

The key input cost for all players in the market is the cost of backbone and access facilities - this has not been addressed

Voice services deregulation will mean very little to SMEs and residential consumers

Only customers with broadband access will benefit immediately from Voice over IP

Mobile operators have no incentive to reduce prices, only to raise their margins

There is still a great deal of regulatory uncertainty, which ICASA must address fast

              

TRANSTELSome comments…

“Internet access won't get much cheaper until the SNO arrives, because we will still have Telkom as the predominant network provider. The SNO has a big part to play as a wholesale supplier of core network services to give Telkom stiff competition for bandwidth prices.”

Storm Telecoms

“SA government's decision to deregulate the telecoms market by February 2005 is positive for IT companies, mobile operators and telco equipment suppliers, but negative for the fixed line market. In the event the SNO is not formed, we believe the government faces the next dilemma of opening up access to Telkom's fixed line network by either unbundling its local loop in some form or offering allowances to investors to build an alternative infrastructure.”

HSBC

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Broadband and Internet

0%

7.4%

4.0%

1.4%

0.3%

0%0%

10.7%

700 --

600 --

500 --

400 --

300 --

200 --

100 --

0 --1995 1996 1997 1998 1999 2000 2001 2002

Broadband as % of Internet users

Internet Broadband Source: ITU Internet report: Birth of Broadband

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South African regulation

ITU case study on broadband in South Africa– “A perusal of legal sources regarding regulation

and market structure shows that South Africa continues to operate with a regime oblivious to the complexities raised by broadband.”

International fibre access– November 2003: IEEE Spectrum magazine wrote

of its shock at the lack of impact that the SAT-3 optical fibre cable has had: Access is limited by monopoly pricing and similar anti-competitive restrictions.

– Fear of similar cartel developing in the East African optical fibre project (EASSy)

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Packet-based

Network(ATM or IP)

Packet-based

Network(ATM or IP)

Converged services

Multi-service Connection!

Broadband digital multi-service network close to the customer

Bundled products

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Convergence?

Convergence will happen, whether we regulate it or not

With the exception of broadcast content, it’s now not at all clear why we need Convergence legislation at all

Convergence is not the solution – competition clearly is!

              

Facilities-based

Service-based(VANS)

Apps

Content

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Why an alternative operator? Essential large scale facilities competition

– Telecoms value chain is dependent on basic facilities

– A choice of wholesale supplier and price is critical A player to challenge Telkom on equal

footing– Licence, regulatory, tackle anti-competitive practice

A large, viable infrastructure investment plan Access to the only other national backbone

– Cheaper facilities over existing rights-of-way– Largest alternative providers entering the market

A friendly facilities provider in the market An environment for partnership and sharing

              

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Second National Operator So sudden a market change has

precipitated a fundamental business plan review

Multiple alternative scenarios are possible The SNO shareholders own the bulk of the

fixed-line facilities outside Telkom With multiple retail players in the market,

there is now a true wholesale market Multi-service Next Generation Network

– Common packet network for all services– Independent service layer (e.g. telephony)– Open interfaces for applications and services

High bandwidth core packet network Ability, rights to deploy broadband access

              

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Back to basics

Do not count on privatisation of the incumbent, for revenue or improved service

Create incentives for competitors in the market

Empower the regulator to punish transgressors

Focus on key issues: interconnection, carrier pre-selection, number portability

Do not fear foreign ownership and control of telecommunications operators

Use positive tools such as a Universal Service Fund to grow access