By Ajay Pandey, Neotel MD & CEO   Mahatma Gandhi coined the phrase I’ve used in my heading in ci ..

By Ajay Pandey, Neotel MD & CEO

Mahatma Gandhi coined the phrase I’ve used in my heading in circumstances that, theoretically, are light years away from the subject of technology – but the principle works in any context in which people have to move from an old order to a new one.

In the South African telecommunications market, that move – from a monopolistic, tightly regulated fixed line situation into a less regulated, highly competitive one - is still a work in progress. However, the establishment some four years ago of Neotel as the official alternative to the country’s former monopoly has made Neotel the catalyst for change in the fixed line environment.

We’re the change catalyst by default, of course. But we’re also the catalyst by choice.

Making sense of competition

There are two reasons. One is that we believe absolutely that competition is the life blood of a healthy economy and, because of lack of competition in the telecommunications sector, the South African economy has been held to ransom for many decades in terms of call rates and bandwidth pricing that can be as much as five times higher than those in Europe, United States  and other parts of the world. South African businesses have, therefore, been at a serious disadvantage in communicating with their customers and supply chains in other markets.

The other reason that we choose to be the telecommunications change this country needs is that competition in and of itself is no longer enough to make a real difference to the quality of existence of businesses and consumers. Simply having two fixed line providers of the same sort, for instance, does have the effect of driving prices down – because, theoretically, subscribers have a choice between two similar services.

But, that elementary type of competition is not enough to change the way business is done and life happens in a country that has always done things telephony in only one particular way; a country that has been living in a Henry Ford landscape in which “you can have any colour you want as long as it’s black”.

South African subscribers, whether via their businesses or their homes, are not used to buying converged communications services. Which means that they don’t know how to shop for such services. They don’t know what to ask for and they don’t know how to compare one service with another. In other words, we have a perfect  situation of  a  market  that  has “latent communication  needs.”

Living proof

So, it’s been up to us, as the alternate  infrastructure and telecoms  challenger, to educate the public – to tie together all the telecommunications concepts that people are used to with all those they don’t know and help them make sense of what their voice, data, and Internet options really should be.

That responsibility, in turn, has meant that we’ve had to tie together all the practical elements of voice, data, and Internet delivery – at the level of infrastructure, regulation, and market peers and competitors.

We’ve had to be – and must continue to be, until there is true competition in the market – a living example of what modern communications have to offer.

So, for instance, we made a deliberate decision to fully open subscriber access to bandwidth. At the time of our establishment, South Africa had only one submarine cable (SAT3/SAFE) connecting it with the rest of the world. An elderly infrastructure, it has failed three times in 2010 already, with subscribers having to be frighteningly reliant on redundancy systems – and being driven, as a consequence, to our doors in search of greater reliability and access speeds.

In 2009, the SEACOM cable, which runs down the eastern African seaboard, was landed at Mtunzini on the south east coast of South Africa under our licence, and we manage access to it from our campus in Midrand, in the middle of South Africa.

We are also consortium members of the Eastern African Submarine Cable System (EASsy) due to go live in August 2010, and the West African Cable System (WACS, still under construction) – which makes us the only South African telecommunication company to be able to give subscribers unlimited access to international connectivity and bandwidth. At the other end of that international connectivity, we link to Tata Communications Limited, one of our largest shareholders. Tata Communications is one of the world’s largest telecommunications operators, with relationships with almost 400 other operators globally and handling some 30 billion voice minutes.

In other words, when it comes to international bandwidth, speed, reliability, and access, we do truly tie together the world for South African subscribers.

Sharing resources

At an in-country infrastructure level, we have acted in the belief that telecommunication companies should absolutely compete on the streets when it comes to brand, products, services and price. It makes no sense, however, for each telecommunication company to try and build its own wired and wireless infrastructure in the face of a monopolistic incumbent that has millions of miles of copper cable already laid. We have ourselves laid some 3 000 kilometres of fibre optical cable in major urban areas in the past three years and other operators have begun to lay their own copper and fibre optical cable. Still, none of us can possibly put enough cable in the ground fast enough to be able to catch up with the former monopoly in any time frame that would really liberate the South African subscriber from economic disadvantage.

So, we have created partnerships with South Africa’s two largest mobile telecommunication companies, Vodacom and MTN, who each also have significant and influential shares of the rest of the African market. These partnerships give us immediate access to MTN’s and Vodacom’s 20-year old infrastructures while providing them with access to our expanded international bandwidth and reach.

Naturally, all three organisations benefit. More importantly, the South African subscriber benefits from better access, better speeds, and massively increased reliability.

Services that mean something

Then there’s the issue of tying together service options in such a way that the subscriber, business or private, has total freedom of choice as to how, when, and when communication takes place.

As South Africa’s first converged communications provider, we have changed the way telecommunications are delivered in this country. We have brought new technology into play. So, thanks to our Next Generation Network (NGN),organisations can now have voice, data, and the Internet in a single pipe.. Before Neotel, they’d have had to have the monopoly build another ring of infrastructure around their existing systems in order to get only a circumscribed increase in bandwidth and access and questionable service quality based on ageing foundation equipment to which newer equipment has to be cobbled.

We’ve also commoditised our offerings to serve different markets in ways most appropriate to them. For instance, we’ve created locally an Internet-based Cloud for our wholesale customers, who would otherwise have had to connect via the United Kingdom.

Our next generation network (NGN), is focused on the enterprise market, where the single pipe for voice, data, and the Internet is a priority.

And, our packet network gives us the flexibility to offer consumers a wide range of affordable mix and match products that meet their financial needs.

Overall, we’ve spent some R3.5 billion on developing an infrastructure that enables us, in the fixed line and wireless environment, to be all things to all subscribers. We’ve tied together the technology with appropriate services and products.

Making change official

To be a truly effective consumer advocate and change agent, however, you can’t, as a telecommunication company, stop at knitting together infrastructure, access, bandwidth, products, and services – though that is hardly small potatoes.

You must also pro-actively lobby for positive regulatory change – and provide input to the change so that it is both coherent and appropriate to the end user.

To that end, we have campaigned strongly for geographic number portability (GNP) in South Africa, in order to enable subscribers to change fixed line providers without having to change their fixed line numbers. Gratifyingly, GNP is now being rolled out, with the consumer phase due to kick off at the end of April 2010.

However, GNP is only useful if the last mile of cable to consumers and businesses is unbundled from the clutches of the monopoly – so that subscribers don’t have to incur the time lag and the amortised cost of their new provider having to lay new cable to their doors. Local Loop Unbundling (LLU) is legislated for South Africa for 2011. We expect there to be some not inconsiderable resistance to it, though. So, we’re publicly throwing our weight behind LLU, to ensure that life is finally given to South Africans’ legally entrenched right to freedom of communication and freedom of access to information.

The point being that technology of any sort is about change. The kind of change that permeates every aspect of society. It’s both absurd and irresponsible to try and benefit from that kind of change commercially without committing your own prosperity and progress to the change you want other people to accept. That means making the change comprehensible and then pulling all the threads together so that the change you’re advocating works positively for everyone who is touched by it.

END

Historically, most countries started out with a single local telecommunications operator in any give ..

Historically, most countries started out with a single local telecommunications operator in any given area. The process of dismantling these monopolies in order to allow competition and, therefore, greater choice and reduced prices for subscribers has varied from country to country.

There has, however, always been one common issue – the “last mile” of copper wire to a home or a business. The incumbent local exchange carrier (known in the United States as an ILEC and in most other countries as the national carrier) owns that last mile, simply because it was the organisation that dug all the trenches and laid the cable.

The original local telco’s investment in infrastructure has generally been very substantial. In South Africa, for instance, there are some 5 million copper wire pairs (“local loops”) going from local exchanges into individual homes and businesses. The crucial fact, though, is that, vast as the copper wire infrastructure usually is, the subscriber has already paid for it – via the cost of renting the lines – and paid for it a long time ago.

For any competitor to lay all that cable again, in order to make new connections to subscribers who want to change their fixed line provider, is going to take more time than the South African consumer should have to wait for greater, sustainable competition. Certainly, it’s going to take more time than South African businesses have in order to be competitive with their global counterparts.

Quite apart from the time factor, there is the very good question of why subscribers should bear the additional cost of new cables, purely in order for them to be able to switch to a telecommunications operator that can give them cheaper but more varied services. Especially when they’ve paid for the infrastructure already.

No competitor to a monopoly can afford to lay new last-mile cables without recovering from the subscriber the cost of digging the trenches, the cost of the cable itself, and the cost of laying it in the ground.

In most countries in which deregulation of fixed line services has happened, local loop unbundling (LLU), which allows competitors access to the incumbent’s last-mile copper wire, has been made a priority.

LLU enables a competing carrier to provide any service, including voice, on that last mile. But its primary effect is to create broadband Internet access competition. That’s because LLU does not itself create an incentive to build new broadband access infrastructure but it does open the door to new business models in which such investment is driven by demand from multiple carriers. It also enables governments to subsidise new access rollout without favouring one carrier.

Once unbundled, the local loop typically remains in the hands of the incumbent telco – which doesn’t necessarily solve the anti-competition problem! Following this reasoning, the United Kingdom has taken the concept of LLU one stage further by splitting its original monopoly, British Telecoms (BT), into two separate companies – one that supplies telecoms services and one (Openreach) that owns the local loop originally laid by BT and wholesales it to whichever telecoms competitor needs to use it in order to provide services to its customers.

In South Africa, however, the question remains as to why we would still need LLU, given the escalating ADSL price war. The answer lies in the sustainability and underlying competitiveness of the market. Currently, all ADSL providers are, in effect, simply resellers of Telkom’s access services. This means that one company controls the underlying price, including line rental - which is charged separately in South Africa and captures most of the margin. More importantly, it limits innovative uses of the local loop, holding the country back from the improvements we’ve seen elsewhere around the world.

Based on provisions in current legislation, the Department of Communications and ICASA have started the process of unbundling the local loop in South Africa, with a commitment to implementation by 2011.

Last ditch resistance to the changes seems likely. Incumbent local carriers always raise concerns about the sustainability of unbundling, citing high maintenance costs and the need for expansion and upgrades - and refusing to invest further. Whilst these are real concerns, they have been addressed successfully in other jurisdictions. Why should South Africa be the exception?

It’s crucial, therefore, that businesses and consumers understand what they stand to lose if LLU is not implemented. The benefit of LLU for subscribers is on a par with the reduction earlier this year of interconnect termination rates by mobile operators.

When mobile operators agreed to drop their interconnect rates, fixed line operators dropped their fixed-to-mobile rates, and calls from fixed to mobile phones can now cost as little as R1.20 per minute, depending on which fixed line operator you use.

ICASA has been assiduously chipping away at the monopolism in South African telecommunications for some years, tackling the issues one by one – along the lines of the old saying that it is possible to eat an elephant, if you take it one bite at a time.

Geographic number portability (GNP), which allows subscribers to change their fixed line provider without having to change their fixed line number – and which comes into effect for consumers at the end of April, is another feather in ICASA’s regulatory cap. It forces the fixed line operators to become agile on price and services in order to retain existing or win new subscribers. Inevitably, of course, the subscriber wins by being able to vote with his or her rands.

We now have real competition in international submarine cables. In national long distance networks, lower interconnect rates are enabling lower voice prices. Geographic numbers can be ported. LLU is, therefore, one of the last of the big steps towards total freedom of choice for subscribers. It’s also, perhaps, the most important. Without LLU, all the other steps taken end in a cul de sac in which consumers have to pay for unnecessary telecommunications infrastructure.

Neotel, South Africa’s first provider of consumer, business, and wholesale converged (voice, data, a ..

Neotel, South Africa’s first provider of consumer, business, and wholesale converged (voice, data, and Internet) telecommunications services, has endorsed the announcement by the Independent Communications Authority of South Africa (ICASA) of the postponement by a month of geographic number portability (GNP) for consumers.
Geographic number portability deals with fixed line numbers, such as 021 and 011, that indicate a subscriber’s geographic location.
GNP allows subscribers to change their fixed line operator without changing their fixed line numbers. Phase one of GNP, which was focused on businesses using blocks of 1 000 or 10 000 numbers and was initiated on 18th May 2009, is now complete.
Scheduled by ICASA to start on 18th April 2010, phase two - aimed at consumers - will now start on 26th April 2010, following a request by Neotel and Telkom for time to allow them time to iron out minor technical problems not anticipated at the time of the original scheduling of the phased roll-out of GNP.
“We were early advocates of GNP because it is one of the most important aspects of deregulation of the South African telecommunications landscape,” says Angus Hay, Executive Head of Technology at Neotel. “It gives subscribers true freedom of choice as to their fixed line service provider. They can keep their fixed line number which, for most people, is an integral part of either their home or business lives, while being able to shop around for better rates and services from carriers. GNP gives control of the telecommunications market to consumers.
“In doing that, it forces service providers to be competitive not simply on price but on the type and range of services they provide. Only the most agile and customer-focused of service providers will survive. Clearly, we’re confident not just of surviving but of prospering in such a competitive market - and, for that reason, we’re looking forward to helping to ensure, in this next month, that there will be no glitches once GNP for consumers is launched.”
Ends
About Neotel:
Neotel is South Africa’s first converged communications network operator. It provides a range of value-added voice and data services for businesses, wholesale network operators and providers and consumers using its pure-IP Next Generation Network, powered by Neotel’s high-performance fibre optic backbone.  Neotel connects the major centres in South Africa to each other and to the world, directly linking the country into Tata Communications’s global Tier 1 network. Neotel offers fresh thinking, a creative approach and flexible solutions for communications in South Africa.

Contacts:
Chuma Siswana                                           Anique Human
Neotel                                                             Fleishman-Hillard
+27 71 853 4405                                         +27 72 567 1996
Chuma.Siswana@neotel.co.za                 anique.human@fleishman.co.za