ICASA Hearings

1
ICASA Hearings

• The disease in broadband
• by Nic Roets

2
Q1 Q2 Modems

• I estimate Telkom makes R400 on each modem they
  sell.
• Plus Installation fee of R350.
• Minus Unknown Capital cost for advertising,
  DSLAM, fibre, routers and other equipment.
• Result ADSL subscribers are not profitable from
  the first month. (But soon thereafter...)

3
Q3 Service

• Requiring a guarenteed level of service from
  Telkom will benefit consumers in the short term.
• But in the medium term, Telkom will respond by
  slowing the roll out, or even reducing
  availability.
• And in the long term, the SNO will have more
  difficulty raising capital as the regulatory
  environment seems less clear.

4
Q4 - Q7 Q11 - Q13 Capping and Prioritization

• Users of the same product pay the same price.
• But they have different usage patterns.
• Capping and prioritization tries to ensure that
  they all get the same value for money.
• Some users with specialized needs are not
  accommodated within South Africa A symptom of
  the disease.

5
Q8 Q9 Rental costs

• IMHO Business line rental should be cheaper than
  residential, esp. those who buy in bulk.
• Whether you live next to the exchange or many
  kilometres away on a plot, your rental is the
  same.
• Telkom is not passing on the cost savings it is
  able to make A symptom of the disease.
• High rental caused many lines to be mothballed
  Another symptom of the disease.

6
Q10 Q15 ICASA's role

• Understand the disease.
• My diagnosis Lack of proper competition.
• Telkom and all the other competitors are signing
  up new subscribers at a tremendous pace. If
  you're gaining customers, why would you slash
  prices ?
• All the other players are forced to use Telkom
  infrastructure at Telkom rates.

7
ICASA's role

• All the other players are forced to use wireless
  technology that is more difficult and expensive.
• Sentech is a parastatal and cannot be regarded as
  an efficient competitor.
• WDS is a brand new player.
• Vodacom is a Telkom subsidiary. Why wage a price
  war against your parent ?

8
ICASA's role

• Medicine needed Open up the market. Lobby
  Government if necessary.
• Create stable regulatory environment in which
  capital can be raised.
• Avoid waste
• Underutilized or unused telephone lines are like
  vacant office space.
• Unused radio spectrum is like idle arable land.

9
ICASA's role

• Understand the capital intensive nature of
  telecoms. Think about the long term
• 25 years for cables and buildings.

10
Additional The role of ISPs

• ISPs came into being when they added Internet
  Protocol (IP) and e-mail to existing voice
  networks.
• IP equipment has grown much faster than the South
  African telecoms market (as measured in Rand per
  MB).
• Example The routers at my work are 100 times
  faster than 10 years ago and costs much less. Our
  internet connection is a mere 12 times faster and
  costs much more.

11
Role of ISPs

• It is now possible for Telkom to handle all the
  IP traffic on its own network.
• There is no IP bottleneck left for the ISPs to
  solve and the interventions proposed by some ISPs
  will unnecessarily increase the regulatory
  burden.
• The true bottleneck is in fibre capacity,
  installation and maintenance of cable, or in the
  department charged with issuing the licenses.

12
Questions ?

• This presentation can be found at
• www.rational.co.za/icasa.ppt