Archive for June, 1999

SOUTH AFRICA PREPARES FOR PRIVATISATION – JUNE 1999

Tuesday, June 1st, 1999

South African telecommunications carrier, Telkom will face competition in April 2002 or 2003, by which time it must install at least 1.8 million telephone lines and possibly as many as 3 million.

The main target for these lines will be under-serviced and disadvantaged areas and will include providing telephone services that will meet the needs of the disabled. In the same time-frame, first-time telecommunications services must be provided to more than 20,200 schools, hospitals, libraries and local authorities, as well as 3,200 villages – many of which have never had access to a single telephone service.

Telkom is also obligated to convert 1.25 million analogue lines to digital by March 2002, although it has gone public with the statement that by the end of 1999 there will not be a single electromechanical or manual switch in its network. This means that every Telkom customer in South Africa will then have access to digital services such as electronic call answering, detailed billing and so on.

The overall target of Telkom’s exclusivity licence is to increase the number of lines, from the 4.2 million lines in operation before the five-year exclusivity was issued in May 1997 to about 7 million within the exclusivity licence period, thereby increasing teledensity from 10.12% to 40%. This means South Africa has to install telephone lines at an annual growth rate of about 10% between now and 2002. Most other African countries have development plans that demand a 20% growth. In terms of its licence conditions Telkom must install 120,000 public telephones. Many of these new lines will use wireless local loop (WLL) technology, which surprisingly has not been widely deployed in the rest of Africa.

Three licences wh0ich were awarded to Telkom dictate these terms, which will have to be met by Telkom in return for a five-year period of exclusivity for providing fixed-line voice services in South Africa. If Telkom were to achieve 90% of its total target within the first four years and commit itself to rolling out a total of three million lines, the majority state-owned company would be eligible for an extra sixth year of exclusivity to 2003.

The South African government, in its offer to the World Trade Organisations Group on Basic Telecommunications, committed itself to ending Telkom’s exclusivity on PSTS services by no later than 31 December 2003, after which another public network operator will be permitted. To date the only real competition Telkom has faced has come from the two cellular operators, MTN and Vodacom. Telkom holds a 50% equity stake in Vodacom.

In effect, the Telkom licences established a regulatory regime for the telecommunications industry, which is currently dominated by Telkom. In terms of the licences, during its exclusivity period Telkom will have to turn around its much criticised customer service record or face hefty penalties. It must also clear more than 90% of faults reported by business and residential customers within 48 hours and 80% of residential phone orders must be met within 28 days.

Post and Telecommunications Minister Jay Naidoo has said penalties would be imposed by the South African Telecommunications Regulatory Authority (Satra) if Telkom does not meet its targets. The newly granted Telkom licences were the last to be issued by the Post and Telecommunications Ministry, as Satra has now taken over this function.

Telkom’s mandate is to promote the extension of quality and affordable services to those previously denied them. Its mandate also includes the promotion of a wide range of telecommunications services in the interest of South Africa’s economic development. Satra has said it would not hesitate to impose penalties on Telkom should it fail to meet the stringent targets outlined in its licences. Telkom could, for example, be fined R1,350 for every line missed in an under serviced area and R4,500 for every line missed to a clinic.

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INFO.COM 2025 – JUNE 1999

Tuesday, June 1st, 1999

The Department of Communications in South Africa has embarked on several short-term and long-term projects under the banner of its ‘info.com 2025’ initiative, among which is the building of telecentres that will provide access to telephone, fax and Internet facilities in rural areas in the short term. Another project is to create a direct electronic link between individuals, telecentres and information resources dealing with health-related matters.

Another initiative embraces community information centres that will provide access to a broad base of government and private-sector information to all, but with the emphasis on development for disadvantaged areas, through the Internet. Other aims of info.com 2025 include making government accessible and online, by developing a paperless electronic system of government information access, distribution and retrieval.

Schoolnet is another info.com 2025 project, which aims to provide access to interactive distance learning and education and yet another is the Internet 2000 project, which will provide Internet access to a substantial number of schools in South Africa by 2000.

A project called Web Internet Laboratory provides learning laboratories for use by universities, colleges and technikon campuses in confined user group communities and Virtual Library will provide public access to local and international library resources. It is envisaged that info.com 2025 initiatives will utilise Telkom’s new broadband backbone network. The communications department and the South African Post Office are also piloting a public information terminal (P.i.T), which is targeted at bringing easy access to e-mail and the Internet to South African individuals. The vision here is that eventually each member of the public will have an electronic address to receive online information at post offices nationwide.

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TELECOMMUNICATIONS IN AFRICA – JUNE 1999

Tuesday, June 1st, 1999

Our researcher Jennigay Coetzer recently updated our reports on Africa, and in particular on South Africa. Following is a summary of what’s happening in that part of the world

The African continent houses just over 700 million people. The social and economic conditions range from poverty to affluence, South Africa being the most affluent.

Of the world’s 48 least developed countries, 33 are in Africa. Africa is rich in natural resources except for water. By 2025, it is predicted that South Africa, Lesotho and Malawi will be almost without water, while others will become increasingly short of water resources.

Telecommunications coverage in Africa is among the lowest in the world, with an average of only two phone lines per 100 inhabitants. In Southern Africa teledensity is just over four phones per 100 people. Ghana, Guinea and Senegal were among the countries that registered the highest growth in main telephone lines in 1997. Rural areas, where 70% to 80% of the population live, are largely not reached by telephone service.

South Africa is striving for universal access whereby every individual has access to a telephone within 30 minutes’ travelling distance. According to a recent report by BMI, Malawi is striving for telephone access within 10 kilometres of all inhabited areas, Kenya is striving for telephones within walking distance and Ghana is targeting a telephone in every town that has more than 500 inhabitants.

To achieve universal access, African countries are implementing policies to drastically increase the number of public telephones. In Senegal, for example, entrepreneurs are allowed to operate telecentres, of which 5,000 were in operation by the end of 1996. These accounted for more than 5% of all the telephone lines in the country.

To date, the telecommunications sector is heavily dominated by single state-run telecommunications monopolies, although an increasing number of countries in the region are moving towards deregulation. However, by the end of 1998, some 18 incumbent operators in the African region had some degree of private and/or foreign ownership. Ghana, Uganda and the Seychelles have already licensed second national operators. Meanwhile South Africa, Ghana, Tanzania, Uganda and the Seychelles have begun the liberalisation process. Botswana, Mauritius, Mozambique, Lesotho and Zambia are among the other African countries that are preparing for privatisation.

There is competition in the cellular operator arena in more than 20 countries and several others are moving in this direction. Some 20 new mobile cellular networks came online in Africa in 1997 and 1998 and two of the region’s top ten telecommunications operators are pure mobile operators. By the end of 1998 there were 25 privately owned cellular networks in 13 African countries. The number of cellular subscribers is estimated to have exceeded 3 million by the end of 1998 and is forecast to reach more than 5.5 million by the year 2000. More than half of all new telephone subscribers in Africa in 1997 signed up for cellular service.

Prepaid cellular services are opening up the market to those who cannot afford to commit to, or who do not qualify for, airtime contracts. In South Africa, for instance, more than one-third of cellular network operator Vodacom’s subscribers are prepaid. To encourage lower income groups to become cellular subscribers it has become the practice to sell prepaid cards through chain store retail outlets, many of which allow their customers to pay off their phone handsets over a six-month period.

The majority of African countries are currently linked to the Internet to some extent, either by dial-up, e-mail store and forward services or leased line services. Most allow competition for Internet access services and foreign ISPs are setting up business there. Of the approximately 400 ISPs in the region by the end of 1998, some 75 were in South Africa, 100 in North Africa and close to 200 in Sub-Saharan Africa. By the end of 1997 there were an estimated 150,000 Internet users in the rest of Africa, not counting South Africa. Because of the cost entry level of individual Internet connectivity, there is a move throughout the African continent to provide Internet access in schools, libraries, pay phone centres and other public places.

By mid-1998 there were about 150,000 Internet host computers in the African region, of which 140,000 were in South Africa, 3,700 in North Africa and the remainder in Sub-Sarharan Africa. The annual average growth in hosts has been averaging more than 50% in South Africa, 100% in North Africa and more than 150% a year in Sub-Saharan Africa.

According to the 1997 report of the UN Development Programme in Sub-Saharan Africa:

– Life expectancy is 50 years, but one-third of the population is unlikely to reach 40

– Child mortality is 97 per 1,000 live births

– 47% of the population have no access to health services and 49% have no access to safe water

– 44% of adults are illiterate

– Full-time school enrolment is low and 29% of children don’t reach grade 5

– 39% of the population live on $1 a day or less

– Africa will record growth of 4.7% in 1998 – just less than Asia. At this rate, Africa could take over as the fastest growing region in the world.

– Angola, Uganda and Botswana are forecast to be among the 10 fastest growing economies in the world in 1998.

In Southern Africa, 104 million inhabitants live in 10 countries – Angola, Botswana, Lesotho, Malawi, Mozambique, Namibia, South Africa, Swaziland, Zambia and Zimbabwe. These account for 18% of the total population of Sub-Saharan Africa and are responsible for 55% of its total GDP, 51% of exports, 70% of motor vehicles, 58% of railway lines, 82% of electronic power production, 92% of steel production and 45% of tarred roads.

(For more on Africa, see our Web Reports in the Geographic Regions and Countries section on our Web site – www.budde.com.au).

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WIRELESS ACCESS PROTOCOL (WAP) – JUNE 1999

Tuesday, June 1st, 1999

In May 1999 Optus announced its plans for a WAP trial, with a commercial launch planned for late 1999.

Today some 40% of the workforce of the developed world are mobile, or soon will be, and many of them interact directly with customers. Thus, the market for the wireless intranet exists, sales of the new wireless information devices are going to take off and Wireless Access Protocol (WAP) will create a global market for value-added services.

WAP is a standard set of protocols for wireless Internet access which can deliver special Web pages to portable devices such as smartphones and palm-portables. It relies on the use of WML instead of HTML and so, to use it, the site requires two discrete downloading ‘trees’. WAP Web pages are often called ‘card decks’. These systems generally support Java and Windows CE.

The trouble is that the industry is trying to buck the market by touting high-speed circuit switched data (HSCSD), using multimedia as the spin, when what is really needed is low-cost, ubiquitous packet-switched mobile data. And in this day and age, the market will win.

(With thanks to Stewart Fist for his contribution)

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ATUG – NOW99 AND BEYOND – JUNE 1999

Tuesday, June 1st, 1999

By the time you read this the annual conference and exhibition will be a thing of the past, as so many new things have happened over the weeks following this event. Still, you might be interested in a summary of the conference, as I saw it:

The conference

As always the ATUG event is the best networking event of the year – it would be hard to beat in that respect. Particularly for die-hards like me, the networking aspect is the best part of the show. As in previous years, I was rather disappointed by the standard of presentations. To me the majority appeared to be just pushing their own barrow, to promote their company. And those who did address more general topics, regardless of the sometimes excellent quality of their presentation, just seemed to be repeating the usual feel-good stories. Although the packaging might differ depending on what is the ‘flavour of the year’ (ATM, ISDN, Internet, Multimedia and so on), the content remained the same.

My feeling is that more independent international speakers should be invited (and paid for) to present more interesting papers. But, since to a large extent the audience has a technical orientation I am sure the conference, as well as the exhibition, fulfils an important need. Coming from a marketing background, I know all about targeting your audience and how important it is to keep a clear focus on them. However, as a non-technical person, I did find a lot of the sessions self-indulgent, technically hyped-up and, in fact, pretty boring.

I was delighted to see a packed house – standing room only – when I presented my paper at the conference, Trends and Developments in the Telecommunications Market. Subsequently there was a mini-stampede to our own little corner at the ATUG café where a copy of my paper was available. In this strategic position we were able to meet up with many of you – this was especially gratifying to our office staff, who were interested to meet the people behind the voices they talk to daily on the telephone.

If you are interested in a copy of my presentation let me know and we will e-mail one to you.

The Exhibition

This year’s exhibition was significantly smaller than those in previous years. With fewer service providers at the exhibition the technical side of the industry was highlighted even more. Also, many end-user companies such as Ericsson, Nokia and Motorola did not have a presence. Their products have become more ‘mainstream’ and few mainstream people visit ATUG events. The same applies to Internet products and services – more specialised exhibitions are enticing exhibitors, delegates and visitors to their own events.

However, the more important underlying factor here is the bitter competition between the ATUG event and their American competitors, ZD Events, who organise Interop – this year in association with a Comdex event. It is a great pity that the two can’t amalgamate. While I empathise with ATUG, the fact remains that the exhibitors will judge both events on their commercial merits and will have to make commercial decisions. My suggestion is that the telecommunications industry in Australia should convene, make some fundamental decisions about the future of these events and come to an agreement on how to make it work for all involved. And who would be in a better position to make this happen than ATUG?!

The fun element of the event was greatly facilitated by companies such as Samsung and Marconi. ATUG themselves set the scene – both at their own stand as well as during the conference luncheons, where they featured excellent comedians. Full marks to all of them.

The quality of the coffee is definitely improving – now it is not only AAPT that provides great espresso and cappuccino coffees – these are also offered by NCD, Plestel and others. For a coffee lover like myself it is very encouraging to see people flocking to these stands. – our industry obviously consists of people of discernment in matters other than technology. However, for the few stands left with ordinary coffee – the writing is on the wall.

Regulatory fine-tuning won’t work

Plenty of action at and around the event.

Things got off to a good start with the Minister, Richard Alston. He is by now a telecommunications veteran, with eight years of experience up his sleeve – a lot more than the average employee in the industry. He gave a very relaxed and pleasant presentation.

As you might have read in the newspapers, I am pretty happy with the regulatory changes the Minister proposed. In principle, I am always very optimistic, enthusiastic and positive about new initiatives that seem to be headed in the right direction. But (and you probably felt a ‘but’ coming on), I do have reservations.

I doubled-checked the facts by asking the Minister a series of questions, which could be reduced to the following: Are the new rules framed so that – after arbitration, consultation, due process and God knows what more – when the regulator finally comes to a conclusion, the decisions relating to this conclusion can be implemented?

The answer essentially was – no. Sure, the rules will have been sharpened and fine-tuned, but Telstra’s army of lawyers will no doubt find new loopholes and will use them to delay and stall. The recently restructured legal arm of the firm is larger than most private law firms in Australia and I believe that, without firm decisions from the government, Telstra will just continue to look for loopholes.

Some Telstra people I spoke to commented along the following lines:

What do you think we should do? The ACCC delivers a report, puts it on the table but then fails to tell us what to do. Should we then not look after our shareholders and only comply if specifically required to, under duress by legislation. Unless this happens we will fight to the bitter end to protect our business.

While I don’t agree with this viewpoint, I can follow their reasoning. It will be up to the government to demonstrate how serious they are. So far there is nowhere in the world where self-regulation in telecommunications is working in a situation where you have one dominant player, so why should Australia be any different?

Regulators in Europe are far stricter, and look at the changes that have occurred there over the last 18 months. It is just mind-boggling. The Australian lead in deregulation has already totally disappeared and every day we are getting further behind.

These views were confirmed when the report jointly initiated by Deloitte Touche Tohmatsu and Decisive Publishing reported that liberalisation is working, but that battle fatigue is causing havoc amongst those who are sick and tired of having to fight all the political battles instigated by Telstra. A cat and mouse game, in which Telstra is not a cat, but an 800-pound gorilla.

Another telling example of delay in the regulatory arena was the confirmation of the declaration of the analogue subscription broadcast carriage service by the ACCC, earlier this month.

I was personally present when the Labour Minister Michael Lee confirmed the ‘open cable’ position – I believe this was back in 1996. Next we had the new Act of 1997, formalising this position again. Now, two years later, yet another confirmation that the service is declared.

Isn’t this a clear indication of extremely successful delaying tactics on the part of the incumbent operators. They have already gained at least three more valuable years without competition. How many more confirmations do we need before we finally see competition in pay TV content in Australia?

Telstra confirms hard line

The next day Dr Ziggy Switkovski, Telstra’s new CEO, mentioned – as basically every other Telstra manager and/or CEO has done at any other ATUG event I can remember – that they support the competitive environment, that they are an open organisation and that they are always willing to frankly discuss points that need improvement. My question then is: if this is true why does the Minister have to come up with these legislative changes, and why is practically the whole of Australia in an uproar about Telstra’s conduct, level of service, prices, etc?

One of the first things Ziggy mentioned at a short impromptu press conference, after his presentation on the day after the Minister’s speech, was that he believed his company’s churning process is good and that it will fight the case to the bitter end. (For more details see Web Report Australia – The Incumbent Carrier, Dominance, Privatisation) On my question to him about the overall competitive issue he was a little more conciliatory and indicated he was willing to explore new practices.

In my opinion his ATUG speech was a miss for open goal, regurgitating exactly the same old feel-good Telstra story and failing to discuss the problems that everybody else is talking about. He didn’t even refer to the changes foreshadowed by the Minister. He side-stepped all that by making the statement that Telstra had seen a sea change in approach and attitude. Does he really believe this while all around him, from the Minister down, is saying the opposite?

As we have experienced with virtually anybody else on a senior level within Telstra he quickly retreats to the Telstra strategy of avoiding these issues, talking up the hi-tech stuff, painting a wizard-like techno future with lots of goodies and talking about high-touch customer service. This last item, especially, didn’t go down well with the delegates. According to high government level Telstra-users, this was a big joke (they called it an ‘out-of-touch’ service) and you only have to read the various letters to the editors in newspapers and magazines to see a totally different picture.

AAPT -and Optus

Before the event Optus had made a move on AAPT. During the event TCNZ announced its intentions.

Much has happened since.

It was refreshing to see that the ACCC could act swiftly. I was involved in their investigation process and was impressed by the level of professionalism and thoroughness. It is disappointing that it appears to be impossible to have an equally swift result in relation to the dozens of investigations regarding Telstra and regulatory issues in general.

Full marks also to Optus. They were dignified in defeat – a refreshing change in our litigious industry. As I have mentioned before, the company clearly has its eye on the ball and didn’t fall into the trap of distraction by challenging the judgement of the ACCC. It was very much a confirmation to me that this company is well and truly on the right track. they are focussed on exciting new business opportunities, rather than fighting the ongoing turf wars.

Hopefully we will also see a breakthrough from them later on this year, when they introduce their high-speed Internet product. I am not a big believer in a fully-packaged @Home service. I prefer to see a very competitively priced vanilla access service for around $25 to $35 per month. If they would like to value-add on top of that, with @Home and other services, that’s fine, but I feel that should be left as a customer choice rather than as a force-fed service.

AAPT and TCNZ

As mentioned, during the event the Telecom NZ/AAPT move was announced. The ACCC decision and the resulting exit by Optus forced this company into action and since then they have bought a 20% stake in the company.

I was interviewed by a radio station in New Zealand on this announcement, as well as on Telecom’s New Zealand annual results. Of course, I said that I was very happy with the announcement as it would give Australia a chance to maintain a strong competitive arena, rather than reducing the top level of competition from 3 to 2 players.

Telecom New Zealand is one of the international success stories on how an incumbent can change (in a positive way). At home it is using all the standard tricks to avoid competition, exhibiting a cultural attitude directly opposed to that of AAPT. However, as we have seen around the world, incumbent carriers can sometimes behave ‘pretty normally’ and very successfully once they have emerged from their incumbent cocoon. I think Telecom NZ dumped its Pacific Star venture too quickly because of inexperience with competition; this time round they are more weathered and much better prepared to take on the challenge, especially when dealing with a company like AAPT.

Paul Budde

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