Analysts look at some key sectors in the ICT industry

As 2013 kicks off, industry observers predict that this will most likely be a year of mixed fortunes for the different segments that make up the local ICT sector. While some significant movement can be expected in the Internet and telecoms space, the outlook for ICT in government is less optimistic.

World Wide Worx MD Arthur Goldstuck has identifi ed three predominant trends in South Africa that will influence the Internet and telecoms space and that will add up to both an explosion in data consumption and in mere usage of the Internet. These will transform communication between individuals, and change the way people expect business and government to communicate with them.

“The year 2013 has always loomed large in our expectations, mainly because of the fact that all the trendlines we have been producing for the past five years have pointed to 2013 as an inflection point in the uptake of digital services,” says Goldstuck.

“This was shown in the Digital Participation Curve, which we first produced in the early 2000s and which, in 2008, began to point to an acceleration in the number of experienced Internet users in South Africa from 2013 onward.”

He adds that there are two other two other factors that make 2013 a year of tipping points in South Africa from an Internet point of view.

“The second is the completion of most of the national terrestrial fibre grids currently being built. The National Long Distance Network, being jointly trenched by Neotel, Vodacom and MTN, is expected to be completed, linking all major cities in South Africa, as is the Fibreco network that includes Cell C and Internet Solutions in the partnership. Dark Fibre Africa is currently completing the urban grids that will link all these networks to the main end users,” Goldstuck notes.

The third key factor, he says, is the tipping point in smartphone sales in South Africa. “For the first time, in 2013, more smartphones than feature phones will be sold, and every one of those phones will be an Internet-connected phone.”

Looking at the rest of the continent, Goldstuck says similar trends are seen across Africa, as data costs plummet, fibre networks improve connectivity, and mobile data becomes more widely available.

However, Goldstuck expects that the rest of Africa will lag South Africa significantly in the quality of access. “It will also become more apparent that the explosion in Internet use in Nigeria, Egypt and Kenya is more about mobile access to the Internet and less about actual use. This will be evidenced by the comparatively low level of data consumption, relative to the amount of people using data, when compared with the South African market.”

OPPORTUNITIES AND CHALLENGES

For the South African Internet and mobile sectors, says Goldstuck, the big opportunity will come with the full roll-out of LTE, and what that makes possible for businesses and individuals who no longer need to feel challenged by limited speed and availability of access.

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Arthur Goldstuck , World Wide Worx" />“It means being able to conduct bandwidth-intensive activity from anywhere, and not being limited to office-based activity.”

The challenge for the Internet sector and for network operators will be to manage demand effectively at a time when data use is accelerating, when the costs are coming down and investment in infrastructure continues unabated.

“The big loser will be government, if it does not show itself to be a willing and cooperative partner in this roll-out. It will be stamped as anti-consumer, anti-progress and anti-competition,” Goldstuck states.

“However, we could also see massive losses sustained by organisations behind the various undersea cables, as competition increases to its highest level ever, and margins drop to their lowest levels ever. The sector needs volume but, with so many players, they are simply not able to stimulate demand that can come even close to matching available supply. Only those organisations with a very long-term return-on-investment horizon will weather that particular storm.”

Goldstuck maintains that the biggest winners will be consumers, as the cost of data falls yet again, price wars offer unheard of deals, and connectivity options mushroom.

Cloud computing can be expected to mature in 2013, and become a common option not only for corporations, but also small and medium enterprises and even consumers. It will help, though, if the term itself could evolve, as the concept of the “cloud” remains too vaporous to inspire confidence, he says.

KEY FACTORS IN 2012

Looking back at key factors last year that are expected to have an influence on the Internet and telecoms sectors in 2013, Goldstuck identified Cabinet pulling the plug on the Telkom deal with Korea Telecom as “probably the single most significant event of 2012”.

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Adrian Schofield , the African ICT Alliance" />This is because it signaled government’s intention to use Telkom as a political tool, and because it put on hold the potential for Telkom to transform its consumer offerings into something that was both world class and that met its customers’ needs. “History will probably show that to be a key moment in the beginning of the end of Telkom as a competitive consumer player – unless an equally startling tie-up, merger or acquisition comes along to kick-start the company again.”

Goldstuck claims that the switch-on of the WACS undersea cable and the announcement of the SAex [South Atlantic Express] submarine cable “combined to provide us with a picture of a future in which bandwidth restrictions would vanish”.

The switch-on of LTE was signifi - cant not because it brought faster mobile broadband – roll-out was still too limited to have a real impact – but because it indicated the networks’ lack of patience with the regulator’s delays in licensing the spectrum that was best suited to LTE, he adds.

“It showed that private enterprise would continue pushing the envelope while government not only dithered, but also appeared eager to hold back progress.”

MORE OF THE SAME

Unfortunately, the outlook for ICT in the government space is not all that rosy. Former Computer Society South Africa president and current vice chairman of the African ICT Alliance Adrian Schofield is critical of government’s track record in the ICT space and expects the state’s poor performance to continue.

“Locally, unfortunately, more of the same unfocused, unfounded and unforgivable so-called policy from the Department of Communications (DOC), which seems to be doing everything it can to prevent the South African community from utilising technology for socio-economic development and growth.

“From ministers to minions, the department has produced ineffectual verbiage, tardy and bad decisions and dysfunctional agencies. Telkom is a business disaster, digital television will reach only a fraction of the target population, the Universal Service and Access Agency of South Africa should be closed. It is impossible to see how there will be any improvement in 2013, and the risk remains high that further damage will be done.”

Schofield says, however, that in other areas of South African government ICT usage there are beacons of hope – but these are dependent on having the right people in place on a sustainable basis. He cites examples such as SITA CEO Blake Mosley-Lefatola, Sello Mmakau at the Department Home Affairs, and SARS COO Barry Hore.

“Too often, though, the potential for ICTs to enhance service delivery and revenue collection is wasted by ‘managers’ who have no understanding of the need for professional application of technology within a strong governance framework.

“The billing disaster at the City of Johannesburg will haunt municipal managers for years to come. Away from the high-profile departments and metros, there is little evidence that the role of ICTs receives more than scant attention in government circles,” Schofield says.

Across Africa, there are countries that have embraced the need for accessible and affordable technology, such as Mauritius, Kenya, Egypt and Rwanda, he adds. Roll-out of the networks is accelerating, partly as a result of the growing bandwidth available from the submarine cables that now surround the continent, partly from the realisation that the “knowledge economy” genuinely does increase GDP. “However, across Africa, the benefits are slow in being realised, as too many economies are rooted in exploitation of resources and subsistence agriculture,” Schofield adds.

ICT CHARTER

Schofield maintains that it is tough to pinpoint highlights in the public sector ICT space in 2012 – and even harder to find ones that are likely to impact 2013.

“A big non-event was the ill-fated ICT Indaba that did more to damage [communications] minister Dina Pule" rel=tag>Dina Pule’s reputation than it did to enhance the use of ICTs. On the other side of the coin (and enhancing [former science and technology minister] Naledi Pandor’s reputation) was the finalisation of the SKA deal, which will bring jobs, skills and technology to South Africa, starting with the meerKAT installation.”

Schofield says that although the issues are not strictly around the technology, the Gauteng e-tolling saga will play out in 2013 as another example of the government’s penchant for acquiring grossly over-priced technology from overseas suppliers with “secret” contracts.

“It’s hard to criticise the private sector for importing technology, when government is the worst offender,” he states.

“Was the long, long overdue gazetting of the ICT BEE Charter an important event? It should have been, but it is more like a damp squib than fireworks to galvanise the sector into action. Not only was the final document poorly executed and unnecessarily complex, but it was almost immediately superseded by the publication of the government’s new proposals for the BEE Codes.”

Schofield points out that another long-delayed event was the finalisation of the set-top box specifications, which may mean that at least some South Africans will be able to view the digital versions of SABC and etv output sometime towards the end of 2013. However, the “digital dividend” will be a long time coming, he says.

Seven of the 489 National Development Plan’s (NDP) pages were devoted to the use of ICTs to enhance the future of South Africa, Schofield explains.

“I can do no more than quote from my guest column on the subject: ‘What is worrying (frightening, more like) is that the plan (page 194) says it will take five more years to ‘develop a more comprehensive and integrated e-strategy’. Without a strategy, you cannot have a plan. We will sit on our hands, doing nothing while we develop the strategy. Come on! Get the right brains around a table and the strategy can be done in five days, not five years’.”

Schofield says that, in the same vein, and probably the direct cause of the uselessness in the NDP, the Department of Communications might take some steps towards a National ICT Policy in 2013, having held yet another colloquium on the topic in 2012. It’s extremely unlikely that the policy will contain anything new, neither will anyone be held accountable for turning (or failing to turn) the policy into action, based on past experience, he says.