A stand-off between the most powerful figures in SA telecoms over the regulation of Sat-3 is just the beginning. The stalling tactics we are likely to see after that could make South Africa`s walk to telecoms liberation among the longest of all IT SEEMS INCREDIBLE that government, a 38% shareholder in , is unable to secure a copy of the agreement that governs the submarine telecoms cable system that links SA with the rest of the world.

Government wants to regulate access to the 27 450 km cable system that runs most of South Africa`s international voice and Internet traffic in an effort to reduce telecom prices. Telkom, the only SA investor in the system with a 13% share, has been accused of charging excessive rates to lease capacity on it, keeping the cost of bandwidth in SA artificially high and discouraging investment in business process outsourcing ventures, such as outsourced call centres.

The complication came last week when Deputy Communications Minister Roy Padayachie said he is keen to empower the telecoms sector regulator, the Independent Communications Authority of SA (Icasa), to regulate the cable, and so needed a copy of the consortium agreement. A Telkom spokesperson has been quoted as saying the company "is not aware of any request by the DOC for access to the consortium agreement. The document is not secret but as with any commercially sensitive contract or agreement, it contains confidentiality clauses".

Subsequent reports name further complications. ITWeb quoted Communications DG Lyndall Shope-Mafole as saying Minister cannot declare the cable system an essential resource until the Electronic Communications (EC) Bill is enacted.

The EC Bill states that on a date to be declared by the minister, a number of services, including the Sat-3 cable, would be declared essential resources. Shope-Mafole also noted that there are other stakeholders in the Sat-3 partnership who are not South African.

"The minister will consult with the ministers of the other countries involved, who will in turn consult with the telecoms companies that invested in the project," she says. She also notes that the minister is currently involved in budget speech planning.

But without the contract at hand, how, may we ask, will the minister negotiate with ministers of other countries regarding the amending of terms governing Telkom`s role?

Shope-Mafole added that once the East Africa Submarine System (Eassy) is completed, it would provide to Sat-3, thus neutralising the Telkom monopoly. Eassy is scheduled to come into operation in the fourth quarter of 2007. , coordinator of Eassy, reports that planning for the project is on track. The tender for construction will be completed in the second quarter of this year, the system coming into service in the third or fourth quarter of 2007.

However, Connection Telecom co-founder Steve Davies notes that Eassy has not even been built yet. "Waiting for that undersea cable to provide competition to Sat-3 would effectively sentence SA to a status quo where Telkom charges an out-of-proportion price for its half of the international data link," he says.

Shope-Mafole confirms that ministers of African governments involved are scheduled to meet on 2 March in order to signal their approval of the project`s regulatory framework.

Davies argues that Sat-3 has ample unexploited capacity; capacity that could be moving data that translates into commercial activity, which in turn translates into increased economic activity and employment.

"Instead it sits mothballed in order to manage available capacity and therefore price," he says.

OVERDUE

Mike h, group CEO of Gateway Communications, says a Sat-3 declaration is long overdue. He argues that where there is a clear case for opening up access to a scarce and vital resource which was originally built with largely South African taxpayers` money, and if the government does not act, the ministry is holding back the growth of broadband services in South Africa.

The real crunch, though, he says, is not that the cable is not being used; it`s the fact that even those who use it are careful due to the very high costs when compared to international norms. He notes that WBS, , and all apply caps to their cable use in order to manage the cost. Namibia does not use Sat-3, even though it has access, while Botswana limits its use and has complained bitterly about the price, Van den Bergh says.

For , CEO of , effective regulatory intervention would ensure that the second national operator and other telecoms operators gain fair access to Sat-3 in order to compete effectively. "Without this component, the promise of competition and pricing in line with transparent markets will be mere rhetoric," he says.

And if all that sounds like a lot of confusion and a long way ahead in the walk to liberation of South African telecommunications, more lies ahead. Meanwhile the industry, consumers and the country are suffering.

JUST THE BEGINNING

Even assuming bureaucratic challenges will be overcome and regulatory interventions on Sat-3 will fall into place, both MacRobert and Van den Bergh agree that Telkom would likely create further hurdles to the implementation process. , a partner to Davies in Connection Telecom, has said before that Telkom`s list of refutations of customer complaints about pricing and service is "a very thick book, and it is still reading from page one".

"Telkom would probably challenge it in court, which would be a pity as I think this could be the time for them to demonstrate a welcome commitment to supporting the growth and development of the South African broadband market," Van den Bergh says.

MacRobert also points out that the declaration would only be the first step in a series of regulatory interventions needed to ensure that the essential facility was dealt with in a fair and transparent manner. Government would need to implement a wholesale framework that prevents unfair competition in both the wholesale and retail markets.

NOT ALL BAD NEWS

Despite current challenges, prices are going to come down, and continue to come down, Van den Bergh says.

Davies agrees. He acknowledges that Telkom has reduced prices and will continue to do so although it will be miles from what the ICT sector and telecoms users wish to see happening.

Business will also have to get used to operating in a changing, confusing environment where the way you spend your communications budget remains difficult to plan in the medium term, Davies says.

"If it was my job to develop a communication strategy for a large company, I would remain open to take on new players, and not lock myself in long-term contracts with players like Telkom," he says.

Van den Bergh notes that a five-year period, during which Telkom has an exclusive right to provide South African access to the cable, ends in 2007.

`This will allow other owners of capacity on Sat-3, including VSNL (the controlling shareholder in the SNO), Telecom Namibia (another SNO shareholder), Deutsche Telekom and British Telecoms to offer capacity on a full-circuit rather than a half-circuit basis.

Van den Bergh says once full circuit access is available to SA the lower charges would significantly lower the overall costs for those wishing to lease capacity on Sat-3. These lower costs will in turn accelerate the growth and deployment of new broadband services, and will also lead to lower international telephony call charges with better overall quality.

The overall impact will be an enhancement of South Africa`s competitiveness in the international outsourcing market.

That will only take us a way down the bumpy road to telecoms deregulation though. Davies notes that it took the UK at least 10 years to achieve substantial change. The interesting point for Telkom to note is that fixed-line monopoly came out of the process even stronger, he says.

"We are not trying to take anything away from Telkom; we are simply creating an environment where they have to compete and provide services that substantially improved for the benefit of the consumer," he says.



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