First steps

In the 17 month-long gestation period since they were awarded the historic licence to operate, Neotel`s founding management members have been carefully mapping out this terrain, plotting courses and finding partners.

"If it navigates the landscape effectively," says MWEB chief technical officer Mervyn Goliath, "Neotel can make a massive impact on the consumer market."

Getting access to the 800 MHz spectrum, and buying Transtel for R230 million, were important steps in allowing Neotel the opportunity to have an impact on the local market. Neotel`s chief executive Ajay Pandey recently sat down with iWeek. He hopes to offer the consumer wireless telephony and broadband (via CDMA), fixed-line broadband in other areas (via the former Transtel fibre), and also WiMAX services in some regions.

"There will be no waiting period, he promises. "As we have always said, this is something that should appeal to all South Africans." It will be as simple as buying a phone-in-a-box.

GLIMMER OF HOPE

Convergence product manager at Verizon Business, Louis Pienaar, describes Neotel`s introduction as "the first glimmer of hope" in terms of local competition.

As key figures in two of the country`s major ISPs, Goliath and Pienaar obviously have a keen interest in Neotel - but so should the millions of people that the new operator will soon be serving.

In actual fact, Neotel has been offering services to 12 key enterprise partners since August of last year.

MWEB`s Goliath has mixed thoughts on Neotel`s business offerings. "Unbeknown to the market at large, Neotel has been doing a sterling job at a level that is not immediately visible to the general market - in terms of engaging with key players, like MWEB."

"However, to put it quite frankly, on a pricing level [Neotel`s performance has] definitely not been good enough," he adds. Let`s hope this won`t be the case for consumer services.

THE TRIGGER

"Getting the 800 MHz spectrum is definitely good news - it allows us to trigger off the process of rolling out our services to the masses," says Pandey, adding that getting access to this spectrum was really a foregone conclusion - as per the licence agreement of December 2005.

What the spectrum will allow Neotel to do, initially at least, is begin its roll-outs of code division multiple access, or CDMA, wireless services. Pilots in Pretoria and Johannesburg should start in the second quarter of this year (before the end of June), Pandey reveals.

Using CDMA fixed-wireless handsets (currently widely manufactured by the likes of LG, Samsung, and other lesser-known Asian-based manufacturers), CDMA should offer high-quality voice services at reasonable cost, he says, with a certain amount of mobility.

"But the focus - from our point of view - will be that we can use CDMA for internet connectivity as well."

He believes that it won`t take too long to upscale these initial pilots into much broader "multibillion-rand" commercial roll-outs.

BLENDED SERVICES

Long before it bought Transtel, Neotel acquired the state organisation`s intra-city network, a total of 1 300 kilometres of high-capacity fibre optic networks in Johannesburg, Pretoria, Durban, Cape Town, Port Elizabeth and East London.

Neotel will build another 800 kilometres of cable itself, says Pandey. This wireline infrastructure is to be used in tandem with CDMA and WiMAX.

Telecoms liberalisation activist Rudolph Muller finds Neotel`s focus on CDMA intriguing. "Selecting what is essentially a wireless technology to compete with a fixed-line operator is an interesting move," he says.

But, on the other hand, bearing in mind that local loop unbundling seems some way off, he suggests that it may turn out to be an astute move.

GOALPOSTS CHANGED

But while the allocation of the 800MHZ spectrum has been given to Neotel, as per the licensing agreement signed in December of 2005, another key agreement between Neotel and government has not been followed through as promised.

The infrastructure that is now housed in Infraco (national long-distance and international) was supposed to be passed on to Neotel. "This was the fundamental proviso on which the licence was awarded." Government believed that privatisation was not progressing as planned, he explains, and wanted to retain a certain amount of control [over the infrastructure].

NO REVOLUTION HERE

Asked what he expects from Neotel over the next year or so, Goliath responds: "Well that`s an easy one - better service than is currently available in the market, and at far lower pricing levels."

Telecoms analyst Neil Emerick, however, has a more conservative outlook, saying the local broadband landscape really began to shift when the cell operators launched broadband services, forcing Telkom to reduce ADSL prices, and speed up installations.

"Neotel will be one more welcome addition, but an incremental addition - no revolution there," he comments.

The most important aspect of Neotel`s service offerings, argues Emerick, will be how much of the `last mile` will be covered by its wireless networks. "The technologists will argue that fibre to your house is technically more efficient, but using the radio spectrum is going to be more flexible and much cheaper."

He hopes ICASA`s spectrum allocation will find a suitable balance between shared or `common` spectrum frequencies, and those that should be privately owned and traded.

READY FOR BATTLE

"One way they can elevate themselves above Telkom will be by offering a higher cap on data services," notes Muller. Other factors critical to Neotel`s success will be the non-shaping of traffic, and offering of high-local bandwidth.

Telkom has made it quite clear that it is ready for Neotel`s entrance. It is investing R30 billion in network upgrades over the next few years, to give it a fabled next-generation network. It also recently confirmed it would pump R7.5 billion into its new Telkom Media division - aimed at offering IPTV and VOIP services within the next couple of years.

Muller throws in another fact well worth noting: "Telkom seems quite ready to [further] reduce costs if Neotel was to come in with lower prices."

Telkom spokespeople refuse to comment on Neotel at this stage.