Broadband blues

European countries and most of the Far East come in at less than 1%. South Africa`s index is 100% - ADSL line here costs the same as the average South African makes in a month.

This means video streaming apps, call centres or the Next Big Internet Killer App to require a fast line are just too impractical to host in South Africa, let alone fostering the kind of innovation that happens when almost anyone can afford broadband.

So how did we get here? Why are we 38th in the world when it comes to broadband when other emerging economies are in the top 10?

The answer, in a nutshell, is that Telkom is in charge of the only international link that connects the South African Internet with the rest of the world and so it can - and does - charge whatever it wants.

Telkom`s monopoly is only matched by its aggressiveness defending it. Anyone who hoped the 1994 transition to democracy would usher in a competitive telecoms environment was severely disappointed. Against all industry advice, Telkom was granted a six-year monopoly on fixed-line telecoms services with predictably (to all it seems but those in power) disastrous results. Fewer people now have telephones than did in 1994.

When Telkom was partially sold off to raise money, government kept a majority shareholding and also allowed a consortium including one of the most monopolistic Baby Bells from the US - SBC - to take a shareholding at a bargain price.

The independent regulator has been undermined by both the government and Telkom itself almost from its inception, with the Minister of Communications curbing its power and Telkom ignoring its rulings, even after being ordered to do so in court.

INFRACO CONCERNS

The price and quality of Internet access has suffered badly as a result. Thanks to a combination of corporate lethargy and little or no understanding about how the Internet would affect its business, Telkom was late getting into the ISP game ("What is this Internet?" asked its technical director once). But when it did, old attitudes were applied.

The evolution of the South African Internet industry from volunteer-based to commercial competition had almost completed when Telkom started testing a commercial retail Internet service in 1995.

By 1996, existing ISPs had banded together and formed the Internet Service Providers Association to combat Telkom`s growing habit of cross-subsidisation and anti-competitive behaviour. A toothless regulator and dithering Minister were no match for the SBC executives who effectively ran the company until the de facto monopoly expired.

The Second Network Operator - Telkom`s supposed competition - has yet to launch, although at least it now exists. An additional undersea cable project to connect African countries with each other and Europe has been characterised both by squabbles and hijacking by government ministers. And government itself seems to have undermined confidence in the SNO by announcing Infraco, another broadband-based provider.

Business ISP DataPro has called for greater clarity on the role and funding of Infraco, which is set to take over the telecommunications infrastructure owned by Transtel and Eskom.

"Public Enterprises Minister Alec Erwin has explained that Infraco will supply bulk fibre-optic infrastructure to the telecommunications industry, but it`s still far from clear why government has to be involved in this," says DataPro`s MD Gary Sweidan. "We thought the advent of Neotel was the beginning of government getting out of the telecommunications business. Why has there been this last-minute change of plans?"

Sweidan said the information currently available made it difficult to see how Infraco would benefit consumers. "Our single biggest telecommunications problem in South Africa is getting Internet access to the mass of consumers, and it`s hard to see how this will change that. It`s doing nothing to break Telkom`s monopoly over the last mile. Why not continue liberalising the market so the private sector can fill that gap itself?"

Government`s commitment to invest R1.4 billion in Infraco over the next three years was also of concern, said Sweidan.

"Leaving aside the fact that there are probably better ways for government to spend its money, they have said that Infraco will provide access to its infrastructure at a very low margin over cost. Is that sustainable?

"We`ll be delighted to buy network services from anybody who can enable us to offer better, cheaper services to our customers, but we want to be sure that our suppliers have sustainable businesses."

MOBILE TO THE RESCUE?

The rebellion against Telkom has taken some time, but there are recent encouraging signs from somewhat unlikely quarters. Municipalities with private networks are getting into the game, thanks to new legislation that allows value-added network providers to offer connectivity through private infrastructure.

Broadband over powerlines, or BPL, is another technology that could see the local end of the telecoms circuit have additional choice.

Until more companies are allowed to provide international connectivity, bandwidth and ISP costs will have to be borne as best we can. But existing players are getting creative.

The cellular carriers have recently slashed their prices on mobile broadband and MyWireless has also cut its prices. "Mobile broadband has revolutionised the way people in Africa and South Africa conduct business and has created a taste for "information on the move", comments Dot Field, Vodacom`s chief communications officer.

"Mobile broadband technology can be made to work for you at a personal as well as a business level. With the dawn of 3G technology and HSDPA, mobile users can benefit from services like video calling, broadband mobile access, fax-to-mail and voice-to-mail services, picture messaging, graphics, voice and data communication to enhance their business.

Vodacom recently announced an unparalleled cut in mobile data rates of up to 61%. Whether a customer uses 3G or 3G HSDPA access, they can now surf the Internet for under 19c per megabyte.

Marcel Steyn, portfolio manager for MyWireless, says that the company has finally levelled the broadband playing field and consumers can now enjoy services that offer broadband speeds at competitive pricing.

"For as little at R99 per month, our users can now benefit from always-on connectivity that are available at speeds of 1 Megabits per second, which is considerably higher than the ICASA broadband benchmark of 256 Kilobits per second. The resultant introduction of other competitively priced offerings, also begs the question why it takes one player to take the first step for others to radically reduce their product pricing. I believe that from the onset we have been very honest about our pricing structure, whereas other service providers consistently charged higher prices although they could afford to be far more competitive."

Looking at current consumer broadband demand, Steyn comments that most consumer needs, whether at home or business, are at this stage still relatively straightforward as they mostly require speed and reliability. "In Europe, for example, we`re seeing that consumers are demanding more value-add, be it with bundling options or addressing very specific connectivity needs. In South Africa consumers aren`t quite there yet, but I believe value-add will be the next important step for service providers." Andre Joubert, GM at MWEB Business, says that small and medium businesses do not necessarily have the same online behaviour patterns as large corporates, and should look at how broadband will benefit their businesses.

"Of course, once you`ve tried it, there`s very little chance you`ll go back to dial-up," says Joubert. "One quickly gets used to a certain standard of speed and accessibility, and with broadband, these two factors are improved immeasurably. However, there are many small companies for whom the Internet is not as important as it is to corporate employees. In a large corporate, employees generally find being online and working are inextricably linked. This does not mean the Internet is not important for SMEs, it`s just that their online behaviour is completely different."

Joubert says that many small business owners do not spend the day at a desk interacting with the world from an e-mail address.

"Many small businesses rely more on the telephone and on face-to-face meetings and perhaps access the Internet two or three times a day to download e-mail, manage bank accounts and send quotes. On average these businesses would spend between 20 and 40 minutes per day online.

Therefore, investing in a top-of-the-range 4Megabit ADSL line is really overkill. Typically, they would only need the equivalent of a 512Kilobit mobile product or a 1GB ADSL account," he says. "The main reason for SMEs choosing broadband over dial-up is the significant cost saving that broadband offers. However, once they have broadband installed, the additional benefits and access to online business solutions quickly make the initial investment worth while."