So the judge has ruled on the case, and I was wrong in the major issue. The judge ruled this morning (I was unable to attend in person sadly), and broadly; VANS have been able to self provide since Feb 2005, and thus all VANS licensees should be awarded Individual ECNS licenses, which will allow them to roll out infrastructure.
There are two broad impacts of this decision. Firstly, this will mean that there will be a lot more suppliers in the market than simply Telkom, Neotel, WBS (iBurst) and the 3 cellular operators - but over 600 new operators. This should increase competition, and ultimately bring better service and hopefully better pricing.
Secondly, and rather drastically - the managed liberalisation of the telecommunication market in South Africa is no more. And this can be very dangerous. The whole rationale behind the managed liberalisation is simple: give a second (and later the third, and fourth etc) enough space and time to build up infrastructure and service offerings such that they can compete effective and efficiently against the incumbents. An unmanaged liberalisation could result in too many ambitious projects that may not actually allow real competition with the incumbent (in the case Telkom) and thus ultimately fail in the end goal.
The fact of the matter is; it takes a lot of money to invest in telecommunication infrastructure. A router that is meant for the home costs R1000; the router that is meant for a medium sized business costs about R10 000; the router that is used in large company sites costs about R300 000 and the routers that are used by carriers cost upward of 1.5 million Rands. There are simply not enough companies out there, that can commit to investing in what is required to build a good telecommunications network.
I will be presenting a paper at WCITD 2008in October (not peer reviewed though) where I discuss the economics of WiMax as applicable in South Africa. I will go into more detail then (maybe), but basically, I do not see WiMax as the saviour for cheap Internet access - the numbers just don't seem to work out. Likewise, having 600 new operators will not really help - it will just make a lot of wireless Internet service providers legal.
3 comments:
So what is exactly the problem with this situation? Effectively you've managed yourself into a natural oligapoly where the barriers to entry is a simple economies of scale and large initial outlay. This would either create competition amongst small operators and force them to be more innovative or sometime in the future for consolidation between them and possibly create a third national provider.
naturally since i'm not an expert in the field neither am i an economist this is merely my 2 cents and for whatever it is worth.
This ruling does in theory create significant potential in the South African telecommunications market, however, whether there will be more than 2 VANs that will take up the challenge to create a network spanning anything more than business hubs remains to be seen. Traditional telecoms services is falling into a commodity product where it is unlikely that anyone will be willing to invest so much in such a small margin business.
So in my opinion, it's much of the same, and now it will become harder to complain against the monopoly :)
IANAL but there are also the problem of the competition law in SA. These VANS can no longer re-sell products from their competitors, that is explicitly forbidden under competition law and thats how the milk companies got into their problems
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