The toppling of Telkom’s dominance

The final toppling of Telkom’s stranglehold as the dominant last mile provider in South Africa was the biggest change to the IT landscape in 2012. This is the opinion of three6five co-founder, Jeff Fletcher.

Three6five is an independent networking services company operating in Africa.

“While the change has been a long time coming, the combined efforts of mobile network operators (MNO’s) and the fibre optic network providers have demonstrated that it is now not just possible, but actually convenient to buy connectivity services that do not transverse the Telkom network.”

The Fall of a Monopoly

According to three6five, it has long been the wish of many South African business customers to be able to make use of alternate telecoms service providers.

“This is as a result of bad service experiences, concerns of over-pricing or a general dislike of monopolistic behaviour,” Fletcher said. “This year we saw the widespread availability of fibre and WiMAX alternatives and the launch of Long Term Evolution (LTE) late in the year with the result that Telkom is now an option and not the standard.”

The group believes it creates a very different market dynamic where many more companies can compete as resellers and aggregators as they are able to bundle more options from the telecoms operators for customers. And more competition also means a massive drop in price, it says.

The absence of established pricing regimes, apart from those of Telkom, has however caused uncertainty among service providers as to what to charge. This is especially relevant to the fibre market, which has a range of different pricing models in the market at the moment, Fletcher argues.

“While the fall of the Telkom monopoly has been the catalyst for the biggest change in the industry this year, it could also be the biggest potential problem,” he warned. “A collapse in service levels will have far reaching consequences for everyone in the ICT value chain, with the infrastructure investment that the MNOs, ISPs, corporates, SMMEs and even consumers have invested in Telkom’s network . While Telkom needs to lose its monopoly, it must not fail entirely.”

Cloud

‘Cloud’ was the big buzz word for 2012 which has been a springboard for virtualisation, web applications and infrastructure, software and platform as a service.

“During the year we saw a decline in the purchasing of dedicated server infrastructure and a shift away from infrastructure residing in make-shift data centres on the premises of enterprise customers. Microsoft’s launch of Office365 further empowers enterprise customers to weigh up their options between an upgrade of their existing server infrastructure or a move into the cloud,” Fletcher said.

Future capacity investment

Three6five points to another positive move within the IT industry in 2012, namely African ISP’s investing heavily in the infrastructure needed to cater for the projected growth in internet capacity in the future, specifically from video delivery.

Tariff Plans

“On the negative side, Fletcher says that business and consumer tariff plans for internet access, network services and voice remain needlessly confusing. Bundling hardware and services into one pricing plan creates disparity and makes pricing comparisons difficult, he stresses.

“In the business market, the service provider websites further add to the confusion by making it difficult to get a clear indication of what something costs, preferring to use a direct sales or proposal approach. This is indicative of a market that is not fully commoditised and has some maturing to do,” Fletcher added.

“Long haul capacity remains expensive and difficult to gauge for an enterprise customer looking for direct connectivity. Virtual Private Network (VPN) services are relatively easy to price, but getting a dedicated layer 2 service between Johannesburg and Cape Town is still expensive and more difficult to obtain than it should be,” he said.

By Jeff Fletcher, co-founder of three6five

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The toppling of Telkom’s dominance