Telkom to face big challenge in fixed lines - TechCentral

Telkom to face big challenge in fixed lines

Duncan-McLeod-180-profileIn the past 20 years, Telkom has lost almost every aspect of the absolute monopoly it once held over South African telecommunications.

First, it lost its supremacy over voice communication as cellular rivals challenged it for dominance and won. Today, the cellular operators carry the vast majority of South Africans’ phone calls.

More recently, Telkom’s chokehold over international bandwidth has ended thanks to a raft of new submarine cables with names like Seacom and Wacs. These cables have brought down wholesale bandwidth prices substantially in the past five years, and these cuts have, for the most part, been passed on to consumers.

Next to go was the company’s national backhaul monopoly as competitors built alternative networks to connect up cities and towns. Telkom remains fairly strong in this area, but the investment by rivals is ongoing. The big mobile operators, and independent companies such as Dark Fibre Africa and FibreCo, are racing to build alternative fibre infrastructure to connect not only the cities, but also to wire up base stations for 3G and 4G wireless services.

Even Telkom’s dominance in fixed-line services for large businesses has been eroded to some extent by companies such as Neotel, Vodacom and MTN providing alternative infrastructure.

Through all of this, though Telkom has managed to retain it monopoly of fixed lines into people’s homes and into small businesses. That is about to change.

Both Vodacom and MTN have been known for some time to be interested in tackling the fixed-line broadband market as the growth in mobile slows. But the companies have been reluctant so far to talk about the scale of their ambitions.

That changed this week when Vodacom CEO Shameel Joosub revealed that the operator’s business plan involves deploying fibre to 150 000 homes and 100 000 businesses within the next three years. That’s an aggressive target. More than that, it represents the first real challenge to Telkom’s “last mile” network. Joosub has thrown down the gauntlet. And rival MTN, though it hasn’t revealed its plans yet, is very likely to be planning to do the same.

The shift in approach by the big telecoms operators in the past 12 months has been dramatic. A year ago, if you’d asked any of them if they would deploy fibre to the home, the answer would have been that the South African market isn’t really suited to it. They’d argue that our cities are too sparsely populated for it or that the fact that we’re a developing economy works against the business model. Clearly, they’ve had a change of heart.

MTN, Vodacom, Telkom (yes, Telkom) and a number of smaller, independent players — Dark Fibre Africa, Vumatel — are champing at the bit to build last-mile fibre networks directly into people’s homes.

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Telkom was the first of the big operators out of the gate, announcing back in July already that it would build fibre to homes in 22 suburbs in Johannesburg, Pretoria, Durban and Cape Town before the end of the year.

Although the first to make an announcement about its plans, Telkom arguably should have been making home fibre investments years ago. Instead of pouring money into Nigeria, one can only imagine the powerful position it would be in today if it had spent the R10bn-plus it wasted on Multi-Links on building home fibre networks in South Africa instead. Many of its its residential clients might not now still be on its ageing and creaking copper ADSL network.

Instead of leading from the front with fibre investment, Telkom is now going to be in a direct race with the traditionally mobile players to build South Africa’s next-generation fixed-line network.

Telkom has number of natural advantages over its rivals, including rights of way and deep  knowledge and real expertise in building fixed-line networks. Still, CEO Sipho Maseko and his management team are going to need to be at the top of their game if they’re to see off this threat to their core business. Are they up to the challenge? We’ll know soon enough.

  • Duncan McLeod is editor of TechCentral. Find him on Twitter
  • This column was first published in the Sunday Times

6 Comments

  1. Competition is always needed to drive technology forward and prices down. Its about time S.Africans have a more reliable and possible cheaper option to high speed broadband.

  2. Relevant question: Does this fibre competition mean that FINALLY we can be assured we wont have our damned pavements dug up 3 times a year and fibre put down and then….they do it all over again, and again?

  3. Unusually the ANC is not to blame in this case. The big operators face the dilemma of wanting control (build their own fibre and keep the small guys in their place) or use open access fibre (from the likes of Vumatel and DFA) at a lower cost. As with duplicating towers in the 90’s I think you can expect them to continue duplicating ( and digging up the pavements multiple times) before they come to their senses.

  4. They are a state controlled entity, same as Eskom, SABC, SAA. the government, read cANCer is really in control of these companies. The SABc talk about their stake holders, who is that? Oh yes the minister, nobody else.

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