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    Wake up, Telkom

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    [By Duncan McLeod]

    Telkom’s new mobile operator, 8ta, last week introduced a mobile broadband special offer that deeply undercuts its parent’s own fixed-line broadband prices. It’s a bizarre situation that underscores Telkom’s lack of a coherent long-term strategy for its core business.

    Last week, two important news items flowed from Telkom, the country’s oldest and arguably still most important telecommunications operator.

    The first came on Thursday, when 8ta, the country’s fourth and newest mobile provider, unveiled the lowest mobile broadband prices SA has seen to date. The second came a day later, when Telkom filed its annual fixed-line tariff adjustments with its regulator, the Independent Communications Authority of SA, for approval.

    The two announcements tell the tale of two Telkoms. In the latter, the fixed-line incumbent unveiled new tariffs little changed from last year — indeed, subscribers to its fastest broadband product will pay more than last year despite a deflationary telecoms environment.

    The earlier announcement, a special data offer from 8ta, has set the market alight with the lowest-ever mobile broadband prices in a move has probably shaken competitors Vodacom, MTN and Cell C to the core. 8ta’s special offer — admittedly, it’s time-limited — makes its parent’s fixed-line prices look exorbitant.

    The developments raise an interesting question: is Telkom giving up on residential fixed lines? Does it eventually want to get out of the consumer fixed-line business, where, let’s face it, margins in a competitive market will be — and ought to be — razor thin? It’s certainly behaving as if the “last mile” — the access lines into residential homes — is dying.

    Hard questions need to be asked by our politicians, especially the increasingly scarce communications minister Roy Padayachie, about what the fixed-line operator’s strategy is to bring high-speed and high-capacity fixed-line broadband to consumers. It’s true that across Africa mobile is regarded as the future means of delivering Internet access. That’s because in most of Africa fixed-line networks were never properly developed, unlike in SA. Mobile is no substitute for the sort of high-quality broadband that can be delivered over fixed lines. But allowing Telkom to abandon or even diminish its focus on delivering fixed-line residential broadband would be doing SA’s economy a great disservice.

    What Telkom should be doing — and, again, the country’s politicians need to be pressing home this point and taking the company’s management team to task on this issue — is ensuring South Africans are served by next-generation fibre-optic infrastructure. Instead of presiding over a decaying copper legacy, the country should be investing the billions of rand it will take to build fibre into millions of homes and small businesses.

    As I wrote in last week’s column, Telkom is best placed to take fibre to the home. If the company is not prepared to do this on a large scale — and soon — then rivals should be given full and unencumbered access to its exchanges and its telecoms ducts to build these networks.

    It’s deeply troubling that Telkom is focusing so much attention on mobile while allowing its traditional business in residential fixed lines to decay. SA’s economic competitiveness — and the ability of its people to innovate — is dependent to a large degree on providing high-speed, cheap and reliable communications infrastructure.

    Technology start-ups, many of them incubated by people working at home — in garages, even — can’t build successful businesses while relying on third-rate and expensive Internet connectivity. Ultra high-speed telecoms infrastructure, delivered over fibre, is a basic ingredient they require to create the companies that will help make SA competitive in an increasingly fast-paced world economy.

    The competitive spirit demonstrated by 8ta needs to be transferred to its mother ship. And then some.



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