1. TRANSTEL Implications of the Big Bang on telecommunications and the SNO Dr Angus Hay Chief Technology Officer, Transtel

2. TRANSTEL The Information Society “An enabling environment at national and international levels is essential for the Information Society … The rule of law, accompanied by a supportive, transparent, pro- competitive, technologically neutral and predictable policy and regulatory framework reflecting national realities, is essential for building a people-centred Information Society. Governments should intervene, as appropriate, to correct market failures, to maintain fair competition, to attract investment, to enhance the development of the ICT infrastructure and applications, to maximize economic and social benefits, and to serve national priorities.” The Declaration of Principles of the World Summit on the Information Society, Geneva, 2003

3. TRANSTEL The Big Bang l Mobile: Self-provision of backhaul infrastructure by mobile operators l Payphones: Full de-regulation of the public payphone voice re-sale market l VANS: Provision of voice by Value Added Network Services providers l VANS: Provision of VANS over facilities other than those of public carriers l VANS: Simple re-sale of telecommunication facilities by VANS providers l PTNs: Re-sale of the facilities of Private Telecommunications Networks l Edu-rate: 50% discount to education

4. TRANSTEL Some facts… l Apart from SNO, there is not a vast pool of underutilised telecommunications facilities l The key input cost for all players in the market is the cost of backbone and access facilities - this has not been addressed l Voice services deregulation will mean very little to SMEs and residential consumers l Only customers with broadband access will benefit immediately from Voice over IP l Mobile operators have no incentive to reduce prices, only to raise their margins l There is still a great deal of regulatory uncertainty, which ICASA must address fast

5. TRANSTEL Some comments… “Internet access won't get much cheaper until the SNO arrives, because we will still have Telkom as the predominant network provider. The SNO has a big part to play as a wholesale supplier of core network services to give Telkom stiff competition for bandwidth prices.” Storm Telecoms “SA government's decision to deregulate the telecoms market by February 2005 is positive for IT companies, mobile operators and telco equipment suppliers, but negative for the fixed line market. In the event the SNO is not formed, we believe the government faces the next dilemma of opening up access to Telkom's fixed line network by either unbundling its local loop in some form or offering allowances to investors to build an alternative infrastructure.” HSBC

6. TRANSTEL Broadband and Internet 0% 7.4% 4.0% 1.4% 0.3% 0% 10.7% 700 -- 600 -- 500 -- 400 -- 300 -- 200 -- 100 -- 0 -- 1995 1996 1997 1998 1999 2000 2001 2002 Broadband as % of Internet users Internet Broadband Source: ITU Internet report: Birth of Broadband

7. TRANSTEL South African regulation l ITU case study on broadband in South Africa –“A perusal of legal sources regarding regulation and market structure shows that South Africa continues to operate with a regime oblivious to the complexities raised by broadband.” l International fibre access –November 2003: IEEE Spectrum magazine wrote of its shock at the lack of impact that the SAT-3 optical fibre cable has had: Access is limited by monopoly pricing and similar anti-competitive restrictions. –Fear of similar cartel developing in the East African optical fibre project (EASSy)

8. TRANSTEL Packet- based Network (ATM or IP) Packet- based Network (ATM or IP) Converged services Multi-service Connection! Broadband digital multi-service network close to the customer Bundled products

9. TRANSTEL Convergence? l Convergence will happen, whether we regulate it or not l With the exception of broadcast content, it’s now not at all clear why we need Convergence legislation at all Convergence is not the solution – competition clearly is! Facilities-based Service-based (VANS) Apps Content

10. TRANSTEL Why an alternative operator? l Essential large scale facilities competition –Telecoms value chain is dependent on basic facilities –A choice of wholesale supplier and price is critical l A player to challenge Telkom on equal footing –Licence, regulatory, tackle anti-competitive practice l A large, viable infrastructure investment plan l Access to the only other national backbone –Cheaper facilities over existing rights-of-way –Largest alternative providers entering the market l A friendly facilities provider in the market l An environment for partnership and sharing

11. TRANSTEL Second National Operator l So sudden a market change has precipitated a fundamental business plan review l Multiple alternative scenarios are possible l The SNO shareholders own the bulk of the fixed-line facilities outside Telkom l With multiple retail players in the market, there is now a true wholesale market l Multi-service Next Generation Network –Common packet network for all services –Independent service layer (e.g. telephony) –Open interfaces for applications and services l High bandwidth core packet network l Ability, rights to deploy broadband access

12. TRANSTEL Back to basics l Do not count on privatisation of the incumbent, for revenue or improved service l Create incentives for competitors in the market l Empower the regulator to punish transgressors l Focus on key issues: interconnection, carrier pre-selection, number portability l Do not fear foreign ownership and control of telecommunications operators l Use positive tools such as a Universal Service Fund to grow access