Study: VANs, ISPs have opportunities in South Africa

Until now, most analysts have assumed that the emerging regulatory changes, including the forthcoming convergence legislation, would take place relatively slowly, without any sudden, revolutionary changes — although ultimately making a significant impact on the South African telecoms market structure.

Competition enablers such as number portability and carrier preselection would be introduced as key enablers for the SNO, but would not necessarily be tied to the convergence timetable. One might have assumed that the same would apply to the timetable for allowing voice over IP, self-provisioning and resale for ISPs and VANs — whereas previously it was understood that these provisions would be delayed by up to two years, to protect the fledgling SNO, these particular enablers are now likely to be introduced as soon as next month, according to BMI-TKnowledge Group.

The latest round of announcements (by the South African Minister of Communications) promise to introduce a fresh wave of competition into the market and, like any change, bring opportunities for those who can successfully identify and exploit them. VANS and ISPs are poised to benefit significantly, being at the cutting edge of no fewer than three of the new competition enablers. Of course, new opportunity also attracts more competitors into a market, so the larger and more established players among them may also find themselves with more competition than before.

A major impact of the new regulations — and the future horizontal licensing framework — will be enhanced services-based competition, BMI-T adds. In the spirit of convergence, new partnerships are expected to emerge between service providers in different sectors of the market, e.g. between VANS, cellular service providers, LCR players and call back operators. Most, however, may elect to simply expand their range services to include a wider range of the above types of services.

Innovative new partnerships will emerge between these players and others focused on supplying customer premises equipment, especially emerging voice technology platforms, according to BMI-T analysts. All of these players are expected to increasingly partner with a wider range of infrastructure players at both the access and backbone network levels.

There may also be renewed interest in the local market, post liberalization, from international operators — some with powerful global managed IP VPN solutions — players such as BT Group PLC, AT&T Cotrp. and Cable and Wireless PLC are already active here, but are increasing their direct presence. Existing VANS and ISPs will seek to strengthen their position in the market, as they face a new wave of competition, along with a range of new opportunities, BMI-T adds.

At the very least, VANS and ISPs in this country can benefit from cost savings that will emerge from competition emerging in the backbone provisioning layer of the market. However, the heightened completion at the access level will mean that most of these savings will have to be passed on to customers, in the form of price reductions (or at least price/performance enhancements), BMI-T continues.

A major fillip for the customers — and the market as a whole — is expected to be the impact of reduced prices, as and when they eventually trickle through. Only competition, at all levels of supply (access and backbone provisioning), will force prices to fall. This, in turn, will stimulate consumer demand, particularly residential uptake of broadband Internet Access services. Residential broadband is a market that is currently running on fresh air, and needs a major boost of cheaper (and faster) supplier offerings to lift adoption rates to be comparable with a country such as Australia, for example. This, in turn, will benefit some players, while others will suffer from lower profit margins that are implied.

BMI-T says it will soon release a report titled “the new opportunities for VANs and ISPs in SA”, that will provide an analysis of the local VANS and ISP services markets in a future competitive landscape, including Voice over IP, self-provisioning and facilities.

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