Time to Reboot Telkom

By Glenn Ashton · 25 Jun 2013

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Picture: lifehacker.com.au
Picture: lifehacker.com.au

South Africa remains stuck in the telecommunication doldrums, a victim of its own apathy. There have been massive investments in unprecedented interconnectivity with the rest of world yet our internet speeds, cost and accessibility remain uncompetitive. The country is missing out for failing to hook into the high speed internet revolution, despite years of promises from the state to break a logjam largely of its own making.

South Africa presently has average internet speeds of 2.3 Mb per second, slightly above the African average of around 1.5Mb/s, much of this over cellular and wireless networks. However our average peak speeds of 7Mb/s are well below the global average of 16Mb/s. We presently rank 120th in the global internet speed stakes, 25th in Africa.

A study by the University of Munich showed that each 10% of extra broadband internet connectivity can increase personal GDP up to 1.5%. Broadband penetration can increase national productivity and GDP more than 5%. Instead of rolling out the IT revolution, South Africa has focussed on wringing as much money as possible from an extremely limited market. Consequently the core state responsibility to create tools capable of lifting the majority from poverty remains unmet.

Why has South Africa failed so miserably in this regard? We could retreat to the ready culpability of apartheid and its progeny, the monolithic Telkom, but that is a passive and barren response. Yes, Telkom remains central to the problem but the underlying reasons are rather more complex.

Telkom has adapted, but only along the neo-liberal lines promoted by the Washington consensus in the last decades of the 20th century. Despite its monopoly position Telkom exhibits many attributes of a failing company. It has utterly failed to engage in partnerships with competitive entities, its share price has plummeted below its listing price and it has just declared unprecedented losses. It has had poor leadership, little strategic direction and major income streams are shrinking.

Most worryingly Telkom has proven incapable and unwilling to deliver anything resembling a world-class service to its customers, or to the nation at large. The new CEO, Sipho Maseko, promises change but this song has been played to death.

Telkom’s failure cannot only be blamed on its rapid turnover of executives, some good, some bloody awful. The gorilla in the room remains the primary shareholder, the government, which together with the Public Investment Corporation exerts its majority stake. This effectively renders the board powerless to force through progressive change unless government is amenable.

This reality was driven home in the recent well-publicised case of the failure to bring Korea Telcom (KT) onboard, despite clear, declared interest by the Koreans. South Korea has the world’s fastest and most accessible telecommunications networks, in which KT is a major player. An earlier communications minister, Roy Padayachee, was instrumental in bringing KT into South Africa, yet the merger was irrationally blocked as being against the national interest by the ruling party’s National Executive Committee.

Thing is, everyone – the government, business and citizens – agree we need cheaper, better, faster information technology access. Yet a palpable torpor erodes any momentum toward achieve this goal. How do we solve this problem?

Clearly the problem cannot solve itself, demonstrated by the failures of the past decade. Top international investors have shown interest and massive new bandwidth capacity has been installed through new undersea cables. EASSy, WACS, SEACOM have added more than 11 terrabits per second of capacity in the past couple of years. Another 100 Tb/s are in the pipeline. Given that the country very recently relied on a single 360 Gb/s (.360 Tb) cable, this progress is astonishing.

Yet this new capacity has not yet delivered a concomitant fall in price for users and citizens. Yes, investors require a return on their capital for installing this infrastructure but this is not the problem. The fact is that the delivery logjam can never be broken without concerted effort by both the Ministry of Communications and the supposed regulator, the Independent Communications Authority, ICASA. Each of these central entities have serially failed to fulfil their mandates.

Essentially there are two bottlenecks, which require clearing. Both are related to Telkom’s de facto monopoly but the solution does not necessarily lie only with Telkom. The first problem is the so-called last mile, or local loop – the connection between exchanges to the point of connectivity. This remains firmly within the clutches of Telkom, despite gradual inroads made by Neotel with its new backbone. The second relates to the unhealthily cosy relationship between Telkom, the state and ICASA.

Neither the state nor ICASA appear capable of solving the Telkom dilemma. Instead its dominance had to be indirectly challenged, by private industry indirectly tackling these problems via our competition laws. As a consequence the competition authorities recently slapped a R200 million fine on Telkom, while its balance sheets are simultaneously drenched in Texas chainsaw massacre 3D quantities of red ink.

The Ministry and ICASA have failed on promises, going back to 2007, to unbundle the local loop. Regulations meant to be promulgated this month have again been postponed, now to March 2014 – seven years late! The incumbent minister has further emphasised her signal failure in leadership by failing to even mention local loop unbundling in a vague and completely unhelpful draft national broadband policy, gazetted in April. ICASA and the minister make Basil Fawlty’s management style appear positively slick.

In order to catch up for the lost years of indecision, telecommunications experts insist we must now leapfrog old-fashioned ADSL to the next step in connectivity, VDSL2. Both use copper for local connection, which reduces cost. Inexplicably, the national broadband policy insists on using fibre optic cable. Australia is about to pay more than R300 billion to install fibre optic. South Africa simply cannot afford such a shift, especially given that Australia has half our population. VDSL2 could put us on par with present global broadband averages. Failure portends further years of ICT misery ahead.

However there is light at the end of the tunnel. Telkom has begun to experiment with VDSL2. A recent start-up in Gauteng has been able to offer 40 Mb broadband for less than R350 per month – around what most people presently pay for 1 Mb broadband and close to average global costs.

Further, given that South Africa has been selected as host to the world’s biggest scientific experiment, the Square Kilometre Array (SKA) radio telescope, we should be able to fire our catatonic internet speeds to something approaching warp speed. We will certainly need to. The dishes of the SKA will generate around 10 times the global internet traffic, which was around 350 exabytes (350 trillion megabytes) for 2012. The full SKA will generate something like 10 times more data still. We clearly need some huge data pipes to shunt this science around the world.

While the SKA should provide massive direct and indirect benefits, we cannot expect our languid leadership to deliver a miracle. Yes, the Communications Ministry has experienced instability, with 3 ministers over the past few years. However it really is time for Minister Pule to go – she has achieved little, promises less and appears out of touch. ICASA also needs a rocket for failing to deliver on its promises or obligations and letting the competition authorities do its job.

Finally, the argument that Telkom will fail if the local loop is unbundled requires examination. Telkom remains essentially a state owned enterprise (SOE), despite its listing. Because of government interference in running it, we should revert to default and allow the state to revert to supporting Telkom’s transition toward an SOE. This would be in accord with current economic practice where essential infrastructure is supported by the state for the greater good, and away from the discredited ideological dictums of economic thinking that informed Telkom’s failed privatisation.

South Africa certainly possesses the capacity to deliver the benefits of the digital revolution to everyone. We need leadership, not the dithering, which has seen Nigeria and Kenya leave us in their African dust over the past decade. Rolling out low-cost broadband across mobile, fixed line and box-top systems may appear expensive over the short term. The reality is that the long-term dividends will certainly eclipse the ongoing wasted opportunity costs.

Ashton is a writer and researcher working in civil society. Some of his work can be viewed at Ekogaia - Writing for a Better World. Follow him on Twitter @ekogaia.

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