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Altech ruling could herald chaos

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The Altech court ruling against ICASA has caused a major stir in the telecommunications industry, with experts predicting that there will be an influx of VANS licensees looking to self-provide in the future.

But Anton Potgieter, CEO of the Huge Group, believes that although the immediate influx could be significant by number, any excitement on the part of consumers may be premature.
"The immediate entry of more participants into this market does not automatically translate into lower prices and improved quality of service for the customer," he cautions.
"While we are certainly a step closer to a more competitive landscape, the market is still not as yet truly deregulated and I don't believe we are going to see a massive change in the competitive landscape from a consumer's point of view just yet," says Potgieter.
"Firstly, the building of networks is capital intensive with few being able to roll out a national network. Secondly, the implementation lead times are significant and thirdly, it will take time to build up spare capacity to such an extent that it causes downward pressure on prices."
There are currently 300 VANS licence holders and the one fear that has been voiced around the Altech ruling is that many are going to try and build their own networks, causing havoc with South Africa's infrastructure.  
"It takes an enormous amount of money to build a full national telco network of the size owned and operated by the current incumbents," says Potgieter. "I believe there is definitely space to compete in this arena, and in particular there is tremendous scope for new participants to create viable, geographically-specific infrastructure, such as in large residential and commercial developments as well as municipalities, and bring this to the market far quicker than the roll-out of a national telecommunications platform."
He says this will see smaller players creating closed user groups by carving out a niche market for themselves.  "And here comes the kicker – in five years time or so, we'll most likely see them get bought out by the bigger players who will be embarking on acquisition campaigns – which will provide the niche operators with a neat and profitable exit strategy."
Potgieter believes that the allocation of spectrum and the cost of building network reach are two of the most significant hurdles for prospective participants to overcome.  
However he notes that this will not stop the proliferation of smaller players building networks of varying size and stability, which in the short term will "create chaos and confusion for the average customer by swamping them with different offerings, pricing, and service levels, and not to mention the exponential difficulty that rises
when comparing between offerings as well as managing them."
Potgieter further suggests that over time the 'big five' telcos will have to come up with a strong set of value added services to ensure that they do not lose too much market share.  "The Altech decision will basically force them to change their approach to the marketplace in the longer term."
In addition, he believes the industry will eventually self-regulate, much like the least cost routing industry did before. "It doesn't seem likely or make any sense for the big players to increase their current investment in infrastructure; rather, they will wait for the smaller players to do that, and when they do, the larger players will then most likely attempt to buy the successful smaller players leading to another round of market consolidation."
However, this consolidation could have a countervailing but further negative effect on the market's competitiveness, and could result in regulatory intervention or further regulatory actions in future – much like the Altech ruling, which promotes continued competitiveness in the market.