South Africa's long-suffering telecommunications users may have to bite the bullet for longer than they thought as operators warn prices won't be coming down any time soon.
Hopes have been bouyed with the news that the first new undersea cable, Seacom, will commence operations later this year, with at least two others to follow in the next two to three years.
In addition, ICASA has been taked to task and forced to issue licences to new telecommunications operators which will allow them to offer new services as well as to self-provide their own network infrastructure.
Meanwhile, Neotel – the long-awaited second network operator – has been operating for well over a year now, joining other more-established infrastructure providers like Vodacom and MTN in supplementing Telkom's fixed line network with both fibre optic and wireless products.
However, guest speakers at a press briefing this morning, hosted by Ernst & Young, poured water expectations of any quick wins for consumers.
"We know that with Seacom landing later this year people are expecting a massive drop in the broadband price," says Alan Knott-Craig, MD of iBurst. "This is probably exaggerated."
He acknowledges that the cost of international bandwidth will probably come down after August, when Seacom is expected to become operational, and Telkom is looking to reduce its SAT-3 pricing as well. However, the cost of transmission from the kwaZulu-Natal coast to the business centres of Gauteng – on networks still owned and operated by Telkom – will ensure the price of connectivity remains high.
"For the man in the street, there won't be much difference," Knott-Craig cautions. "And there won't be a price war like there was in 2007 when prices came down by 60% or more.
"All the operators are sweating their broadband profitability and will be happy to take an alleviation of the cost of sales for a while."
John Holdsworth, MD of ECN, points out that a major part of the telecommunications costs lies in the interconnect charges that operators charge one another.
"This is a serious barrier to competitiveness in South Africa and until that drops we won't see competitiveness."
Carrier pre-select is another issue that often slips under the radar, Holdsworth explains, and he is doubtful that ICASA will be able to address this issue effectively.
"Telkom is not the only incumbent," he says. "If ICASA doesn't also target the mobile operators and the pre-paid market we are wasting our time.
"We desperately need competition in the mobile market and carrier pre-select is vital to achieving that."
Local loop unbundling – long on the cards but so far not accomplished – also needs to happen before consumers will see price cuts, says Holdsworth.
Knott-Craig points out that the weaker rand also means the operators are paying increased prices for imported equipment and even bandwidth.
Another challenge, from a commercial perspective, lies with the building of infrastructure. "There are really only three companies with proper infrastructure, and no-one can catch up with them," he says.
The economic downturn is also taking its toll, with operators not able to count on the rapid growth rates they have enjoyed in the past.
Overall, Knot-Craig expects the number of broadband users in South Africa to increase from today's 1,2-million to about 1,8-million by the end of 2009.