Transtel briefing and Committee Annual Report adoption

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Communications and Digital Technologies

15 February 2005
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Meeting report

COMMUNICATIONS PORTFOLIO COMMITTEE
15 February 2005
Transtel Briefing ANd COMMITTEE ANNUAL REPORT ADOPTION

Chairperson:

Mr Lekgoro (ANC)

Documents handed out:
 

Transtel PowerPoint presentation
Committee Annual report (see
Committee Reports)

SUMMARY
The Committee adopted its Annual Report and Members were briefed by Transtel on its operations. The company had been operating as a private telecommunications firm for some time, servicing companies in and outside South Africa. As a second national operator (SNO), Transtel would be faced with challenges such as providing public fixed lines without the necessary infrastructure. Secondly, the company had entered the rapidly changing telecommunications field characterised by the convergence of voice, data and the Internet. Lastly, regulatory laws had been lagging behind the technological changes and the market needed to be liberalised.

MINUTES

Committee Annual Report
The Chairperson asked Members for amendments. As there were none, Ms S Vos (IFP) moved for adoption and Ms Magazi seconded the motion. The Annual Report was adopted.

Transtel briefing
Mr Karl Socikwa, Chief Executive Officer, explained that Transtel had started as a signalling arm for the railways, South African Airways, the ports pipeline and. various other transport entities. Over the years, it had evolved into a fully-fledged private telecommunications group in the southern hemisphere. It provided a unique telecommunications service for an increasingly diversifying transport utility company. Transtel had annual revenue of R700 million, of which 30% had been generated from outside sources. Other customers included the Department of Trade and Industry, MTN, Airports Company South Africa and Eskom. International customers include banks, retail stores education institutions and other private telecommunications networks.

In a deregulated market, a private telecommunications network could no longer compete in generic telecoms. A limited private operation would therefore not be profitable. A public telecommunications company could offer a range of services, as was the case in India. Those services could be transferred to a public operator. Safety-critical transport services would remain with Transtel, such as signalling for trains. Project management and logistics communication would remain with Transnet. The SNO would provide a resilient new backbone as an alternative to Telkom for public telecommunications traffic. Customers would have access to a range of new converged services. For this to happen, there was a need for a massive investment in infrastructure. Transtel had a network of electricity pylons to support infrastructure development, but more investment would be needed.

The viability of the regulator depended on license fee allocations. Number portability would transfer power from the operator to the consumer. Mobile teledensity had overtaken fixed teledensity as a measure of access to telephony. Africa has the lowest fraction of the world’s broadband connections. The digital divide was no longer about telephones, but about access to information for a society. Broadband and convergence meant that consumers would be able to transmit voice, data and the Internet over one medium.

Discussion
Mr R Pieterse (ANC) asked about the benefits of the SNO to consumers. What would be the relationship between Transtel and Telkom? What would happen to the infrastructure of Transtel tied to the railway network?

Mr Socikwa replied that consumers were already benefiting from reduced international fixed line call prices. For local calls, prices would probably go down in the future. Their infrastructure would remain, even if some railway lines closed down. Transnet had invested billions of rands to revitalise the ageing rail system. Telkom had been invited to be a partner with countries along the African West coast to finance the undersea cable. This cable connected West African countries with Europe and North America. Transtel could use satellite, but it was the most expensive method, and there was a little bit of delay during transmission. Therefore a new entrant should have access to the undersea cables other infrastructures.

Ms S Vos (IFP) asked how much infrastructure Transtel would be able to roll out, and when they would start operating.

Mr Socikwa replied that they would begin within six months of obtaining the license. It was difficult to give a date for residential rollout. Transtel had been busy pushing for the local loop unbundling without having to wait for two years of cable laying. Number portability would also make it easier for consumers to move from one operator to the other. In order to cover operational costs, there needed to be a balance between residential and business sector rollouts. Liberalisation of the industry did not have to involve infrastructure development. The sooner the regulator dealt with these issues, the sooner the SNO would have access to the Telkom access network. It would depend on the regulatory mechanisms to level the playing field. The roll out process would happen in phases.

A Member asked Transtel’s views on convergence.

Dr Angus Hay, Chief Technologist, replied that convergence was a move from horizontal to vertical means of communication. Convergence would blur the lines between fixed and mobile lines. In India, China and Nigeria, operators were using both mobile and fixed lines. Convergence entailed the transmission of voice, data and the Internet on one medium. It would therefore be a good means of opening up the market.

Mr Pieterse asked how liberalisation would affect Transtel’s outside customers in the private telecommunications sector, and what would happen to their operations like project management.

Mr Socikwa replied that his company did not have a monopoly on working with Spoornet, South African Airways or Eskom. They had been able to retain those services through competitive pricing, customer service and innovative offerings. Those services had been open to competition for a long time, and they were open to challenges from other operators.

The meeting was adjourned.

 

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