Interconnect cuts slow telecoms growth // ITWeb

By Leigh-Ann Francis
Johannesburg, 23 Sep 2010

Increased competition in the local telecoms market, coupled with the impact of falling mobile termination rates (MTRs), will restrict market growth in an already slowly recovering economic climate.

BMI-TechKnowledge senior analyst Tertia Smit, who wrote a recent report on the corporate and SME telecoms market in SA, predicts a market growth of only 5% over the next five years, with most of the growth coming form Internet and data services.

“Growth in the telecommunications sector has generally slowed down in the past year and this will continue until the end of the year, due to the slow recovery of the economy. The next few years will continue to be difficult due to ongoing regulatory uncertainty, and increased competitiveness, as well as the impact of falling MTRs on the LCR [least cost routing] market,” she says.

Vodacom's latest quarterly results showed the operator had taken a heavy knock from lower interconnect rates, reporting a loss of close to R400 million.

Earlier this year, pressure from the Independent Communications Authority of SA (ICASA) resulted in Vodacom, MTN and Cell C dropping interconnect rates to 89c per minute, from R1.25.

With operators still reeling from the effects of the first cut, ICASA had hoped to implement draft regulations for a further rate reduction this year, to 65c per minute, with the objective of reaching an interconnect rate of 40c, by July 2012.

However, mobile operators have been up in arms over the proposed glide path, and ICASA's regulations have not yet been finalised.

Despite the impact of MTRs on market growth, BMI-T suggests the situation presents an opportunity for fixed-line operators.

Flat fixed-line growth

BMI-T forecasts that, despite an expected 4% fall in fixed-line connections, mainly on the residential side where fixed-mobile substitution continues unabated, fixed-line voice revenues will record relatively flat growth over the next two years.

Neotel is partly responsible for this, as it continues to grow its share of the PSTN (public switched telephone network) voice market.

Growth in the fixed voice market could be somewhat improved, BMI-T believes, if Telkom and Neotel introduce offerings that take advantage of the falling MTRs by picking up traffic along fixed-to-mobile routings that was previously routed by means of 'traditional LCR' (using cell routers).

Incoming Telkom Mobile has previously stated that the primary purpose of its mobile offering would be to offer converged bundle options.

“Although there is good growth in the mobile data market, the Internet market in general, and particularly the revenues derived from business customers, will continue to be negatively impacted in the next couple of years by the general level of competitive behavior,” says Smit.

“This includes a heightened level of competition between the mobile operators within the corporate sector, where more vigorous discounting may apply in future,” she states.

Numbering regulations reach final phase / ITWEB

By Leigh-Ann Francis
Johannesburg, 14 Jun 2010

The Independent Communications Authority of SA (ICASA) is in the process of formulating the Number Plan Regulations and has published a draft version, which is now open for public comment until mid-July.

The regulations are intended to align the regulatory framework with the Electronic Communications Act 2005 and the ICASA Act 2000, as amended in 2006, and to cater adequately for the newly competitive environment.

Senior telecoms consultant at BMI-Tech Knowledge Tim Parle explains that the regulations cover three phases, two of which are already complete.

The first phase was completed in 2007 and entailed changing the international dialling prefix used in SA from "09" to "00". This was in line with international norms and freed up the numbers with the second digit of 9, states Parle.

The most visible part of the second phase was the withdrawal of local calling, requiring South Africans to come to terms with dialling the prefix to local numbers and not just national, long-distance numbers, he continues. “For example, where we had to add 011 to all Johannesburg numbers regardless of whether we were calling from Sandton or Durban.”

The second phase introduced non-geographic numbers and short codes, needed to allow Neotel, and operators, to compete in the fixed market, he explains.

Parle notes that the third phase entails a more radical change. Here, the first digit dialled will change from "0" to "6" for geographic numbers and to "8" or "9" for non-geographic numbers. The aim is to provide more capacity for the long-term, he explains.

ICASA has called for public comment by 19 July and is holding public hearings on the topic in early August. The date for the implementation of phase 3 will be determined after these events.

Neotel welcomed the publication of proposed changes to the national telephone numbering plan, which the telecoms operator says promises to provide structure and clarity that has been lacking to date.

The regulations will force the industry to prepare for new infrastructure requirements and changes to their business models, which is said to have positive long-term effects for operators and their customers.

Industry impact

“The impact of these changes will be felt by the operators, which will need to re-programme the routing tables in all their switches and do extensive testing,” Parle predicts.

This is a large operation for Telkom, given its footprint of telephone switches across the country, and a significant exercise for the mobile operators, given the large number of base station control and MSCs deployed, he continues.

“The effect ripples down to Neotel, ECN, Vox and the like too. For small to medium enterprises, company PABX/PBXes will need to be reprogrammed to handle the changes with knock-on impacts to billing systems, LCR systems, internal directories and the like.”

Gregory Massel, MD of Switch Telecoms, notes that, while mobile networks and wireless application service providers will have to amend some of their premium rate and content subscription services, both company and consumers stand to benefit.

“Companies like Switch Telecom will benefit by being able to provide toll-free services. At present, Telkom makes this difficult because rather than honouring the toll-free status of the 0800 number, it simply plays a message saying: 'Calls to this non-Telkom toll-free number will be charged.'

“In the future, the calls will be toll-free, irrespective of the network they originate on,” explains Massel.

Consumers also stand to benefit from regulations relating to SMS-based content subscription services. “Providers will not be allowed to sign a consumer into a subscription-based service unless the consumer subscribes via a premium rate shortcode.

“Any SMS-based advertisement they send you enticing you to respond will have to be sent from a premium rate shortcode so that consumers are not misled under false pretences,” he notes.

The regulations also allow for the implementation of tariff controls, adds Massel. Certain number ranges will be classified as cheaper calls and others will be classified as more expensive.

“Having two clear bands, excluding toll-free and premium-rate, will help remove the current situation that has arisen where consumers have no idea what the cost of a call is before dialling,” he says.

Parle predicts that consumers may grumble at the changes initially, and for a few weeks may fumble when trying to make a call, but will soon take the changes on board. There is also a chance that shares in media companies and PBX maintenance companies will become hot items, he concludes.

Case Study—Logistics company controls expenditure between their fleet of trucks and operations using LCR call back

Description of business need

A national logistics company had a requirement to ensure that their fleet of 130 trucks was cost effectively communicating and making use of the most efficient technology available within their existing telecoms environment.

The company was highly dependent on telecoms for day to day business needs and was running 2 branches in Cape Town and Johannesburg.

Their telecoms costs were escalating year on year due to the following:

· An expanding business
· A dependency on telecoms as a critical business tool
· Increases in the size of the fleet
· Annual supplier increases

Managing the drivers and their costs was proving problematic and confrontational. Management required a solution that was reliable, manageable and cost effective to use for daily communications within their fleet

Situation

There were 3 incumbent suppliers; namely Telkom, a LCR supplier and a cell phone service provider. The costs of telecoms were escalating month on month and cell phone usage in the trucks was proving difficult to manage.

Whilst LCR was being used from the offices to the trucks, drivers were calling the offices from company owned handsets and costs were difficult to manage. Furthermore deducting costs from wages every month was causing friction between management and the employees, whilst being difficult to administrate.

Driving down costs, monthly reporting and financial budgeting / forecasting was problematic at best.

Solution

The customer selected DataRoom as its supplier independent advisor with a clearly defined set of objectives:

· Ensure all calls were at all times at the cheapest rate for their business need
· Ensure reliable infrastructure with seamless usage
· Take away the “pain” of managing the costs and reporting

DataRoom performed an analysis on call pattern and infrastructure. The reporting revealed that the opportunity lay with the optimisation of the existing LCR suppliers and managing the call patterns and packages of the cell phone handsets.

DataRoom recommended installing cell phone call back [to the offices] for the drivers and each drivers cell phone number was to call the LCR instead of the Telkom line. The LCR then called the driver back automatically. Furthermore, the cell phones were programmed to limited phone numbers and locked to avoid abuse issues.

The company chose a supplier with digital LCR equipment and a strong track record of good service to support their 24x7x365 requirement. Once the LCR call back was in place the next step was to optimise driver cell phone packages for their low call volumes.

Benefits

No more disgruntled drivers. All the drivers could still phone family, clients and company offices, but the onus on cost reduction was no longer their problem. No more deductions from wage bills either. As a added benefit the monthly fixed costs of subscriptions dropped dramatically.

Cell phone costs and LCR costs reduced significantly and management were confident in their ability to communicate efficiently. Management are now empowered through DataRoom’s “single view” into their telecoms costs and in a position to effectively validate and justify CAPEX and OPEX relating to all telecommunication needs.

Communications between their fleet and the operations were at the lowest possible rate and operating smoothly 24x7x365.