Take charge

By Brian Bakker, Contributor

Johannesburg, 18 Nov 2014

Gavin Hill, director: communications and networking (MEA), Dimension Data.

The real cost of telecommunications services in SA is increasing, bucking international trends. This is according to Jiaqi Sun, senior research analyst for IDC. Sun, who opened this month's roundtable discussion, believes profitability is driving this trend, with mobile operators a case in point. Sun's question to the panel was: "Is it possible to manage telecoms costs?"

Peter Walsh, director at CommsCloud, suggests that while the likes of MTN and Vodacom are making piles of money, they're not investing in their customers.

"Nobody's going to the customer and getting to understand their pain points," he says, adding he has yet to find someone from any of the local mobile networks trying to understand how to drive customers' costs down. "That's because those people (mobile operator salespeople) are incentivised on a commission basis. So you'd be asking them to cannibalise their income and their market," says Walsh.

Nebula's COO Jacques van Zyl agrees. He says mobile operators see no benefit in helping customers understand where they are and where they need to go.

Tyron Sharnock, sales manager at AspiviaUnison, believes things are changing. "Previously, (vendors) just needed to deliver an invoice and you would pay it, possibly with a discount. Now there's more visibility and pressure from the client… to say, I want this, I want that, I want more, I need more, I need better information."

Walsh believes enterprises need to take charge. "That's why we have telecoms cost management; I imagine that, in the enterprise, it's very low in South Africa. I remember going to a telecoms expense management conference in Amsterdam in 2010, and their stats on South Africa was 12% or 15% take-up. So you need to take ownership of your costs."

Catch-22

Stanley Louw, network transformation lead for Accenture SA, believes the issue is one of managing telecoms costs properly within an organisation.

Nobody's going to the customer and getting to understand their pain points.

- Peter Walsh, director, CommsCloud

Gavin Hill, director: communications and networking (MEA) at Dimension Data, says telecoms costs remain high in SA because enterprises don't necessarily pressure the carriers on pricing.

"Pressure from the enterprise is brought to bear when they take a holistic or more strategic approach to how they consume services, who they choose as their carriers, the pricing models they demand and start to dictate, as opposed to being dictated to by the carriers, which has happened for far too long in this country," he elaborates.

But why is this the customer's fault?

"In many instances, it is. We haven't pushed back hard enough... on the carriers to demand the services we want and the prices we want to pay," says Hill.

Jacques van Zyl, COO, Nebula.

Reshaad Sha, chief strategy officer of Dark Fibre Africa, trots out the economies of scale argument, essentially suggesting if SA used more data or voice minutes, the cost would come down. While acknowledging this is somewhat of a Catch-22 scenario, he suggests consumers are not quite as vigilant as they could be.

"If somebody gets a local phone bill with a voice side that's exceeding R2 000 a month, then it's an education issue, because he doesn't understand. He should never have to pay more than R2 000, simply because there are many packages that allow unlimited calls for a fixed fee (of about that)," he insists.

Data vs voice

Hill suggests the reason voice minutes are down is partly due to cost and partly due to increased use of social media. "Voice minutes are never going to grow beyond a certain volume, because the next generation doesn't use them," he says.

Sha agrees: "That's why you're seeing the growth in data far outstripping that of voice. That's why you're seeing the cost per megabyte coming down so significantly as opposed to the cost per minute of voice. It's largely driven by that usage," he suggests.

Van Zyl wonders which came first, the chicken or the egg: "Isn't part of why consumers use WhatsApp, Internet Messaging and Skype because telecoms costs are high?"

However, he notes this is not just restricted to the consumer market. Some companies, he reports, are actively promoting the use of WhatsApp and other messaging apps, instead of picking up the telephone.

If all enterprises take control, you will wipe out 20% of telecoms costs just like that.

- Jacques van Zyl, COO, Nebula

Louw doesn't necessarily believe lower cost is the motivation for using messaging apps instead of voice calls. "The behaviour of a lot of users is changing and the methods people collaborate with each other are changing too," he says.

Van Zyl retorts that at least some of it has to do with a generation gap. "Kids these days, they're more vested in this; it's part of how they've grown up."

Blaming the telcos

Jiaqi Sun, senior research analyst, IDC.

Sharnock finds it interesting that, in a discussion about telecoms cost management, the first thing is to criticise the mobile service providers for charging too much. "But we can't blame them for their business. Their business is to up-sell, to make profit," he asserts.

That said, he appears to concur with the consensus that enterprise customers are not putting enough pricing pressure on their telco providers. However, Sharnock wonders how these companies could do it, given that few have a central telecoms cost management strategy.

According to his experience, responsibilities are all over the place. For example, while fixed-line data costs typically fall within the ICT budget, fixed-line voice is usually the province of operations, while both 3G data and voice are often the responsibility of HR.

Louw agrees: "It comes down to how you manage it and how you centralise these things and automate the processes around them."

Hill raises another pertinent point: "Many organisations, especially smaller enterprises in this country, think that telecoms expense management is call accounting. They think it's checking how many times Mavis in marketing phones her grandmother."

What gets measured gets managed, and unless enterprises actually do something, those costs are going to continue to increase.

- Tyron Sharnock, sales manager, AspiviaUnison

And although he concedes that call accounting should be part of the mix, Hill insists it is far from the be-all and end-all of managing and controlling communications costs. To really get on top of telecoms cost management, he says it's necessary to consider the entire life cycle of each telecoms service from procurement to termination at the end of the contract.

Sha believes for the typical medium-sized business, voice costs are negligible in relation to data connectivity. However, the challenge for such businesses is that their priority is not telecoms management; their priority is doing whatever business they do.

Solving the problem

The solution, he says, at least for medium-sized businesses, is to outsource telecoms management to an external non-traditional service provider empowered to change service providers in order to cut costs, while maintaining constant connectivity and high service levels.

Walsh concurs and cites an example from a few years back. "We did a big mobility clean-up where a client was spending R3 000 000 a month on 3G cards. Some R1 750 000 of that was tied up in 3G cards lying in desks and in cabinets all over the country," he says.

Reshaad Sha, chief strategy officer, Dark Fibre Africa.

Sharnock suggests many enterprises simply don't care about reducing costs because those costs are all recovered through enterprise-based cost accounting. "What they do is a claims-based mobile voice thing or a top-up 3G package or here's your allowance. Whatever is over the limit, we're going to take back from HR," he says.

This brings Sharnock back to the lack of central strategy, which, he believes, ultimately results in the enterprise making this the consumer's problem.

Louw agrees, but takes it a step further than centralisation. "There's all this data sitting inside the organisation, but there's very little analytics being done on it (to rationalise costs). If you drive the analytics, you can influence behaviour (and begin to select) the right packages," he says.

Hill notes it is one thing to have the information, but unless you're actually taking action to influence the high costs, the savings are never going to be realised. Coming back to Sha's point, he also suggests enterprises give a third party specialist organisation the mandate to take remedial action on their behalf.

Van Zyl agrees and suggests the level of savings that could be realised by such action. "If all enterprises take control, you will wipe out 20% of telecoms costs just like that," he says. "And that's without taking on the service providers."

Walsh reiterates his point that the enterprise and service provider need to work together. "Business and service providers need to work as partners. That's what telecoms cost management is all about," he says.

"You have to get engaged internally, you have to sit down and communicate, put a strategy together, and if you don't have the skills to do that, and to play a role in industry, then you need to outsource that to somebody else," insists Walsh.

Tyron Sharnock, sales manager, AspiviaUnison.

Partially echoing Walsh, Louw says it comes down to two things for him: business relevance and partnerships. In the first instance, he says advanced technologies must be used to enable business. Secondly, he notes the old days of adversarial relationships between client and supplier have gone and things are very much more about partnerships these days.

Hill echoes the partnership view, but adds a caveat that not all service providers have embraced the new ethos. "The next generation of service providers can be potentially more agile because they don't have a legacy anchoring them down," he says.

Hill also points to a growing trend to adopt utility models of telecoms and ICT consumption as another way to manage the telecoms cost equation. "You don't tie yourself into long-term fixed contracts and become more agile, because you consume these services on a far more granular scale," he elucidates.

Van Zyl believes the partnership model is the best solution for unlocking the value to be found in effective telecoms cost management.

Sharnock reiterates Louw's earlier point about the value of using analytics technology to take control of telecoms cost management. "What gets measured gets managed," he says, "and unless enterprises actually do something, those costs are going to continue to increase."

Fraud forces Nashua Mobile to act | TechCentral

— Staff reporter, TechCentral

Reunert-owned Nashua Mobile is disabling international roaming, calling and call-forwarding functionality on all of its customers’ Sim cards in a bid to prevent fraudsters using stolen Sims to run up bills.

The company says the problem is becoming more prevalent and it is seeing an increase in stolen Sims being used for international calling.

“Cellphone subscribers that fall prey to this scam could be saddled with bills of thousands of rand,” the company says in a statement.

Nashua Mobile has contacted all customers that use roaming services and alerted them to the scam. Any customer that has not used roaming, international calling or forwarding over the last year will automatically have the service cut off and be notified by SMS.

Users can have the services reconnected by contacting Nashua.

Customers that have not used the service in the past 6 months will be asked to contact the company so Nashua can make sure they are not using it.

“Nashua Mobile is working closely with the network operators to put further measures in place to curb this sort of fraud,” says the statement.

It says to prevent this kind of fraud on mobile accounts customers must report lost or stolen Sim cards, deactivate roaming when they are not away, remove call forwarding on their phones and make sure that forwarding hasn’t been activated without their knowledge.

Death of SMS greatly exaggerated

by Candice Jones, TechCentral

In the early days of mobile technology, the short message service, better known as SMS, became a global phenomenon as consumers, against all predictions, took up the service with vigour.

The first SMS services were established in 1993, but the technology only really took off in the late 1990s. Now, trillions of text messages fly across the world’s mobile networks every year.

In Africa, free online messaging services sprung up like weeds and operators started to include SMS packages for pre- and post-paid offerings. SA operators are still collectively raking in billions of rand in revenue from texting.

However, those billions have started to decline in recent years. Operators and analysts say new data services and instant-messaging (IM) products are the reason. IM applications like BlackBerry Messenger have become a preferred way for many consumers to interact using text.

World Wide Worx MD Arthur Goldstruck says his research shows that between 2009 and 2010 SMS spend by SA consumers dropped from 16% of their total monthly bills to 12%. That, he says, is the “most dramatic drop we have seen to date in the amount customers spend on SMS”, he says.

During the same period, World Wide Worx’s research shows average data spend increased from 5% to 8% of their bills. “This is a strong indicator that data is taking over from SMS,” he says.

Goldstuck says the popularity of smartphones is the reason for the shift. “Services like IM cost a fraction of a cent [per message], and other services like BlackBerry Messenger cost nothing,” says Goldstuck.

He says mobile operators have long inflated the price of SMS, with the cost of texting still as high as 80c/message on some networks and tariff plans.

Premium SMS services used for competitions and polling are even more expensive. “[Telkom’s] 8ta was the only operator to realise that it could play with SMS when it launched with its 50 free SMSes for every five sent. It showed the true cost of SMS to the operators,” he says.

Other providers have yet to match 8ta’s service and Goldstuck says it’s a clear sign that the “chickens have come home to roost for operators over the cost of SMS”. Although SMS revenues are declining, Goldstuck says the service will have a “long tail” and will be used in certain contexts for years to come.

Pieter Streicher, MD of BulkSMS.com, agrees that SMS revenues are declining. However, he says it’s not because of cheap data-based IM applications.

Rather, he says the decline is due to mobile operators including more free SMSes in bundles and other promotional packages. “Take, for example, the MXit service. It has been around for seven years and that hasn’t resulted in a decrease of the number of SMSes,” he says.

MTN and Vodacom’s most recent financial results presentations both show a marginal increase in the number of SMSes sent, even though there has been a decrease in the revenues generated.

The International Telecommunication Union also doesn’t believe there is a dire future for SMS, predicting that by 2013 the number of text messages that will be sent worldwide will climb to 10 trillion a year.

Streicher says SMS is “inelastic”, unlike voice. “If prices go up or down, you don’t see an increase or a decrease in its use.”

IM will not kill SMS because the technology is too fragmented, he adds. “For SMS, all you need to know is the recipient’s telephone number and not whether the person is online or what services they are using.”

He says customers using IM also have to download applications before they can use the services and at least 27% of smartphone users worldiwde have never downloaded an app. “With SMS, it’s already ready and available when you receive the phone,” he says.

He also points to the increased use of SMS by business. “Companies won’t use instant messaging to send commercial messages. SMS will always be entrenched in this environment,” Streicher says.

Trillion Dollar mobile voice and data business

Gartner says mobility will be a trillion dollar business by 2014
Worldwide mobile voice and data revenue will exceed one trillion dollars a year by 2014, according to Gartner.

Mobile will generate revenue from a wide range of additional services such as context, advertising, application and service sales, and so on. Each of these will be a significant business worth several tens of billions of dollars per year.

Gartner analysts outlined the future of the mobile industry at Gartner Symposium/ITxpo 2010, being held here through today and on 8-11 November in Cannes.

“We see three major eras of mobility,” said Nick Jones, vice president and distinguished analyst at Gartner.

“The device era was characterised by iconic devices such as the Motorola RAZR and was dominated by device manufacturers. This was followed by the application era which arrived with the iPhone, popularising application and media stores. Going forward, the service and social era will build on the application era, but it will be characterised by cloud services and streaming media. Applications will survive, but often as a component of a more complex end-to-end experience involving the cloud.”

In mature markets, smartphones will dominate device sales for the foreseeable future. However, the dominant mobile device type shipped globally will be feature phones without an identifiable operating system (OS) because emerging markets dominate handset demand.

Organisations operating in emerging markets should assume smartphones will be a niche device beyond 2014.

Many new device types such as tablets and e-book readers will emerge through 2012 and some will find a role in corporations.

However, none will achieve a market share comparable to smartphones or laptops, which will remain the dominant corporate mobile devices. Mobile knowledge workers will require both a PC and a smartphone through 2014.

The smartphone platform space is very competitive, and the leaders will change through 2014 with Symbian is losing share to Android and iPhone OS (iOS). Android is gaining ground fast and will appear on consumer electronics and non-handset devices such as tablets.

“As the platform wars rage, a variety of new tools are becoming ‘platforms’ in the sense that they provide a user experience and framework for delivering applications,” Mr Jones said.

“These include the mobile Web, where HTML5 will be very influential, OS independent ‘platforms’ such as Flash, and scriptable tools such as augmented reality browsers and mapping systems. In the long term, some will be absorbed into the OS or browser.”

Gartner said that context will be a defining principle of mobile business for the next decade. It will play a key role in many areas of mobile business, especially advertising and marketing.

“In 2010, we are seeing the beginning of simple context using location to suggest interests and to guide searching,” Mr Jones said.

“Context will also be a key criteria for the selection of partners. Many mobile business systems will exploit contextual cloud services hosted by others. It will also be a major commercial battleground with powerful vendors such as Nokia, Google, and Apple striving to own the consumer’s context. Context will also be bound up with social relationships and social networks, illustrated today by services such as location-tagged posts to Facebook and Twitter.”

Mr Jones advised organisations to develop a high-level mobile strategy based on technology-independent management goals and styles, rather than detailed device, platform or application policies.

Traditional mobile strategies were designed to support well-defined requirements with devices, applications and services provided and managed by IT professionals. Requirements of this type will persist, but it will not form the majority of corporate mobility by 2015 because of changes in user requirements, technology, and the nature of work itself.

- compliments of My Broadband

Business Continuity for Telecoms Expense Management

Today the importance of business continuity for TEM [Telecoms Expense Management] really hit home for me.

What prompted my thinking was a conversation with a colleague around a national hotel chain in South Africa; to whom we provide our TEM Solution. He had just finished his first meeting with the new IT Manager. I asked him how it went?

Now picture yourself as a new IT Manager for a large hotel chain trying to get to grips with Strategy, Management, Measurement and Implementation of Telecoms Expenditure over a large geographical area.

Where do you start? Especially considering that the entire management team had recently left.

Well in the first meeting my colleague had sat the IT Manager down and walked him through a high level view of everything he needed to know about the group’s telecoms requirements; from -

• Documented strategy and procurement policy for telecoms
• Suppliers and their SLA’s
• Business need
• A summary of the last 12 months worth of reporting
• Current implementation plan and future requirements for new hotels

All of this backed up with 12 months reporting and an intimate knowledge of the group’s business need.

The IT Manager had walked into a job where the encumbent had left him a structured and well managed Telecoms infrastructure with a solutions partner who catered for this exact eventuality and ensured that no matter who the role player was, they would be able to pick up where they left off.

The lesson for me is that without a TEM solutions partner this would have been difficult to accomplish and documentation would have been open to intrepretation. Businesses cannot afford to take the risk alone anymore. Skills in South Africa are hard to come by and with a mobile workforce your risk in the area of continuity is high. Most importantly, it takes time to build up these partnerships and get the knowledge in place. Sometimes years as opposed to months!

We advocate that you cover your business risk by partnering with a TEM solutions provider who knows how to ensure you get that continuity. And much like our other customers, your ROI will be higher than if you attempt to do this yourself.

Peter Walsh
Cape Town - July 2010

MWeb boosts ADSL arsenal | ITWeb

By Leigh-Ann Francis
Johannesburg, 30 Jun 2010

Local Internet service provider (ISP) MWeb has extended its ADSL market shake-up to its business unit, unveiling a bonded ADSL offering it claims is up to 70% cheaper than the nearest comparable offering on the market.

This announcement follows the recent unveiling of the ISP's range of uncapped ADSL offerings for consumers and business.

Now, in the latest round of an aggressive market strategy, MWeb's bonded ADSL entails combining up to four ADSL lines into a single router that creates a single channel, high-speed link, effectively multiplying the speed of each line by the number of bonded lines.

The benefits of such an offering will be particularly attractive to small to medium-size business, explains BMI-Techknowledge analyst Brian Neilson, because it offers an alternative to leased lines.

“As ADSL services become more highly specified, they can perform a similar functional role to leased lines of lower 'ticket speeds', despite their asymmetrical nature,” he explains.

Neilson notes, however, that it would be necessary to compare bonded ADSL solutions to a single 10Mbps ADSL service from Telkom, which may also perform adequately.

Telkom has been trialling its 10Mbps ADSL service for some time now, but due to a network freeze during the 2010 Fifa Soccer World Cup will likely only introduce the product after the tournament.

MWeb, however, is taking a very aggressive approach to winning the ADSL war, notes Neilson.

“This campaign is the heart and soul of the market share war for business connectivity as a whole,” he opines.

“In the long term, when some proxy for local loop unbundling is finally implemented, the players leading in this space could be even better positioned, because they will already have the customers.”

Neilson explains this announcement means other players will step up their own product strategies, and that more announcements are expected to follow in this regard.

MWeb Bonded ADSL packages
Business ADSL 50GB 8Mbps (2 x 4 bonded) - R 2 299
Business ADSL 50GB 12Mbps (3 x 4 bonded) - R 2 799
Business ADSL 50GB 16Mbps (4 x 4 bonded) - R 3 299
Business ADSL Uncapped 8Mbps (2 x 4 bonded) - R 5 399
Business ADSL Uncapped 12Mbps (3 x 4 bonded) - R 7 999
Business ADSL Uncapped 16Mbps (4 x 4 bonded) - R 10 699

Telecoms Transformation – How to move forward?

A fascinating read by Paul Budde on his blog.

The discussion that is taking place about the trans-sectoral use of broadband is gaining momentum and many countries are now asking themselves serious questions about the future of their telecoms sector.

Until recently governments were convinced that they could separate themselves from the telecoms sector, and the key policies were focused on deregulation and privatisation. During the last few decades, however, this course reduced telecoms to the status of a commercial sector. Governments have accepted the priority placed by telcos on the interest of their shareholders and failed to understand the importance of telecoms as national infrastructure.

The Internet was a major ingredient in changing the direction of telecoms, particularly when broadband was added to the mix. In no time Internet and broadband penetration went through the roof, a clear indication that people were extremely interested in using these new technologies. More and more countries began to recognise the social and economic importance of this infrastructure. Political pressure started to emerge, aimed at governments in countries that were lagging behind in broadband infrastructure.

To read more click on the link above.....

Telkom leaves retail rates largely unchanged | TechCentral

Telkom has left its broadband line rental and post-paid call rates unchanged while hiking basic line rental costs by about 5%.

In its annual tariff filing with the Independent Communications Authority of SA, the fixed-line operator says it could have hiked its basket of rates by as much as 19,3%, but has declined to do so.

Telkom SA MD Nombulelo “Pinky” Moholi says Telkom has not taken advantage of the regulatory allowance because it has a “commitment to the process of ensuring affordable telecommunications access in the country”.

A more plausible reason, of course, is that competitive pressures and consumer distress in a tight economic environment are preventing it from increasing its rates.

Telkom’s broadband digital subscriber line (DSL) and monthly bandwidth charges remain unchanged.

Oddly, the company has made no mention of improving bandwidth allocations for consumers, despite the introduction by competitors like MWeb of uncapped offerings.

It has also given away no details about its plans to increase DSL line speeds. News of this may come on Monday when Telkom reports its annual results.

Telkom is increasing its entry-level Closer 1 calling plan by a modest R5, while leaving other calling plan prices unchanged.

The new tariffs, which become effective on 1 August, are likely to put more pressure on Telkom to cut costs as competitive pressures intensify. It can no longer rely on tariff increases to offset inefficiencies.

International call prices remain mostly unchanged, with some cuts, and increases in call costs to Namibia and Botswana.

The cost of calls to Neotel and other licensed operators remains unchanged, too, as do calls from payphones. However, changes in the metering periods for public payphones will be made to introduce a single tariff for local and long distance calls.

Prepaid users will see a hike in call costs of 4,5% for local and long-distance calls. Prepaid installation costs have also risen. Postpaid line installations rise 4,9% to R491, from R468,05 previously. — Staff reporter, TechCentral

The CFO’s Role in Telecom Expense Management

Author: Kevin Donoghue

Telecom sits among the top four largest expenses for the enterprise. Large budgets for telecom usually contain opportunities for cost control and optimization.

Decentralized purchase decisions and limited oversight of these expenses can result in spending 10%-25% more than you need to on telecom expenses. Breakdowns in internal processes present yet another challenge in managing telecom expenses. Organizations rarely have effective systems for recording telecom contracts, service order move, add, change, and disconnect (MACD) activity, bill validation, and detailed expense reporting.

CFOs should ensure that IT and procurement work to centralize management of telecom expenses, leveraging economies of scale for purchasing decisions, procurement processes, and the operational costs to manage these expenses.

•TEM improves the bottom line with a positive return on investment.
•Having the CFO engaged ensures more favorable results when negotiating large audit refunds with telecom carriers.
•TEM helps CFOs exercise oversight and improve accountability with expense charge-backs to business units for consumption of services.
•TEM delivers with reporting on operating expenses by division, region, business unit, and employee.
•TEM aligns with Section 404 of the Sarbanes-Oxley (SOX) Act that requires CEOs and CFOs of publicly traded companies personally attest to the adequacy of their internal controls.

CFOs often push the enterprise to focus on cost cutting. CFOs play a central role in performing apples-to-apples financial comparisons of TEM suppliers. And, once the solution is selected, CFOs can help to expedite the project by clearing obstacles in locating information sources. Also, CFOs can help set the standards for dashboard reporting to monitor savings results.

It’s up to you to manage business transformation. This requires changes in core processes related to strategic sourcing, service order management, invoice processing, expense validation, optimization, allocation charge backs, usage management, and reporting.

Telecoms prices take a tumble | TechCentral

[By Duncan McLeod] SA consumers, used to high prices for telecommunications, must be rubbing their hands in glee. The cost of broadband and voice telephony has begun falling, in some cases dramatically, as competition finally begins to take effect.

At the weekend, cellphone giant Vodacom announced it was effectively cutting its peak-time prepaid rates by as much as 40%. Vodacom customers who subscribe to a new prepaid offering, with a uniform all-day rate, will enjoy off-net call charges between 6 am and 8 pm on weekdays of R1,80/minute. That compares with R2,99/minute on the company’s 4U prepaid plan.

Vodacom’s move came just one week after MTN introduced a similar all-day package for prepaid customers. And both operators were probably reacting to lower all-day prepaid tariffs introduced by their smaller rival, Cell C, late last year. The recent reduction in interconnection rates — the fees the operators charge each other to carry calls on their networks — probably also helped.

It’s hard to know if prices will come down further in the next few months. The operators have tended to shy away from competing on price, though as the market matures and growth slows, they may be more tempted to undercut each other.

Without an aggressive third player in Cell C, voice tariffs probably wouldn’t have come down. Cell C has less to lose than its two bigger rivals in cutting prices. Also, the company, which lacks a 3G network (for now), has fewer value-added options to keep customers sweet. So it has to compete more on price.

An apparent move by Cell C to sell its national network of base stations could make the market more competitive still. The company is said to be in talks with wireless tower operators Eaton Telecom and American Tower Corp to dispose of them in an effort to defray its crippling long-term debt. If the deal goes ahead, and assuming Cell C doesn’t negotiate an exclusive leaseback, then new players will be able to enter the market, leasing infrastructure on the base stations.

Since the market is wide open to competition, anyone could enter as a fourth mobile operator. ECN Telecommunications has already expressed an interest in doing so.

It seems inevitable that competition will drive down prepaid and contract rates further in the next few years.

It’s not only voice calls where prices are falling. In fixed-line broadband, bandwidth costs have plummeted in the past 12 months. Triggered by smaller Internet service providers, the cost of fixed-line broadband — especially for high-end users — has fallen off a cliff in recent months. And the prices are continuing to drop.

Whereas the average selling price of bandwidth on Telkom’s digital subscriber lines was about R70/GB a year ago, it’s now available for less than R10/GB on certain packages from smaller providers.

The bigger service providers haven’t yet followed suit, but I’ll bet Telkom and Dimension Data’s Internet Solutions, the country’s two largest suppliers of bandwidth, will slash their prices within months. It’s inevitable, given the rapid decline in the cost of international bandwidth.

Seacom, the new undersea cable on the east coast, has already brought about a sharp reduction in prices. New cable systems, coupled with investments in national fibre infrastructure, will surely result in bandwidth prices continuing to nosedive.

With the regulator, Icasa, set to begin tackling the last vestiges of Telkom’s monopoly, especially its control over the local loop, telecoms prices in SA could fall to levels enjoyed by consumers in competitive markets in Europe and Asia in the next few years. Now that’d be a turn-up for the books.

SA’s broadband Wild West | TechCentral

[By Jannie van Zyl]

It’s like a movie about America’s Old West. Except this is SA, and it’s not a gripping story on the silver screen where actors get shot, dust themselves off, have a good laugh, and head back to their trailers.

No, in the Wild West we’re heading into, it’s SA consumers who’ll be in the crossfire, and the damage to them will be very real.

Who’s going to be doing the shooting? A bunch of cowboy Internet service providers (ISPs) and several big landowner operators wanting to hold on to what they’ve taken.

When the dust settles and the fighting is over in two or three years, many of these guys are not going to be left standing. And many innocents will be injured.

It’s the story of the good, the bad and the ugly in SA broadband.

How did we get here?

Anyone who’s spent any time in SA’s Internet or telecommunications industry is familiar with our history — Telkom, minister Ivy, the monopoly issue. The story is all about deregulation, how badly government managed it, and the mess it got us into.

The good

Let’s start by focusing on the good parts, the positives. Broadband penetration is rising — in the home, in small and medium enterprises, and in large businesses. Everyone has access to a growing panoply of bandwidth options.

There are also many new players. Competition is growing by the day and innovators are coming out with new offerings all the time.

There are ecosystems being set up comprising complementary service providers that can take advantage of more readily available bandwidth.

This applies at the high end, where vendor-neutral data centres and new peering points allow companies to pick and choose more freely. And it applies to the low-end, to small ISPs that can create niche products to address particular customers’ needs.

So, that’s all very nice. But it’s not good enough.

The bad

We’re paying through the nose for broadband. In the real Wild West, high prices were due to gouging by monopoly railways and ruthless robber barons. In modern SA telecoms … well, it’s not much different.

Realistically, prices have only come down marginally in the last few years. How can this be, you ask? ISPs are advertising great connections for less than a hundred bucks a month — unthinkable a few years back. But there is one cost that is never talked about. It’s assumed, glossed over, unmentioned — the access cost.

Every connection in SA has two cost components, namely the access cost, and the service provider cost, often known as the data rate. The access cost is not coming down. Telkom still has a monopoly on the last-mile copper loop. You’re still paying R600 to have a Telkom phone line installed and a R152, R326 or R413 monthly broadband line fee. And don’t forget the R130 basic line rental.

Before you’ve even begun to access the Internet, you’ve already paid more for your connection than people in Europe, America, Asia and even other countries in Africa pay in total.

So, having a fixed-line Internet connection is exceptionally expensive, and the solution, local-loop unbundling, is still a distant prospect. Even when unbundling happens, it’ll be expensive for other operators to install the necessary equipment in Telkom’s exchanges.

What about the alternatives? Over the past decade, various wireless operators have set up wireless alternatives to Telkom’s local loop.

But these players have not had a big impact on access layer pricing either. There are a few reasons for this. Limited licences were granted, and even more limited frequency spectrum was issued. There are only a few players — Telkom, Neotel, Vodacom, MTN, Sentech and iBurst parent Wireless Business Solutions.

The problem is that some of these players are not coming to the party when it comes to delivering connectivity to South Africans.

Building a wireline or wireless network is what we in the industry call “very expensive”. This means the vast majority of new licence holders will not be building networks anytime soon. Even the good Marshall Altech announced he will not be building his own network after taking down the bad sheriff who tried to stop him from doing exactly that.

This means, even with deregulation, we will probably still see the existing players dominating the industry. And some of them are just not doing what’s necessary.

Worse, spectrum is exceedingly limited. Though some providers are using this spectrum to connect broadband customers as fast as they can, some are doing nothing at all.

Those doing nothing should lose their spectrum. The question is, how can we tell if a licensee deserves to keep its allocation?

iBurst has developed a simple ratio that provides an intuitive feel for who is using spectrum efficiently, and who isn’t. It’s a bit rough and ready, and it ignores some finer details, but it provides a quick way of determining whether a licensee is doing SA a service or not.

We call it the “Paris Principle”, in honour of the man we hope will use it.

This is how it works: we take the number of base stations an operator has built, divide this by the spectrum it has been allocated, and look at the number of “Bs/MHz”.

Why base stations? With wireless networks, the number of base stations an operator has built tells us how many users it could possibly serve, as well as whether it is operationally capable of the logistical and technical challenges of building a wireless network.

For example, let’s take the Wireless Business Solutions network that powers iBurst Wireless. We have 5MHz of bandwidth, and have built 263 base stations in the past four years. That means we have a “spectrum usage ratio” of 52,6Bs/MHz.

Now, let’s look at the WiMax technology and which operators have spectrum. Our WiMax network has a ratio of 17,3Bs/MHz (260 towers and 15MHz). Sentech’s ratio is 0Bs/MHz (0 towers and 106MHz); Telkom’s ratio is 1Bs/MHz (57 towers and 56MHz); and Neotel’s is 1,3Bs/MHz (75 towers and 56MHz).

Are Sentech, Telkom and Neotel doing enough to keep their spectrum?

We’d like the Independent Communications Authority of SA (Icasa) to use this simple but effective “Paris Principle” to regulate frequency spectrum allocation to ensure the country benefits as fully as possible. It’s a strategic national asset.

However, the lack of effective spectrum usage in SA is only part of the problem.

The other challenge is that only a few players can provide a comprehensive national wireless service. Base stations are expensive, and the high sites to build them are hard to secure.

Operators need hundreds of millions of rand for capital investment. Their shareholders want a return on investment, but competition in the wireless access provision space is limited to a small handful of carriers. A red warning light is already flashing. Many of the operators are holding onto the wireless “last mile” for all they are worth, meaning that other service providers can’t buy wholesale access from them to create innovative services. This is keeping wireless broadband prices higher than they should be.

What is Wireless Business Solutions doing differently? A few months ago, we made a strategic decision to adopt an “open access” policy. If you’re a service provider, you can buy access to our network at wholesale prices. We believe Icasa should compel the other wireless operators to do the same.

The bottom line is this: the last-mile access network is the biggest component of the cost of broadband, and it’s not getting any less expensive. Addressing this problem should be a top priority for Sheriff Mashile.

SA needs local-loop unbundling as soon as possible; Icasa must enforce open access on wireless networks; and operators who are not making efficient use of spectrum should lose it.

And the ugly

But there’s another component to the big broadband mess SA finds itself in.

In the Wild West, it was the shoot-from-the-hip cowboys, the cattle rustlers and the bandits. In SA, it’s the irresponsible, foolish and sometimes downright dangerous ISPs. A whole gang of them have ridden into town, and they’re spoiling for a fight.

The concern is that some of these ISPs are offering data rates at well below market prices. There are cowboys and gamblers who buy wholesale bandwidth, and resell it at below cost, betting the farm their cost prices will continue to drop so that they get a nice big bunch of contracted customers on their books so that they can then make profit on them later.

At first glance this seems to be a consumer paradise. But many of these guys are also shaping traffic and bumping up contention ratios. This means users are getting cheaper rates but lower-quality connections.

In order for the market to stabilise, consumers must understand that they need to pay a fair price for their data so that ISPs can be sustainable and provide acceptable service.

Even though international data prices will continue to drop as more undersea cables come on-stream, this cost is becoming a smaller portion of the total cost of delivering broadband.

The gunfight between the ISPs will continue. We just have to take our medicine and wait for the dust and smoke to settle, and then drag off the bodies of the cowboys that were not fast enough or strong enough to survive.

Consumers and business owners need to have their wits about them and steer clear of the ISPs with tattered boots on mangy horses. Their promises of a broadband Eldorado may be empty.

Why Telecoms Expense Management fails or succeeds

I found this summary on “Telecoms Expense Management” [TEM] – written by Anthony Cone from Tangoe Inc. in New York to be succinct.

For more on his public profile see http://www.linkedin.com/pub/anthony-cone/4/80a/a86.

How TEM solutions succeed?

There's a lot of great TEM success stories out there. But why did they succeed? Was it the process, the technology, the people a procure-to-pay solution?

1. Mutually agreed upon expectations from the beginning of the project
2. Clear goals and objectives
3. Requirements defined
4. Clear ownership of tasks & deliverables
5. TEM augmented by audit and sourcing at beginning
6. Unified solution for Fixed / Wireless for Admin and end-user?

Why TEM solutions fail?

Whether we like to admit it or not somewhere along the way we've seen failed TEM relationships. What are some of the root causes of this?

1. Under management of time and resources
2. No designated project manager from both the vendor and customer
3. Vague goals and objectives
4. Poorly defined requirements
5. Underestimated complexity
6. Lack of ownership
7. Vendor "bought" the business and is trying to recover margin

Choosing your Telecoms Consultant or Telecoms Cost Management company

When choosing the right telecoms consultant or Telecoms Cost Management compnay, here are some questions to ask:

• Does the company or individual have a proven track record?
• Are they supplier independent?
• Do they have a fixed monthly cost, published pricelist or do they take a percentage of your savings or do they charge per hour?
• Is there access to secure website online reporting available?
• Will the solution on offer cover all your telecoms costs? Namely Fixed line, GSM handsets, GSM fixed Cellular, VOIP and wireless solutions
• Do they manage both fixed and wireless costs?
• Do they install equipment on site or are they able to perform off site / virtual data analysis?
• Is the solution ongoing and sustainable?
• Is the information you receive 100% accurate? Based on supplier billing.
• Is the solution using manual systems or fully automated?
• Are site visits, project management and consulting included in the price or does the supplier charge extra for this?
• Is a well documented return on investment [ROI] included with your proposal prior to any contract being signed?
• Are they able to benchmark all your products and services?
• does the solution include any "Best Practices, telecom polices, methodology and benchmarking?

Neil Buckley - Apex Business Intelligence - neilb@apexbi.co.za

082 805 5555

Focus on the pain not the price

Last year I was sitting in Cape Town airport waiting for an aircraft that was late to land [due to rotational reasons - I believe that’s a euphemism for sorry we are late again] and take me home. My mind was mulling over a question I had been asking myself again and again.

Why do we struggle to get our message across to our clients?

Some background at this stage; the company I work for manages telecoms costs for businesses that spend anything from R100 000 to R12 million per month. In essence we measure, manage, optimise and report on telecoms infrastructure and its associated costs. Our offering typically costs a company less than 3% of what it spends every month on phone calls and for the most part, we reduce these monthly costs by an additional 15 to 25%. I am the sales guy responsible for bringing in the budget every year.

So there I am wondering what I can do differently. What can I tell my clients that would speed up my sales cycle? Why are they not hearing me? Surely it’s not that difficult?

Let’s go back to the facts, I think aloud. We offer a good service at the right price! We have a good track record. Oh, except for that one incident [sigh] where we spent a small fortune fixing a mistake we made and got the boot anyway.

Businesses have a very definite need for telecoms cost management right now. Telecoms costs in South Africa have been exorbitant for years. And the government has no interest in doing anything about it. Too many vested interests are at play for politicians to care what happens to businesses and the people they employ because of prohibitive telecoms costs. Lack of leadership is the latest excuse being offered to explain the debacle.

Telecoms costs are so far down our list of social problems that we can’t expect any good news in the short term. Those cell phones you cannot do without will carry on costing you money, but your employees need them. Telkom will continue to put its prices up, and if Telkom is sold to new owners who have to pay back their funders it is not going to get any better.

So where was I? Oh yes. What can I do differently? In a perfect world, one would rather spend less time selling and more time delivering services. My logic is that the quicker I deliver, the more we invoice and the less time I would need to spend in this airport. More time in the bush, a better social life and financial security, surely this is the way to go?

I have been managing telecoms costs more efficiently for various companies for nine years. And I consider myself very good at what I do. Many of these companies are still our customers. Our business is successful, our clients are happy and we have built up a steady reputation as the guys who deliver the goods. So clearly it’s not what we do, it’s how we explain it to potential new clients that is the problem.

Our company DataRoom has spent the last nine years perfecting its value proposition and the delivery of solutions to clients. We have many success stories to talk about. We have a slick presentation. We have the testimonials. We even really understand the business needs. We do our job better and cheaper than most companies out there. Yet sometimes it still takes months for new clients to make up their minds. That’s frustrating.

So why is it hard to sell managed telecoms services to businesses?

Our customers have been listening to their service providers telling them for years that their solutions and products are going to save them money. All they need to do is give them the business and they will look after your telecoms. This endless sales pitch has clouded the real problem, and customers have bought into it. Never mind that telecoms in SA are so complicated and so mired down in inter-connect rates that the chances of making a cheap call are about as strong as unemployment halving by 2015.

There is no political will to do anything about the high interconnect rates charged between networks, since they were designed to protect the incumbent fixed line operator that the government happens to have a share in. And interconnect rates and bandwidth costs are responsible for the high cost of calls in South Africa. How do you rent network capacity from the only provider and then compete with it? The government has created a very expensive telecoms environment and low telecoms costs in South Africa are not going to happen for quite some time.

Since we have some of the highest telecoms costs in the world, businesses need to learn how to manage those costs. So surely they need the help of experts?

But there’s a catch. Commission-based sales incentives for sales people, network incentives offered to service providers for every new connection, and the fact that a service provider only manages call made over one network, not on rival networks, leaves a lot of room for improvement in the management of telecoms.

Every telecoms sales person in South Africa is promising to deliver cost savings. Yet customers are sick of hearing about how much money they are going to save - they would far rather hear about how we can take away their pain and deliver the goods.

Negotiating some discounts is not a euphemism for managing telecoms. To do the job properly you have to get to understand a company’s requirements, and invest time and money in managing and monitoring those requirements into the future or the costs rise.

This is a difficult and time-consuming process. So if you do not have the toolset, the business intelligence and the knowledge, then negotiating discounts are just about all a procurement guy, IT manager or CEO can do. Never mind what that sales guy with the Porsche selling Premicell and VOIP solutions tells you. How do you think he got to afford the car?

You see it is not all our fault. Our customers play a role. They let the equivalent of the "local building supply store" design their dream house and supply the building materials. They get a house all right, just not the one they wanted. If you want a dream home you go to an architect. And if you don’t like what he or she shows you, you go the next architect until you do like it. But you need to recognise that you do not like it. Or that you could do better. But without an architect you are unlikely to find out.

So why, when it comes to understanding one of the world’s most complicated telecoms environments, and when they need a world-class telecoms infrastructure, do our customers go the “local building supply store” for their designs? And more importantly how can I get them to see that they need an expert to manage their requirements?

Why do companies in South Africa rely on their service providers to tell them what to do? Having the fox watching the henhouse has never worked well for Farmer Brown and it will not work for your business.

Needless to say I did not get the answer that afternoon in Cape Town. But the answer has crystallised over a period of time through lots of debate and discussion. We had a sales conference in Johannesburg in September, where we threw out the agenda and decided to reinvent ourselves. We decided we had to present ourselves for what we were. After all, we are a business that understands telecoms better than any of our competitors. Even better than our customers understand their own business needs. We decided to show our customers we had a plan.

So what should our customers really be looking for when it comes to making telecoms decisions? How do you manage those cell phone costs? How do you ensure your mobile employees have connectivity on the road without killing your cash flow? Which PBX and which service provider will do your communications platform proud?

Customers want to know that their supplier has the knowledge and strategy to know what they are talking about and they want to see a plan. Customers want a partner that understands telecoms better than anyone else. They want a partner that invests in getting to understand their business and their business needs better than anyone else. A company that puts together a documented plan and sticks to it until circumstances change.

That supplier needs an independent insight into how to do things better and a sustainable solution that delivers real management benefits cost effectively.

To manage your communication costs properly, you need more than a discount from your service provider. You need not sign long-term deals with a fixed line operator and cell phone provider to gain what you rightly deserve. But you do need an expert to help you understand what to do, where to start and how to implement the changes.

And your expert must manage everything; fixed line, least cost routing, cell phones, 3G cards, VOIP and infrastructure. So here is my advice to the businessman or businesswoman who wants to know where to start or just needs to know they are on the right track. If you are looking to manage your monthly telecoms costs, make sure the people you hire are experts who have a plan for where to start and what to start with, and most importantly make sure they are 100% supplier independent.

Peter Walsh
www.dataroom.co.za
Saturday, June 07, 2008