Just another application on the network: The SA Voice landscape in 2012 and beyond - By John Holdsworth


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Just another application on the network: The SA Voice landscape in 2012 and beyond - By John Holdsworth

  1. 1. Voice SA Conference Fixed voice : just another application on the network John Holdsworth Non-Executive Chairman
  2. 2. The views and opinions expressed here are my own, and do not necessarily reflect those of my employer or its staff. Disclaimer
  3. 3. <ul><li>Provides affordable converged voice and data solutions to corporate customers across a next generation platform. </li></ul><ul><li>Provides mission critical voice services to 25% of JSE top 200 companies covering all market segments of the economy </li></ul><ul><li>21st century next generation network with POP’s located in Pretoria, Johannesburg, Bloemfontein, Port Elizabeth, Durban and Cape Town. </li></ul><ul><li>State of the art network operations centre incorporating both passive and active traffic monitoring. </li></ul><ul><li>Extensive converged voice and data skills in the areas of billing, switching, MPLS VPN’s, managed services, VoIP etc. </li></ul><ul><li>The acquisition of ECN by Reunert will enable ECN to add mobile solutions to its fixed voice offering. </li></ul>Introduction
  4. 4. <ul><li>Operators in the SA fixed voice market face a complex and fast changing blend of commercial risk and competitive threats. </li></ul><ul><li>Commoditisation of fixed voice services driven by regulatory interventions, technological change, intense competition and operator convergence is underway. </li></ul><ul><li>This threat is particularly concerning for the smaller players given ICASA’s historical inability to regulate the market effectively and its vertical market approach. </li></ul><ul><li>Large competitors with established brands, depreciated infrastructure and strong balance sheets are more capable of taking advantage of technological changes, acquisition opportunities and spectrum auctions. </li></ul>Background
  5. 5. The Market The SA Business Telecoms was 45 billion in 2007 and is expected to grow 60 billion in 2012
  6. 6. <ul><li>Competition in the SA fixed-line telecommunications market is intense and increasing as a result of the ECA. The new licensing framework in the Act has resulted in the market becoming more horizontally layered with a large number of technology neutral licences being issued. </li></ul><ul><li>The mobile networks, whose traditional vertical markets are saturated with limited growth prospects, have been very quick to take advantage of this regulatory windfall and launch business divisions with a specific focus on the fixed line market. </li></ul><ul><li>Product bundling, cross subsidisation and price wars from large dominant incumbent operators will pose major competitive challenges to niche operators. </li></ul><ul><li>Likely consequences will include significant margin squeeze and predatory pricing as the major players attempt to cannibalise each others respective markets i.e. Telkom into the mobile market and Vodacom, MTN and Cell C into the fixed line market. </li></ul>Competition
  7. 7. <ul><li>Voice and Data Convergence:- </li></ul><ul><ul><li>The transition from separate circuit-switched voice networks and packet-switched data networks, to a single packet-switched (IP) network, supporting both voice and data is accelerating in SA. </li></ul></ul><ul><ul><li>Moving voice and data services to a common IP application layer, on a shared data network allows corporates and SME’s to realise significant savings in operational costs. </li></ul></ul><ul><li>Fixed and Mobile Convergence:- </li></ul><ul><ul><li>Fixed-mobile convergence is the seamless connectivity of fixed and wireless telecommunications networks. The goal being to optimise the transmission of data, voice and video communications to and among end users, no matter what their locations or devices. </li></ul></ul><ul><ul><li>Phase one is likely to see fixed – mobile convergence at the services level i.e. combining fixed and mobile products in a single low cost services bundle e.g. providing features such as free on-net calls from fixed lines to mobile phones. </li></ul></ul>Convergence
  8. 8. <ul><li>Commoditization is well underway data tariffs and margins in both the fixed and mobile markets have tumbled in the past 12 months. While new products are appearing they inevitably cost less and do more. </li></ul><ul><li>The cost of transmitting data is getting ever cheaper and IP voice, like email or web services, is just another application on the network and will be bundled and sold as such. It is inevitable that voice revenues and margins will be subject to the same competitive pressures as data. </li></ul><ul><li>The deployment of 3.5G (HSDPA+) and 4G (LTE) networks in the next 5 years together with the pervasiveness of IP will see a dramatic shift in the pricing of mobile voice communications. </li></ul><ul><li>As competition intensifies expect to see new entrants with alternative business models introduce a range of compelling low cost IP voice products that fundamentally alter the competitive landscape in both the fixed and mobile space. </li></ul>Commoditization
  9. 9. <ul><li>Consolidation in the SA telecommunications market is inevitable. Reunert’s purchase of ECN, the acquisition of Verizon by MTN business, the purchase of Gateway by Vodacom business and prior to that Vox Telecoms attempt to consolidate the LCR market with the purchase Definity, Orion and Storm. </li></ul><ul><li>Increasing competition will lead to a further wave of consolidation as operators seek to grow market share and quickly reduce costs in an increasingly saturated market. The only way left for operators to achieve this is through takeovers, mergers and co-operation. </li></ul><ul><li>Dominant incumbent operators with a strong financial base will be able to acquire additional market share and technology. Smaller operators without the necessary scale will be the likely casualties either disappearing or being acquired. </li></ul><ul><li>Expect the large scale players with strong brands, balance sheets, infrastructure advantages and technical expertise to be the ultimate winners in the market. </li></ul>Consolidation
  10. 10. The Impact - Today
  11. 11. Potential Impact - Tomorrow
  12. 12. Regulatory Key game changers Network Build-out Technology Deployment Alternative Business Models X factor ? Ability to create new products and pricing Increases competitive alternatives Enables new offerings Changes market baseline Changing business and social interactions Game changers through 2015
  13. 13. Where are we from regulatory perspective? <ul><li>Regulations requiring completion: </li></ul><ul><ul><li>Facilities Leasing </li></ul></ul><ul><ul><ul><li>Final Facilities Leasing Regulations have been published… But no list of essential facilities has been included! </li></ul></ul></ul><ul><ul><li>Carrier Pre-Select </li></ul></ul><ul><ul><ul><li>Final CPS Regulations have been published… But call origination charges have not been set! </li></ul></ul></ul><ul><li>Final regulations required: </li></ul><ul><ul><li>Number Portability </li></ul></ul><ul><ul><ul><li>Number portability id currently managed in terms of the telecommunications Act regulations </li></ul></ul></ul><ul><ul><ul><li>Non geographic numbers cannot be ported – Telkom dominates 086 and 080 number ranges. </li></ul></ul></ul><ul><ul><li>Frequency Allocation </li></ul></ul><ul><ul><li>Local Loop Unbundling </li></ul></ul>
  14. 14. Thank you very much for Your attention