The digital future depends on stitching networks together so as to bring them into an integrated and interconnected whole. The result should be that subscribers to one phone company can talk to those in another; TV can travel to cellphones; a decoder can receive bouquets from different companies — and allow for interactivity.
The key hurdles to this scenario are the tariffs imposed at the gates between one network and another, and the hiring of facilities across networks.
The technology to interlink everything, increasingly by Internet Protocols through broadband, is not the challenge. The bigger issues are about costs, co-operation and regulation.
So it was that interconnection and facilities leasing were major topics at a recent workshop aptly titled Points of Convergence, convened last week by Wits University’s Link Centre and the Mandela Institute, with support from Telkom and law firm Webber Wentzel Bowens.
Why focus on these matters? The answer lies in the insights of Bob Metcalfe who theorised the ”network effect”. According to his wisdom, the more people in a network, the more valuable it is. E-mail becomes exponentially more useful according to the number of people able to use it. Researchers say once you hit 40% penetration, the benefits really start to show.
Contrast this to the situation in many countries with incompatible phone networks, requiring people to use dual services because they can’t call across systems … if they can afford to do so, that is.
At stake therefore is how to grow a network that provides seamless, affordable and comprehensively linked communications — no matter whether these be in voice telephony (fixed or mobile), internet access or television and radio.
Partly this is about ensuring common technical standards. But mainly it is about the interlinkage conditions a regulator lays down with regards to monopoly control and monetary pricing at the point where networks meet.
As South Africa starts applying the new Electronic Communications Act, these are top-of-the-mind matters for diverse communications players. Among the stakeholders are:
- Neotel, the finally-licensed rival to Telkom, would only be able to offer truly competitive services depending on the price Telkom sets on interconnections.
- Virgin cellular faces similar problems about interconnect charges, not least from rivals Vodacom and MTN.
- All the cellphone firms face number portability, which threatens their desire to keep clients within their own networks.
- Internet Service Providers unhappy with the rates to link with the SAT 3 undersea cable.
- Would-be subscription broadcasters like the South African Broadcasting Corporation face the challenge of building their own set-top boxes if they cannot profitably piggyback on existing MultiChoice decoders.
- Content providers like MultiChoice are trialling the delivery of television to cellphone on a revenue-share model with Vodacom.
- Municipalities can now offer infrastructure and communications as part of basic services delivery, either in competition or collaboration with private companies.
- Many ”Value Added Network Services” — Vans — are hoping for a segment of action in the increasingly networked society.
For the mass media, the unhampered growth of diverse interlinked networks means, potentially, a major market expansion. Media content, in the form of digital data, can then be reproduced and disseminated 24/7 to any audience who can traverse at least one gateway into the total system.
The idea of the Electronic Communications Act is to expedite all these developments towards an efficient and open network in which many diverse players can operate and the whole can flourish.
Accordingly, the law puts a huge load on the regulator, the Independent Communications Authority of South Africa (Icasa), to crochet together the elements of the network by the end of 2008.
Over this period, Icasa has to re-license hundreds of existing players, and approve many new ones, so as to increase competition. These new licences will be according to whether the enterprises seek offer services in the form of infrastructure provision, communications (via infrastructure), and/or broadcasting.
These three areas of activity will also be classified according to three kinds of licence types: individual, class (ie. common conditions for a category of operators), and exempt.
Generally, infrastructure licences (like transmitter towers or intercity cables) plus conventional broadcast licences, will all be on an individual basis with individual conditions on interconnection and facilities leasing. For example, DSTV will be told whether or not to allow other services to run on its decoder.
There will also be individual licence conditions for any business that uses the national numbering grid, such as the Voice Over Internet Protocol phone services.
In contrast, low-power broadcasting, or infrastructure like short-range wi-fi networks, will most likely be licence exempt. The greater the socio-economic significance of the enterprise, the more likely it will attract regulation.
In between the individual and exempt licence extremes, class licences with shared conditions will be given for anyone wanting to do communications services like internet service provision or telephony on any range of infrastructure. Municipalities will also receive class licences for these kind of services.
What needs appreciating is that in all these licences, various regimes for interconnect charges, and for facilities sharing or leasing, will have to be specified.
Under the Act, Icasa can identify who has ”significant market power” within the network, and it can regulate that transactions at points of control should be provided at cost. This is something that will generate huge contestation.
Icasa will thus be hard put to find a balance of interests that also works in growing a viable, integrated and rapidly expanding network. Of concern to the Wits workshop was the sheer extent of creating an effectively patchworked and vibrant system, with all the licence complexities and likely delays and legal challenges at the interconnect and facilities-leasing levels.
A further sobering note was struck by visiting expert Ewan Sutherland. He reminded the workshop of Africa’s low penetration of the actual devices that plug people into an electronic network — be these cellphones, fixed lines, basic internet access or even TV sets.
It is indeed a major mission to sew together a new and growing integrated network that through wise regulation will optimise the interlinkages without reducing profit margins.
This is very vital work. But unless there are also ways to promote universal access on the continent, Metcalfe’s network effect will remain limited whatever the smoothness of the network.