TRANSTEL

proud partner at the birth of the second national operator

TRANSNET

TranstelPrepared for the Parliamentary

Portfolio Committee on Communications

TRANSTEL

proud partner at the birth of the second national operator

TRANSNET

Outline

• Introduction to Transtel

• Transtel present and future

• Progress towards the SNO

• Convergence in communications

• Towards the Information Society

TRANSTEL

proud partner at the birth of the second national operator

TRANSNET

Transtel overview Largest private telecommunications network operator

(PTN) in the Southern hemisphere Annual revenue of more than R 700m

(70% internal to Transnet, 30% external) Country-wide digital transmission network

(8000 km optical fibre; 14000 km microwave) Existing customer base:

– Voice: 132 exchanges; 65 000 ports; 140m calls per annum– Data: 67 nodes; 3420 ports; 3700 point-to-point services– 12 000 mobile radio terminals (230 high sites)

Project management / installation experience– Installed 3000 sites for MTN, 900 for National Lottery

Satellite customers in 17 African countries Over 1 400 employees in 140 places

Transtel depots

South Africa

TRANSTEL

proud partner at the birth of the second national operator

TRANSNET

Transtel customers• Transnet: All divisions and subsidiaries• Other customers in South Africa including:

– SITA (State Information & Telecommunications Authority)– SITA Inc– arivia.kom– SA Post Office– DTI– MTN– ACSA (Airports Company of South Africa)– Eskom

• International Customers, predominantly in Africa:– Include banks, retail stores, educational institutions

and other public telecommunications companies

TRANSTEL

proud partner at the birth of the second national operator

TRANSNET

Transtel’s position

• Transtel exists as the result of a Private Telecommunications Network licence that allows Transnet to have its own networks

• In a de-regulated market, a PTN can no longer compete in generic telecoms services

• Transtel’s Enterprise Voice/Data, and International services will migrate out of Transnet into a public operator (SNO)

• Transtel’s safety-critical Transport Telecoms will remain within Transnet

TRANSTEL

proud partner at the birth of the second national operator

TRANSNET

Transport telecoms services

• Basic transmission/access copper

• Dedicated rail fibre transmission

• Train radio systems: Various

• Common bearer infrastructure

• Other mission critical– Shared use of trunked radio– Port control/operations, containers

TRANSTEL

proud partner at the birth of the second national operator

TRANSNET

Enterprise telecoms services

• PABXs and voice services

• Audio and video conferencing

• Leased lines (Transmission)

• Frame relay supporting IP services

• Ethernet/IP Virtual Private Networks

• Internet access provision

• Broadband wireless access

• Broadband copper access (xDSL)

TRANSTEL

proud partner at the birth of the second national operator

TRANSNET

TelkomSNO

Enterprise telecoms: Future

TranstelDataTran

stel

VoiceC

onverged

Voice, D

ata, Internet

CustomersTranstel services are delivered on dedicated Voice and Data networks

The SNO will give customers access to a range of new, converged services

The SNO will provide a resilient new backbone, and be an alternative to Telkom for public telecoms traffic

TRANSTEL

proud partner at the birth of the second national operator

TRANSNET

PAS -10Ku-band

Transtel International

(Satellite)

PAS -10C-band

PAS -1RC-band

TRANSTEL

proud partner at the birth of the second national operator

TRANSNET

Transtel satellite in Africa

ActiveOpportunitiesUnexploited

TRANSTEL

proud partner at the birth of the second national operator

TRANSNET

Project Services - Achievements• Full Services Network – Transtel and Eskom

– Joint deployment of national optical fibre network and equipment

• Digital transmission networks for railways

– Ore line: 800 km digital microwave from Saldanha to Sishen

– Coal line: 500 km optical fibre cable installed at 4 km per day

• Installation of Radio Base Stations for MTN

– 2142 sites out of 3200 built up in MTN’s first five years

– Have won new contracts for deployment in specific regions

• Installation of LANs for SAA/Galileo

– 900 LANs installed in 24 months

• SA National Lottery

– 500 VSATs installed in the first 20 days

TRANSTEL

proud partner at the birth of the second national operator

TRANSNET

New opportunities

• Provision of basic PTN services to VANS

• Provision of VoIP through VANS licence

• Expansion of international services

• Provisos:– Spare PTN capacity available to the market is

currently very limited – scaled for Transnet– Capital-intensive nature of telecoms limits

opportunities whilst within Transnet

              

TRANSTEL

proud partner at the birth of the second national operator

TRANSNET

The reasons for an SNO remain…• Essential large scale facilities competition

– Telecoms value chain is dependent on basic facilities– A choice of wholesale supplier and price is critical

• A player to challenge Telkom on equal footing– Licence, regulatory, tackle anti-competitive practice

• A large, viable infrastructure investment plan• Access to the only other national backbone

– Cheaper facilities over existing rights-of-way– Brings the alternative infrastructure to the market

• A new competitive provider in the market• An environment for partnership and sharing

              

TRANSTEL

proud partner at the birth of the second national operator

TRANSNET

Progress made towards the SNO• Eight years of legislative and regulatory

preparation for a second operator– Telecommunications Act and Amendments– Drafting of multiple regulations by ICASA

• Three years of network implementation by Transtel and Eskom Enterprises

• Alignment of business plans between identified shareholders

• Preparation of draft licence conditions• Work with market, partners and customers

TRANSTEL

proud partner at the birth of the second national operator

TRANSNET

Convergence and legislation• “Convergence” probably a misnomer; real issue is market structure.• Convergence need not be legislated; it is happening despite legislation.• The creation of universal, fixed & mobile licences is good, but radical• Any new legislation must:

– Have a sound basis in the principles of telecommunications regulation– Control players with Significant Market Power, and essential facilities– Not remove, but replace regulations with appropriate new regulations– Encourage and promote the deployment of telecommunications facilities– Deal with issue of Local Loop Unbundling of the incumbent’s copper lines– Deal effectively with transition of existing licences, to ensure continuity– Apply light touch regulation to services and application (class) licences

• Direct funding of the regulator by licence fees remains the ideal.• Some concerns about the policy framework, which has not been fully

articulated to guide the legislature in finalising new legislation. • Without broadband, there is no convergence. However, there is no

published broadband policy for South Africa, or any mechanism proposed for the setting of targets broadband access rollout.

              

TRANSTEL

proud partner at the birth of the second national operator

TRANSNET

Spectrum and facilities• Giving extensive rights to a large number of facilities-based

(network service) operators on application, has the potential to create environmental chaos. Other countries do not typically give many players such rights.

• Certain frequency bands may require a particular minimum allocation to build a viable business; similarly, there may be an optimum number of players for a viable, competitive market (e.g. 3G).

• Licence fees obviously need to be proportional to the value of spectrum allocated or facilities rights secured in a licence.

• The number of facilities-based (individual) licences needs to be limited:– To ensure a predictable environment for infrastructure investments– To ensure efficient and appropriate use of the frequency spectrum– To provide for control of rights of way and other environmental issues

              

TRANSTEL

proud partner at the birth of the second national operator

TRANSNET

Convergence – Mobile and Fixed Wireless

0.384 2Bandwidth

(Mbps)

Network

Mobile

Fixed

2G 3G

3G applicationsgetting “bigger, better

and more beautiful”

Wireless/mobilespecific broadband

applications

Fixed network applications

go wireless/mobile

4G

Broadband,“Extreme bit rates” NB WB BB

20

Evolved 2G

Evolved 3G

TRANSTEL

proud partner at the birth of the second national operator

TRANSNET

CDMA2000 technology trial

• Transtel has assisted in putting together a trial of CDMA2000 (3G mobile) technology in South Africa.

• The trial is led by Qualcomm, the inventors of CDMA, in partnership with Ericsson (South Africa), MTN, Transtel, the CSIR, and Wits University.

• Trial supports an 800 MHz sharing study by ICASA.• The trial will demonstrate the following:

– Use of upper 800MHz band without impacting broadcasting– Use of CDMA2000 for fixed-mobile and full mobile services– Highest capacity, lowest cost per subcriber for voice services– Very high speed data (EVDO), up to 2 Mbits/s– Full roaming onto GSM infrastructure (dual-band phones)– Applications including e-learning, telemedicine, Internet

• ICASA has issued the temporary frequency licence• Trial will take place through February and March

TRANSTEL

proud partner at the birth of the second national operator

TRANSNET

SNO key success factors

• A clear, consistent policy timeline for the duration of the SNO business plan

• Proportional rights and obligations for facilities-based operators, now and under new legislation

• Regulatory controls on players with Significant Market Power (currently three)

• Carrier preselection (immediate) and number portability (during 2005) as required by the 2001 Act

• Access to additional appropriate fixed-mobile frequency spectrum (e.g. 800 MHz, 450 MHz)

• Access to international optical fibre routes at cost (level playing field for competition)

• Community Service Obligations and rollout targets aligned to broadband convergent access needs

• Ideal: Access to Telkom copper Local Loop (Shared)

TRANSTEL

proud partner at the birth of the second national operator

TRANSNET

The new digital divide

• Mobile teledensity has overtaken fixed teledensity as the measure of access to telephony, but this is no longer the real issue…

• Only a tiny fraction of the world’s 100 million broadband connections are in Africa

• Digital divide is no longer about telephones, but about access to the Information Society

• World Summit on the Information Society 2003 recognised the need for broadband

              

TRANSTEL

proud partner at the birth of the second national operator

TRANSNET

Converged(IP)

Network

Converged(IP)

Network

Broadband and convergence

Multi-service Connection!

Broadband access

Bundled products

TRANSTEL

proud partner at the birth of the second national operator

TRANSNET

Broadband and Internet: Global

0%

7.4%

4.0%

1.4%

0.3%

0%0%

10.7%

700 --

600 --

500 --

400 --

300 --

200 --

100 --

0 --1995 1996 1997 1998 1999 2000 2001 2002

Broadband as % of Internet users

Internet Broadband Source: ITU Internet report: Birth of Broadband

TRANSTEL

proud partner at the birth of the second national operator

TRANSNET

Broadband policy for South Africa

• South Africa needs broadband• True broadband = 1 Mbit/s or more• Both for consumers and businesses• Mobile (3G) has a role, but different• Backbone and international bandwidth• Need a proper wholesale market

– Bitstream (wholesale DSL)– Shared access (proposed by ICASA)– Local Loop Unbundling

              

TRANSTEL

proud partner at the birth of the second national operator

TRANSNET

The Information Society“An enabling environment at national and international

levels is essential for the Information Society … The rule of law, accompanied by a supportive, transparent, pro-competitive, technologically neutral and predictable policy and regulatory framework reflecting national realities, is essential for building a people-centred Information Society. Governments should intervene, as appropriate, to correct market failures, to maintain fair competition, to attract investment, to enhance the development of the ICT infrastructure and applications, to maximize economic and social benefits, and to serve national priorities.”

The Declaration of Principles of the World Summit on the Information Society, Geneva, 2003

TRANSTEL

proud partner at the birth of the second national operator

TRANSNET

A vision for telecoms• Sustainable competition to drive down the

cost of telecommunications in South Africa

• Facilities-based competition with appropriate individual licensing

• Regulation to control Significant Market Power and essential facilities

• An open, competitive telecommunication services market with class licensing