Introduction
Of all of the fifty-five nations of Africa, South Africa is probably
the most developed in terms of Internet connectivity. Because of the country's
dual first world/third world nature, the South African Internet has now
reached a critical nexus of telecommunications deregulation and serious
commercial interest. The impact of these two forces is changing the nature
of the Internet industry and Internet development in South Africa permanently.
Many other African countries are approaching similar levels of connectivity,
and the recent and current developments in South Africa could provide valuable
reference material for other countries. Hopefully, other African countries
will be able to build on both South Africa's mistakes and innovations in
dealing with the issues discussed below.
The entrance of a national monopoly telco into the Internet market
The event that had the most profound affect on the development of the South African Internet during the last year was the entrance of South Africa's national telecommunications provider, Telkom, into the Internet market.
Telkom is a wholly state-owned company, with a monopoly on telecommunications that has only very recently ceased to be an absolute one. Its formal entrance into the Internet market in June 1996 was a comparatively late one, and followed over a year of speculation and rumour. Dubbed the "South African Internet eXchange" (SAIX), Telkom's Internet product was positioned to offer cheap international connectivity and wide national geographic presence to existing and new Internet access providers.
Unfortunately, there appears to have been insufficient consultation with existing market players before the launch of the SAIX product. Instead of seeing the SAIX product as an opportunity, the existing players saw it as a major threat, and as a strategy adopted by Telkom to monopolise the market. The independent ISPs joined together and announced the formation of the Internet Service Providers Association (ISPA), just days before the formal launch of the SAIX product.
Almost as soon as it had formed, the ISPA approached the Competition Board to express concerns with perceived unfair competition by Telkom in the Internet market. Several months of talks with both the Competition Board and Telkom culminated in the submission of formal complaint by the ISPA to the Board. The submission included allegations of cross-subsidisation, predatory pricing, unfair access to customer information, and non-price discriminations (such as faster physical line installations for SAIX customers).
The Competition Board opted to proceed with informal investigations
and a series of talks with Telkom, which eventually resulted in an agreement
with Telkom to put measures in places to prevent some of the alleged abuses
from occurring. However, the Board was hindered by the lack of clear telecommunications
policy and doubts over the possible application of Telkom's monopoly status
to the Internet industry. The situation had reached an uncertain stalemate
when the new Telecommunications Bill was signed into law in November last
year. At roughly the same time, Telkom announced the formation of Intekom,
a solely owned subsidiary concentrating on value-added Internet services.
This was just further fuel for the fire and resulted in the formation of
the SAIX ISP's Action Group's (SIAG), a group whose aim is to promote the
interests of Internet access providers who buy connectivity from SAIX.
The current and future regulatory framework
The new Telecommunications Act provides for the establishment of the South African Telecommunications Regulatory Authority (SATRA), which will regulate the telecommunications industry in South Africa. The new Act also seems to categorise Internet Access Providers (IAPs) as "Value-Added Network service providers" (VANs), which is an important step in terms of the market liberalisation programme described in the White Paper. The White Paper, a precursor to the new Telecommunications Act, will be used by SATRA in its decision-making processes.
According to the White Paper, VANs will operate in a competitive market from the time that the regulator (SATRA) is established and the VANs have been licenced. Assuming that IAPs are VANs, this means than all IAPs (including Telkom) must operate within a competitive environment.
Because of the work it has done in the Internet industry to date, the Competition Board has been given the go ahead by SATRA to facilitate talks within the Internet industry, aimed at developing possible solutions to put the industry on a competitive footing. SATRA has said that it will not necessarily be bound by the outcome of this process, but that it will give the outcome serious consideration.
This process is now underway and has the commitment of Telkom, the ISPA
and SIAG. Based on a series of round table talks with the parties concerned,
the Competition Board will formulate a blueprint for an Internet industry
regulatory framework, which it will then present to SATRA for consideration.
This process is expected to be complete by the end of March 1997.
Telkom's future strategy
Telkom's future Internet strategy is uncertain at this point. With the marginal success of the SAIX product, and the need to work in a competitive environment in the future, Telkom is re-examining its options. There could be significant value for Telkom if it leverages its unique position as the national carrier to concentrate on expanding the national IP grid, possibly adopting a co-operative strategy with other Internet access providers to offer service in areas of the country not currently connected. Although some discussions have already taken place examining this possibility, it may prove economically or strategically a bad decision for Telkom.
Irrespective of Telkom's next move, national connectivity will benefit
- even if Telkom opts to compete head on with the existing IAPs, then national
coverage is likely be a strong marketing tool in an even more competitive
market.
Satellite connectivity
Satellite offers the potential to provide relatively cheap connectivity
to the remoter parts of South Africa (as well as much of the rest of Africa).
Despite limited deregulation, Telkom's monopoly still includes point-to-point
satellite communications.
Satellite services must thus be purchased from Telkom, which can be
a costly and lengthy exercise.
The law hasn't stopped some operators from making use of satellite links
for more rapid data transfer from the US into South Africa.
Interestingly enough, no legal action has been taken against these
operators so far.
South African industry bodies
Internet access provider Associations
There are currently two organisations in South Africa that could be classed as IAP associations, the ISPA and SIAG (see above).
ISPA is the older of the two, having formally adopted its constitution in June last year. The association claims that its membership accounts for at least 80% of the commercial Internet market in South Africa. SIAG was formed in late 1996 as a result of growing unhappiness amongst many of the users of Telkom's SAIX product. The group's aim is to promote the interests of Internet access providers who buy connectivity from SAIX. It represents a much smaller market segment than the ISPA, but strategically an important one. Telkom's aggressive (and according to the ISPA, unfairly cross-subsidised) prices on international bandwidth, as well as a popular 16 kb/s entry level service have encouraged many small businesses to enter the Internet access market, sometimes in geographic locations not previously connected.
As part of the internet.org.za project described below, it is hoped
that these two bodies can be merged into a single Internet Access Provider's
Association (IAPA) following the establishment of a regulatory framework
acceptable to all players.
The internet.org.za project
The internet.org.za is South African project funded by several Internet access providers. Sponsors of the project include both ISPA and SIAG members, as well as both Telkom and the solely Telkom owned subsidiary, Intekom. The current goals of the project are threefold:
- To assist the Competition Board in the process of establishing a regulatory framework for the Internet industry.
- To investigate a single unified Internet access provider's association and to find ways to fund it.
- Examine other issues concerning the industry, such as the intellectual ownership of the South African domain namespace.
The project has been underway since February 1997 as is expected to
run for between three and six months.
A South African NIC
There is a growing awareness amongst both Internet access providers and the broader South African Internet community than South Africa needs more than just an effective access provider body. A more representative body, akin to a regional NIC, is needed to administer allocation of IP address space and to make decisions relating to the intellectual ownership of the country's domain name space.
Progress towards such a body has been slow to date. Industry funding is directed into solving industry-related problems, which have more influence on the day-to-day operations of IAPs. Technical issues, such as IP address allocation, are not considered by the industry to be as important.
During discussions relating to the establishment of such a body initiated
by the internet.org.za project, the question of establishing an African
NIC rather than a South African NIC has been raised. However, this issue
is not one a South African-based project can answer on its own.
Peering
The establishment of peering points in a country has many benefits. IAPs save money on expensive international bandwidth and end-users benefit from faster transfer rates for sites on local networks.
Currently there are two peering points in South Africa; one operated by the ISPA and the second by an independent non-profit organisation, Uniforum.
The ISPA views its peering point as its primary political bargaining tool and have thus far prevented Telkom from connecting its SAIX network to the interconnect. The ISPA have stated that once the Competition Board is happy that Telkom are competing fairly, there will be no objections to Telkom peering. In the interim, many users on the SAIX network are suffering from exceptionally poor performance to many local sites. The Uniforum peering point has unfortunately suffered from a lack of participation by the major IAPs and is not a viable alternative at this stage.
The issue of inter-country peering has not yet arisen. As this will
have a great impact on the general connectivity in Africa, more effort
should be put into examining the issue.
Conclusions
Based on the above observations, the next steps in the development of the South African Internet should probably be: