User:XTerminator2000/Sandpit/Telkom SA

Telkom SA, Ltd.
Company type	Public
Industry	Communications Services
Founded	Johannesburg, South Africa, 1991
Headquarters	Pretoria, South Africa
Key people	Reuben J September, CEO
Products	Telecommunications; Broadband Services
Revenue	2004: R43 billion ZAR (6.5%); ($7 billion USD) [1]; 2005: R43.1 billion ZAR ($6.9 billion USD)[2]
Number of employees	26,133
Website	www.telkom.co.za

Telkom SA Ltd. (NYSE: TKG, JSE:J653) is a wireline and wireless telecommunications provider in South Africa. Telkom is a semi-privatised, 39% state-owned company.

Telkom Market Position and Ownership

Telkom currently has a monopoly on both handling international connections to and from South Africa on the SAT3 & SAFE backbone lines, which account for the majority of international bandwidth in the Republic, and fixed-line communications. However, with the introduction in the form of Neotel, the second national operator of South Africa (which has been providing public services from June 2007) the company is expected to face new challenges.

Telkom was managed by US-based SBC Communications (now AT&T) from 1997 to 2004. SBC has since sold its interest in the company, after reducing operational expenditure (reducing staff resources, etc) and increasing revenue by increased product prices, hereby increasing the share-price for greater ROI.

The South African government is expected to maintain its hold on Telkom's lease until 2012, effectively preserving the monopoly until that date.

Infrastructure

At a 2002 estimate, there are close to five million fixed lines currently in use in South Africa, all of which are currently owned and operated by Telkom. According to the World Factbook, it is the "best developed and most modern in Africa". It consists of local copper loops, microwave and fiber optic loops, and wireless connections.

The first use of telecommunication in the Republic of South Africa was a single line telegraph connecting Cape Town and Simonstown. After Bell Labs' development of the telephone, the first undersea links were introduced, first connecting Durban and Europe, and soon after, the rest of the world. The network continued to develop through internal financing in a heavily regulated market as international technology developed. At this point, telephone services were operated by the South African Postal Service.

In the 1960s, South Africa was connected to 72 nations and total outgoing annual international calls numbered over 28,800.

The routing and billing system were almost completely digital by the mid 1980s, which made way for the currently used systems of ATM, SDH, ISDN and others. Telkom SA, Ltd. was founded on 1 October, 1991.

Telkom ADSL

Telkom provides ADSL over POTS primarily in inner-city and suburban areas such as Pretoria, Johannesburg, Cape Town, and Durban. Telkom is currently the largest provider of fixed-line broadband in the country, with over 120,000 subscribers at last count in 2005. As of 2007 this figure stands at approximately 250,000.

Telkom ADSL is billed as an add-on service to a POTS voice line. A PPPoE account, which can be provided by most Internet Service Providers (ISPs), must be purchased separately to the ADSL connection for internet access. ISPs are divided into two categories, those who purchase IPConnect from Telkom and those who resell PPPoE accounts from IPConnect ISPs or Telkom themselves. IPConnect is a Telkom product allowing ISPs to route internet bandwidth from their ADSL subscribers over their own bandwidth.

Three connection rates are offered (associated with different connection fees) which are 384/128, 512/256, 4096/640 KB per second of bandwidth for downstream/upstream respectively.

Most ISPs (including Telkom) providing ADSL accounts limit data usage per calendar month, with the limit depending on the package purchased. Telkom's default ISP package limits the user to three gigabytes in a calendar month, with port prioritization and bandwidth shaping. Packages offering thirty gigabytes as well as "uncapped" (unlimited data usage) packages are available from other ISPs.

Competition

Recent legislation passed by the South African government have lowered many restrictions on companies wishing to provide telecommunication access in the Republic. Competitors to the land-line monopoly have flourished, with special note given to providers of wireless broadband, who provide greater geographical penetration, by means of the technology used, than Telkom. Examples of these providers include Sentech, an extension of the state-owned South African Broadcasting Corporation, and WBS Co., a black owned enterprise. On the 31st August 2006, Neotel (Second Network Operator) announced the launch of its services as the second national operator, initially offering wholesale international services, with plans to expand to business & residential customers within months. Neotel plans to initially use CDMA-2000 wireless technology for the last mile infrastructure due to the government and ICASA's (the regulator) inability and unwillingness to unbundle the local-loop, leading some to suggest that it's not much more than a cellular operator instead of the much needed competitor to Telkom.

The three mobile telephone networks in South Africa, listed in terms of numbers of subscribers, are Vodacom (who both Telkom and the United Kingdom's Vodafone own large stakes in), MTN and Cell C. There are several service providers, such as Virgin Mobile and Nashua Mobile, which subscribers can use to access the networks. There are approximately six times as many cellphone subscribers than land line subscribers in South Africa (30 million versus 5 million), and since these networks route their calls over their own network, GSM providers have taken a large chunk of Telkom's business.

Another promising technology is Voice over Internet Protocol (VoIP), which may decrease the amount of calls made over the public switched telephone network (PSTN) in the near future. Telkom's international calling rates are already far undercut by VoIP providers: A Telkom call to the United States will cost R1.40 a minute ($0.19 currency conversion); a call of the same duration made through Skype will cost only one tenth of that - R0.14. ($0.02 currency conversion)

Competition in broadband and telephony is diminished immensely because Telkom owns the international links to the rest of the world - the vast majority of bandwidth and telephone calls are routed through them. Finally, although the Government are taking steps to liberalise the market, laws regarding telecommunications are still quite restrictive relative to the United States and other developed nations.

An example of restrictive legislation is the Draft Convergence Bill, which attempts to control the development of such commerce. Telkom is currently under much fire from the Independent Communications Authority of South Africa (ICASA), who accused it of excessive ADSL line charges.

Criticisms

High cost of internet access is a major point of consumer frustration in South Africa. Telkom's monopoly, backed by ANC Government investment, over fixed line provision and international access is often pointed out as the primary reason for the high costs of telecommunications. In light of the high cost of entry many broadband users have settled for cellular alternatives instead. At R2 (USD 30c) per MB (or less when buying data bundles) GPRS, EDGE, 3G, and HSDPA services have become increasingly popular for email and light browsing. Buying data bundles of up to 2 GB is now more affordable than Telkom's entry level packages. Virgin Mobile currently charges data at 50c (USD 7c) per MB without offering data bundles plus reportedly under charges and offer V Rewards for higher usage customers.

The continuing monopoly of Telkom in South Africa's communications industry, and governments large stake in the company have been perceived as not being in the public's best interests. Call costs are high, and the South African telecommunications regulator ICASA is overburdened and restricted in its capabilities as handed down by the Department of Communications. The elderly minister of communications has a penchant for falling asleep during meetings and by her own admission "only hears about rate changes when her friends tell her". Telkom has a monopoly of all international calls originating within South Africa excluding VoIP, and of traffic over the SAT3 fibre that provides most of South Africa's international bandwidth. The indecision over the second network operator, to Telkom's advantage, is also not considered to be in the public interest.

Telkom has also attracted attention for improperly conducting itself in contract dispute with Telcordia resulting in a decision from the Supreme Court of Appeal against its favor in which the Judge described Telkoms legal team as conducting "verbal manipulation". [3]

On the 19th January 2007, a full page advertisement was taken out in The Mail and Guardian, a national South African newspaper. Money for the ad was donated by dissatisfied South African individuals and businesses. The page is used as a public outcry, detailing some of the things Telkom has done in hopes of bringing more attention to the current situation in South Africa's telecoms industry. The effort was organised by the Telecoms Action Group, TAG.

Perhaps one of the biggest criticisms of Telkom was its introduction of a monthly traffic limit or "cap". According to Telkom, this was a measure instituted in order for the South African network not to become "congested" with an overflow of information. However, the general feeling in the South African ADSL community is that monthly traffic limits were strategically put in place by Telkom in order to obtain the maximum amount of money from ADSL users. This is mainly because Telkom offers extra bandwidth to users for a price. If the limit is exceeded during the course of the month, the ADSL connection is cut off until the end of the month. The user can purchase extra GBs after he/she is capped however. The average monthly traffic limit in South Africa is 3GB, an amount which can be used up in less than a day, even on a low-speed line.

Another major criticism of Telkom was its institution of port prioritization or "shaping." This, also was a measure introduced by Telkom in order for networks throughout South Africa not to become congested with too much information. However, port prioritization was an idea conceived mainly to benefit businesses in which employees all shared the same internet connection. Employees who used "bandwidth hogging" applications such as peer-to-peer (P2P) applications and graphically intense online games often slowed down the network dramatically preventing users who wished to browse web pages or check their mail to do so in a short space of time. Port prioritization solves this problem as it prioritizes certain ports to for certain applications. It works according to a protocol which includes all ports and applications generally used in conjunction with them. These ports are sorted into a list of sorts. At the top of the list appear web browsing and email. These ports and the applications which use them receive the most bandwidth from the network. At the very bottom of the list are Peer to Peer applications, online games and virtual private networking (VPN). These receive very little if not no bandwidth from the network. Being unable to establish international VPN connections on the standard package has a detrimental effect on international freelancers who must pay for the much more expensive 'unshaped' service. Although it is the ideal solution for large companies there is no choice in the shaping matter. Personal connections to the internet also get shaped. This has caused an uproar in the South African P2P and online gaming community as one has to pay over exorbitant prices (roughly two times more) to get their connections "unshaped."

ADSL Pricing and Services - South Africa and the Rest of the World

South Africa:

384 kbit/s ADSL Line: R 152 per month (no Bandwidth included)
512 kbit/s ADSL Line: R 326 per month (no Bandwidth included)
4096 kbit/s ADSL Line: R 413 per month (no Bandwidth included)

Fastest available speed: 4 Mbit/s (4096 kbit/s).

Germany:

(ROE: 1 euro = R 11.5)

2000 kbit/s ADSL Line + Flat Rate (no Bandwidth Volume Limit): 15 euro (±R 173)
16000 kbit/s ADSL Line + Flat Rate (no Bandwidth Volume Limit): 30 euro (±R 345) Alice Fun with double Flat Rate (ADSL + Telephone) (No up/download limit and free telephone calls to German landlines.)

Fastest available speed (VDSL): 50 Mbit/s (51 392 kbit/s, T-Home Entertainment Comfort VDSL, 75 euro)^[1].

References

^ www.dsl-up.de: DSL-Nuus

External links

Broadband Guide in South Africa
Telkom Official Website
Telkom Internet
MyBroadband Website
Hellkom
hellopeter.com - Consumer Rating Service for service providers and companies (Telkom SA)
Corporate History
Anti-Telkom consumer activist group

[1] www.dsl-up.de: DSL-Nuus

[1]