Cellular operator MTN is spending US$1.4 million to lay a fixed-line cable between Sandton and Rosebank to ease network congestion and give it more capacity to carry data. The move will sever its reliance on Telkom to provide the high-capacity backbone to link its base stations, giving MTN a cheaper alternative to leasing Telkom's lines. The cable will also connect major customers directly to MTN's network, again taking business away from Telkom.

The JSE has already been hooked up, and the priorities now are to finish laying the cable in Rosebank and extend it to stockbrokers in the area. Tim Lowry, MD of MTN SA, said the underground cable was a pilot project that could be extended to other areas if it proved cost effective and efficient. Leasing its transmission backbone from Telkom was one of MTN's largest operating expenses and would become its single largest cost within 18 months.

"Waiting for Telkom to provide bandwidth also took too long so MTN had to decide whether to start building its own infrastructure or co-operate with other suppliers. We don't have a burning desire to build our own backbone, but with extra data coming it's an increasing cost to our business and we have to look at ways to reduce those costs.

"The purpose of this pilot is to determine whether it's worthwhile for the benefits," he said .

One benefit will be to let MTN switch on new base stations more quickly than if Telkom connected them. That will boost the quality and capacity of its cellular coverage in congested areas.

Rival Vodacom has voiced similar complaints about the cost of leasing bandwidth from Telkom, and plans to lay fibreoptic cables in metropolitan areas to end its reliance on Telkom. CEO Alan Knott-Craig said: "We have to provide our own infrastructure to give us independence and capacity and lower the costs. Fixed lines will become part of our business." While Vodacom was still preparing to do that, MTN was already half way through its first fibreoptic installation, Lowry said.

Voice calls account for the bulk of the cellular operators' revenue, with data accruing about 8% of their income. Most of the data traffic is for SMS text messages, but customers are gradually using the cellular networks to connect their laptops or cellphones to the Internet.

About 139,000 people use Vodacom's network to connect computers to the internet, and 33,000 people watch its mobile television channels. Demand for data capacity is bound to grow as mobile television catches on and as applications to use cellphones as electronic wallets to pay for small purchases or to buy goods over the internet flourish.

As both cellular operators begin to build their own backbones, they could do so together if it made sense. "I don't see why we have to do it in competition with Vodacom. We could do it in partnership with Vodacom," Lowry said. "The situation for all operators in SA is that we have a greater demand for transmission capacity than can be supplied by Telkom." Lowry would not say how much backbone capacity it leases from Neotel, but said Neotel was another partner it could work with to meet its bandwidth needs.

(SOURCE: Business Day)

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