Neotel weighs up its role in retail and wholesale markets


While the prospect of better interconnection rates is on offer, there has been little response from the rest of industry, says Mukul Sharma, Neotel's head of consumer and channel sales.

“I suppose it is because if one has to offer a service, then an infrastructure investment has to be made and very few of the companies are either able or willing to do this. So in the meantime, what can they offer?” he says.

Neotel, which was originally licensed as the country's second national operator to compete with Telkom, has now found itself in a deregulated market sooner than expected. The problem it and Telkom face is whether they should stay in retail and wholesale, or withdraw to just supplying bandwidth for resale by third parties to customers.

Sharma says the telecommunications industry is still struggling to come to terms with the overall paradigm shift that has allowed for literally hundreds of small Internet service providers (ISPs) to offer fully-fledged telecommunications services, although few have the ability to actually carry this through. “It makes sense for us to stay in the retail sector and we have the products to compete effectively there, because we have made the investment,” he notes.

Neotel's chief sales and services officer, Stefano Mattiello, says the termination of the Seacom line at Neotel's Johannesburg facility is part of an overall trend to reduce bandwidth prices that have already fallen by 25% over the past year.

“Seacom and Neotel have a backhaul agreement in place that allows Neotel's customers to connect in Johannesburg, and allows them the same experience as if they had connected with the Seacom facility at Mtunzini, in KwaZulu-Natal, directly.”

He says this essentially saves ISPs and other telecoms operators the time and cost of building their own lines to Mtunzini. However, this remains an option as Seacom operates on open access principles – meaning anyone with the relevant licence can connect with the facility.

Earlier this week, Neotel launched its NeoGo data card, which it hopes will make its CDMA solution more attractive to consumers and small businesses. This is part of its overall retail strategy of first rolling out its fixed mobile solution and later developing other fixed-line solutions that will include fibre to the building, leading to high-speed broadband services. But, for the time being, the company is looking at capturing more consumers with its new data card offering, which it says will redefine the market for this kind of service.

“NeoGo offers the highest data capacity of 1.5Gbps at a monthly rate of R299, over 24 months,” notes Sharma. “A second means of purchasing it is by paying R1,499 and then a monthly service fee of R239. The off bundle fee, when extra bandwidth is used over the initial allocation, is 8c per megabyte. “The off bundle fee is considerably cheaper than the industry average of about 100c per meg,” Sharma says.

He says the development of the data card had taken place over the past year. Its launch close to the time of the Seacom landing was a coincidence, but served to illustrate how flexible bandwidth offerings could become, he explains. Mattiello says Neotel is still looking at other consumer service offerings and planning is in full swing to start rolling out fibre to gated communities. “We are still looking at how the business model will develop there,” he says.