TELKOM STRUGGLES TO COPE WITH BROADBAND DEMAND
Telkom is failing to cope with soaring demand for corporate and residential broadband. Sensing blood, wireless operators, including iBurst and the cellular network providers, are moving quickly to take advantage of the situation.
Telkom's installation times for leased lines - connections used by large businesses that provide guaranteed bandwidth - and for digital subscriber lines, which are typically used by smaller companies and home users, have plummeted in the past few months.
Company executives admit that they're struggling to cope. But they say Telkom engineers are working as fast as they can to deal with the growing backlog.
Telkom's problems are twofold: It does not have enough technicians in the field to cope with consumer demand and it has failed to provide sufficient bandwidth in its core network - the part of its network that carries electronic data between destinations - to cope with rising demand.
Competitors are circling. The cellular operators have cut their data access prices dramatically and both MTN and Vodacom have indicated that further reductions are in the pipeline.
At the same time, Sentech wants a slice of Telkom's leased-line business and has launched BizNet Xpress, a wireless alternative to leased lines that provides a defined quality of network service to customers. However, a lack of coverage - it has only limited funding - is hampering Sentech's plans.
Then there's wireless broadband operator iBurst. CEO Thami Mtshali says iBurst has designs on the corporate market and will soon begin building a network based on a new wireless technology known as WiMax (see "Operator looks to WiMax").
Lastly, the second network operator, SNO Telecom, is also expected to target the corporate and wholesale markets aggressively. Though it hasn't yet provided details of its plans, sources say it has already circulated a price list to Internet service providers (ISPs) that significantly undercuts Telkom's fees for bandwidth.
Telkom will need to fix its service delivery problems quickly if it is to avoid losing market share to these rivals. ISPs, which are forced to supply many of their services on top of Telkom's infrastructure, are up in arms because of the deterioration in service levels.
"It's a huge problem and Telkom doesn't seem able to get on top of it," says Rudi Jansen, CEO of MWeb, one of SA's biggest ISPs. Jansen estimates that there are more than 50,000 asymmetric digital subscriber line (ADSL) orders awaiting processing. Installation takes an average of 6-9 months, he says. The delays are damaging MWeb's reputation as consumers often blame it, rather than Telkom, for nondelivery.
Jansen says Telkom has retrenched too many technicians. "They laid off a whole lot of their installation staff a few years ago," he says. "Now they have to try to get these people back."
Telkom executive officer for broadband technology, Alphonzo Samuels, admits there are problems and says demand has been "unprecedented", especially for ADSL. He says the ADSL subscriber base grew 189% between April 2004 and March 2005 and by 146% between April 2005 and March 2006. A similar level of growth is expected this year.
Telkom has launched several initiatives to deal with capacity problems in its core network, Samuels says. "We are reviewing our planning policies and reviewing our engineering practices," he says. "We have several initiatives with key suppliers of equipment to increase bandwidth capacity to get to the point where a certain percentage of our network is pre-provisioned."
Telkom has also contracted three independent service providers to help it deal with its ADSL installation backlog. Samuels declines to name the service providers, citing "sensitivity" as the initiative is still in a pilot phase. What he will say is that Telkom is busy with an "extensive pilot project to look at process improvements and other efficiencies".