Hostilities have broken out again between Telkom and Dimension Data SA subsidiary Internet Solutions (IS). IS, which is SA's largest Internet service provider (ISP), has lodged an application in the high court against the fixed-line monopoly. It is asking the court to stop Telkom from unilaterally terminating a network "peering" agreement signed between the two parties in 2001. Peering agreements are common between large ISPs worldwide. They are used to expedite the passing of traffic between their networks. IS says in its application to the high court that such arrangements are common where both Internet networks are situated in the same country, because each network provider would otherwise have to incur the cost and inconvenience of communicating with the international public Internet to ensure that traffic from one network ultimately reached the other.

IS says Telkom would be in breach of contract if it were to terminate the peering agreement before next year. Telkom disagrees and says it will defend the matter in court.

If the peering dispute cannot be resolved amicably, IS says it may even lodge a complaint with the competition authorities. Telkom is already the subject of an investigation by the competition tribunal after the competition commission recommended last year that the company be fined 10% of its annual turnover for allegedly engaging in anticompetitive behaviour. That follows a complaint lodged with the commission by the SA Vans Association.

As each side's lawyers prepare to slug it out, it is SA's Internet users that are likely to be the biggest losers. Unless the issue is resolved quickly, consumers could find the performance of some of SA's most popular websites, including the big banks and media portals, significantly degraded. "In the event that the peering link is not present, the customers of both networks would be prejudiced because access to the information over the local Internet would be slower and ultimately more costly," IS says in its court application.

IS and Telkom operate SA's largest Internet networks, in terms of the amount of content provided and the number of users.

IS says it has more than two-thirds of SA's 250 largest companies as its clients. They include banks and media companies. It also hosts the networks of a number of other ISPs, including M-Web, SA's largest consumer-focused ISP.

As SA's only fixed-line network, Telkom is a major player in the Internet market. Though it has had less success than IS in signing corporate clients and has underperformed M-Web in the consumer market, it has signed up a significant number of users to its broadband ADSL service.

Telkom will not comment on the dispute with IS. However, in a written statement sent to its customers, a copy of which has been forwarded to the FM, the monopoly fixed-line provider confirms it will terminate the peering agreement with IS on June 30 as it believes the arrangement is not "mutually beneficial". It says peering is voluntary and is therefore not regulated. "IS can obviously also approach Telkom for further bandwidth, at the usual commercial terms and tariffs, to assist its customers with problems experienced with congestion."

It adds: "It appears that IS customers are experiencing problems with their services from IS, which may be the result of congestion on the peering link Telkom is of the view that the peering link is congested due to traffic being sent across the link by IS which Telkom did not intend would be part of peering traffic. Telkom approached IS with a request [that it] address the issue of the correct usage of the peering link . . ."

IS is not impressed. "From a regulatory and competition perspective, Telkom is blackmailing us and our corporate customers by forcing them to procure bandwidth directly from Telkom to alleviate the poor performance their end-user customers are experiencing," says IS business development director Hillel Shrock. "It's not as if we can go to an alternative provider. The only facilities we can get currently are from Telkom [so] it's a nice way for them to pump up the monthly revenues they get from [leasing telecom] facilities. Even if there was an alternative, it makes little sense not to follow international best practice in regard to peering."

Shrock says Telkom told IS that it should purchase the bandwidth it needed from Telkom's wholesale Internet provider, Saix. "This would increase costs to our users and gives Telkom's users access to content on our network that they, not we, should be paying for."

He estimates these links, if purchased on commercial terms, would cost the company an additional R36m/year.

As an interim measure, IS has bought 40 Mbit/s of capacity from Saix. Much more is needed, says Shrock. Despite this upgrade, the impact of the dispute is already being felt by customers. "There has been quite a lot of network degradation and packet loss," he says.

Adding another dimension to the dispute is the role Andile Ngcaba might play. The chairman-designate of Dimension Data SA is negotiating, through his Elephant consortium, to buy a minority equity stake in Telkom. Will he stay quietly on the sidelines while IS and Telkom head to court or will he seek to placate the two parties?

Whatever happens, Shrock says IS would like to reach an amicable settlement. "We don't want to take a stance that is aggressive and will only do so where that is necessary to protect our rights."

The high court will hear IS's application on Tuesday.