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In a presentation at ISPA’s iWeek Dr Angelo Roussos, Group Executive Multimedia, Sentech signalled that the company will launch its wireless broadband service by the end of the year. It will be targeting South Africa’s main cities and looking for "advanced residential customers’, SOHOs and SMEs. It claims to have cheaper technology to deliver a service that will be "very competitively priced" against Telkom. The question is whether a parastatal can deliver a competitive market service. Russell Southwood listened to the pitch.

Sentech wants to become the pre-eminent and default supplier of broadband services in South Africa (and on into Africa), creating a market-leading multi-media business.Its ambition is to "define the broadband experience."

Despite entering a market where bandwidth prices are declining and are therefore becoming commoditised, it believes that "always-on broadband is the killer app. The need is for ten times to one hundred times the bit rate of today’s offerings."

Sentech believes that there is strong demand for broadband access to the home ("the advanced residential customer"), SOHOs and SMEs. It will target them through "geo-marketing": detailed mapping of where its potential customers live or work. It is now placing hubs where there are aggregates of customers. What about competitors? "This is entry level broadband therefore there are no competitors".

There will be instant self-registration and potential customers will be able to go to a web-site that will be able to identify from their street name whether there is coverage in their street and if not, whether it is planned in the future.

The service will cover Johannesburg, Pretoria/Midrand, Cape Town and Durban: "We’re currently rolling out the networks and will have service offerings in all these places by the end of the year. There are a couple of snags at site level and coverage in some areas will be delayed until the New Year". Will it be rolled out to smaller places or more rural areas? "The geographic scope of the service will be determined by the economic case". It has acquired spectrum in second tier markets and some rural areas.

Pricing? "We will be very competitively priced and be offering an ADSL-type bandwidth product. We believe in a shared bandwidth-type environment. The service must be transportable and rapidly deployable".

There will be two broad services: the basic offering: internet access services, data carrier services and VPNs; and the advanced offering: B2B apps, web hosting, VOIP, custom video and apps services.

It chose broadband wireless as the delivery technology for a number of reasons. It is high capacity can offer multimedia services. The technology offers fast roll-out times, can give on-demand build-out and therefore offers faster pay-back times. It also extends the reach of the existing fibre loop.

It has equipment that will run at 14 mbps and the cost of the equipment to deliver it is significantly lower than equivalent fibre or dsl solutions. Roll-out will be at around at USD7-800 per connection with non-line-of-sight technologies. However it will not be offered to customers at 14 mpbs. The delivery device for customers is a low-cost, battery powered modem is small (4 inches wide, 3.5 inches high and 0.75 inches deep) and portable. It uses 802.11b, proprietary and Sentech claims it will offer high spectral efficiency.

It will get to market through working with resellers: "We will go into the market with an almost zero margin (on the modem) to get them out widely into the market. Customers will probably buy from partners of Sentech. For example, ISPs will resell services." However it will have a central maintenance structure.

One of the weaknesses in the plan is that it needs others to provide an interconnecting fibre network: "We are relying on the SNO to do certain things for us. Backhaul and international costs are an issue for us. We have to offer Telkom and the SNO backhaul. We don’t have a fibre backbone."

Once it has established a customer base it intends to increase revenue in two ways: by offering broadband value-added services and leveraging the network with larger amounts of residential customers.

It also wants to bulk sell to wholesale buyers of bandwidth and services: internet peering, ISPs, international data, GSM backhaul and internet bandwidth. It has the capability of being a full-voice carrier network.

However it was anxious to make clear that it didn’t intend to offer VOIP telephony to end users: "We are running the largest core IP data network in SA/Africa. It can deliver telephony services but can’t deliver them to end-users. We’re a carrier-to-carrier service. But there’s no such restrictions on the multimedia side".

"Our licence is technology-neutral and is focused on the availability of access technologies". The various Acts and licences that cover Sentech mean that "we can do almost anything except circuit-switched voice. IP is the transport for everything."

There must be some scepticism about how a parastal that is current a network operator can enter the retail end of the market: it’s never been there before. "We’re a parastatal and there’s a significant amount of work to be done to get ready for a competitive environment".

A success or failure of a service of this kind probably has relevance to the densely-populated cities of Africa with larger groups of internet users, places like Cairo, Nairobi and Dakar. Currently the Middle East and Africa has a paltry 2% of the worldwide broadband demand according to a report from Ovum. Investors will be interested to see whether Sentech can make it work before putting down money elsewhere.