SA’s telecoms industry is rapidly falling behind that of East Africa. Why?

ALEC HOGG: David, you know the Venter brothers, Robbie and Craig. They are the kind of guys you'd like to have on your side in a fight.

DAVID SHAPIRO: Ja, especially Craig!

ALEC HOGG: Well, it was interesting because this morning I spent a good hour and a bit at a  press conference - I don't get to too many of them nowadays - to listen to what Craig and tonight's studio guest Brian Herlihy had to say about a strategic alliance that they've put together, Altech and SEACOM, in East Africa.
    Brian, a lot of interesting stuff came out of there. First of all, maybe the headlines. The two of you, Altech, SEACOM, getting together to put really strong bandwidth into East Africa. You did say that East Africa has the potential now to overtake South Africa quite quickly.

BRIAN HERLIHY: First, it's an exciting announcement for us. We are laying on the beach - and then what?  We need these partners to get us to the customers. So the strategic with Altech is really that ability to get into Nairobi, Kampala and Kigali. To your point, East Africa is showing this incredible reception to bandwidth - reception we are not seeing in South Africa - where all the entrepreneurial activity is really being based on ICT, call centres, start-ups, people who are really grabbing at this. Banks - we are doing their ICT platforms - and all these people running after it. We were that missing link, and now it's there. So a huge amount of excitement.

ALEC HOGG: Altech's putting a lot of cable into the ground, fibreoptic cable, and also doing well at the moment. Craig was saying that they made R150m profit on East Africa last year, they are going to make R250m this year, and half of the profits in two years' time of that whole group will come from East Africa. Things seem to be mushrooming.

BRIAN HERLIHY: Ja. They are taking a huge risk and I think they are seeing the rewards. You didn't have an incumbent in East Africa like you do here at Telkom, who had put in the copper years ago. So people are having to go in with those next-generation networks for the very first time. So they are going in with the best, and able to actually connect on networks that are equivalent to the US today; they are not spending money replacing a legacy system, so it puts them in a very good position.

ALEC HOGG: What was really interesting in the discussions was that you are suggesting that Altech might do the same here in South Africa. They do have a licence now, which might open the taps for them. They could be the disruptive influence. If you are so close to them in East Africa would you be able to support them in South Africa, because somehow the SEACOM promise hasn't yet been fulfilled in this country?

BRIAN HERLIHY: Ja, I've been using the word "disruption" or "disrupter" quite a bit. You have a lot of bottlenecks between cable that sits in the water and the actual end-user. There's the national networks, and there's the peering cost, there's the local loop, which won't be unbundled here till 2011. Yes, so you look at what Altech did with the licensing regime, and you wonder are they gearing up to do something similar with the end-users and provide the content that everyone wants so badly.

ALEC HOGG: But why is it taking so long for the bandwidth to actually hit us here in the studio, or hit us at home?

BRIAN HERLIHY: When you take your costs, and you say "here's my cost as Moneyweb, to have my dedicated one megabit per second" - which I laugh at, because I have 100 megs in my home - but anyway, your one megabit per second, and you start breaking down what's in that cost, you are starting to see that 80%-plus is really going into the hands of the people who own the local infrastructure, Telkom, Neotel, these guys own the local infrastructure, and I can't reach you until those costs come down. I am reaching you, you are seeing some things, but not at the rate that the rest of the world's going at. You really need people to say, "Hey, wait a second, we don't have the same Internet that people in London have."

ALEC HOGG: I remember once discussing with an ex Telkom executive that the reason why - he believed - Telkom was so successful in its efforts to stop bandwidth coming into South Africa, to stop the broadband revolution, was they had a lobbying team of 70 people telling government that it wasn't a good thing to allow the taps to be opened. How big is your lobbying team?

BRIAN HERLIHY: You are looking at it! It's quite small. I think the days of governments being threatened by ICT are over. There used to be a huge fear by sovereign entities that "how can we put our national data into the hands of an operator that isn't owned by the government?" But those days are over. People understand ICT as a catalyst for economic development. They are demanding more now too. The new regime here is saying "I want the underserviced areas to have broadband". We need to see what's going to come of it. But they are now saying this is not a desire - it's a must.

ALEC HOGG: You mentioned call centres. How many new call centres are opening up in East Africa as a result of the SEACOM broadband that is going in?

BRIAN HERLIHY: I think four new ones in Kenya, OK, which equates to about 2 000 seats of new call centres, which is four persons to a seat. So that's 8 000 new jobs in about two months' worth of activity.

ALEC HOGG: And nothing yet in South Africa?

BRIAN HERLIHY: No. I mean, there are call centres, there are a couple of groups that have call centres that are quite well established, but not the explosion that ... growth from sort of zero to 8 000. It's a huge number.

ALEC HOGG: Brian, if you were sitting in government, what would you do?

BRIAN HERLIHY: It's not a seat I want, but look, you need to unbundle the local loop. It's happened everywhere in the world. But when you look at the different ISPs, they are completely disadvantaged because they have to pay huge fees to Telkom to reach the end-user. So you need to unbundle the local loop. I know they've announced it for 2011, but I think it could happen faster. That would create the biggest impact in South Africa.

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