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South Africa: Breakthrough Plans for Rural Voice And Data Services
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Business Day (Johannesburg)
27 March 2008
Posted to the web 27 March 2008
Lesley Stones
Johannesburg
A NOVEL idea to take voice and data services to the most rural areas could see ultra-rich Vodacom and MTN paid subsidies to do the job.
The operators have to promise high-quality services even the poorest people can afford in return for having up to 80% of infrastructure subsidised. But the cost will not hit taxpayers as the cash will come from the Universal Service Fund, to which the operators themselves contribute.
The plan was mooted by the Universal Service and Access Agency of SA after the failure of efforts to help small black companies take telecoms services to poor, rural areas.
CEO James Theledi said the big commercial players were rightly hesitant to tackle some of those areas as they were expensive to reach and had no potential to generate revenue.
Even where mobile operators had made inroads, the services were still expensive, and offered only voice calls rather than data.
The agency handed millions of rands in grants to small black companies that won licences to operate in underserviced areas, but many fizzled out. Only one is actually operating.
They had lacked the cash, training and experience to be successful, Theledi said, while regulatory issues and delays in allocating spectrum also fuelled their failure.
The only solution was to offer incentives and subsidies to commercial players, he said.
The agency rates 27 areas as underserviced. In one, Umzinyathi in KwaZulu-Natal, 64% of the population has no electricity, 94% no landlines and 69% no cellphones.
Fresh research will calculate what it will cost to provide full voice and data coverage.
"If R50m is required in one area the subsidy could be R35m to R40m," Theledi said.
"If 27 areas need R40m each we will say this is the money required from the Universal Service Fund."
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The subsidies could be launched next year through open tenders, and the company requesting the smallest subsidy and promising the most affordable services would win.
The move would not encourage operators to slow their network roll-out and wait for a handout as the conditions would be reasonably onerous, he said. "We will give MTN or Vodacom or whoever a subsidy, and expect them to provide quality services and affordability," Theledi said.
Last year, R261m sat idle in the Universal Service Fund as the treasury refused to hand it over until the agency submitted sound business plans. The cash comes from an annual levy of 0,2% on revenue generated by each telecoms company.
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