Two years after the launch of the awkwardly named underserviced area licence operators (Usals), they are proving to be another expensive policy failure by the department of communications.
Telecom research group BMI-TechKnowledge (BMI-T) finds that despite the good intentions, the seven operators are falling well short of providing affordable telecommunications services in rural areas.
Both operational and financial statistics are disappointing. In the two years since the Usals were licensed to operate in rural municipalities, they averaged only 3 000 users each, who spend only R20/month. Their potential market is a huge 7,4m people, most of whom have limited access to telephone services.
Of the seven Usals, four generated a combined revenue of R2,4m in their first six months of operation, two have not disclosed any figures and one has yet to begin operating.
The programme was meant to boost rural development. The operators were licensed in areas with less than 5% teledensity, their owners had to be majority black-empowered companies and they received a R5m capex subsidy from a department of communications arm, the Universal Service & Access Agency of SA (Usaasa).
BMI-T director Mandla Kuzwayo says state funding for Usals is not nearly enough to buy the necessary equipment or fund their operations. "Working capital is a big drawback for Usals," he says.
Ahead of their launch, a study by Canada's International Development Research Centre estimated the capital needs of a Usal network at about R20m. It did not help that the SA Revenue Service taxed the subsidy as a profit.
Tebogo Khaas, president of the SMME Forum and CE of Digital IQ, believes the problems around Usals stem from their business model. "Usals can operate only in areas where there is no money to be made," he says. Khaas says Digital IQ came close to submitting an application for one of the licences but the closer it examined the businesses model, the more it was discouraged.
Despite the problems, Usaasa maintains Usals are still a necessity. "We accept the report. We believe the necessary intervention can save the programme," says Tebogo Thupaatlase, manager for legal & corporate affairs.
For Usaasa, Usals are not only about providing a telecom service in underserviced areas but also about increasing the number of black entrepreneurs participating in the sector.
BMI-T director Brian Neilson says government must rethink the set-up. "The policy was put in place five years ago and has not been revised," he says.
Thupaatlase says government's telecom policy is flexible and points to the recent promulgation of the Electronic Communications Act as an example of the department's willingness to adapt to changes in the environment.
At a recent telecom conference a number of changes were put forward, such as setting up a company that would provide a combined billing service or have some Usals become non profit companies and act as service providers for government.
Usals are not just critical of the lack of support from Usaasa. Thinta Thinta Telecommunications (3T) CEO Bule Mhlongo says the telecom industry regulator, the Independent Communications Authority of SA, has yet to approve the radio frequency it has applied for. 3T is widely viewed as one of the better-run Usals and, according to Mhlongo, has received R51m in debt funding from the Industrial Development Corp.
Kuzwayo recommends measures to improve their business case: radio frequency must be made available to Usals immediately, the subsidy must be raised and backed by other support measures, and Usals must be allowed to interconnect on a cost basis.
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