Gathering up Wisps to build a Hero

ALAN Knott-Craig jnr is nothing if not ambitious. The man behind the Project Isizwe free Wi-Fi scheme in Pretoria and the former boss of Mxit and iBurst wants to build “the Capitec of telecoms” as he seeks to consolidate South Africa’s hundreds of small wireless internet service providers (Wisps).

With the backing of heavy hitters such as former First National Bank CEO Michael Jordaan and Rand Merchant Bank CEO Mike Pfaff, Knott-Craig has raised funding to help HeroTel, his new company, establish a national presence, partly through acquisitions of likeminded Wisps and partly through establishing a national brand under which third-party Wisps can sell their services.

“This is going to sound arrogant, but it’s not meant to: we are trying to build the Capitec of telecoms and, one day, people will say Capitec is the HeroTel of banking,” he said.

He is a big fan of PSG Group chairman Jannie Mouton, who funded Capitec. “I like to copy guys who know how to make money, and Jannie Mouton knows how to make money.”

By using unlicensed spectrum — the same spectrum that consumers use for Wi-Fi at home or in the office — and pooling the resources of hundreds of Wisps, Knott-Craig believes there is an opportunity to build an alternative last-mile broadband network into homes across the country.

He estimates the total addressable market for uncapped broadband is about five million households, and said high-speed fibreoptic broadband would probably only ever reach 400 000 of them.

Fibre start-up Vumatel was leading that race, although Telkom would probably buy the company at some point to ensure it remained a leading player in fixed lines, he said.

The rest of the market would be served by legacy copperbased ADSL — where Telkom has only one million customers — and by wireless providers.

Mobile operators could not — or would not — offer affordable uncapped 3G and 4G broadband, he said, and proprietary wireless solutions such as iBurst were “dead-end” technologies because of the lack of devices available to connect consumers.

The obvious answer, KnottCraig believes, is Wi-Fi.

“It’s a commodity and it’s cheap. That’s why the HeroTel CAPITEC OF TELECOMS: Alan Knott-Craig jnr admires Jannie Mouton strategy makes sense.”

Knott-Craig had no interest in bidding for protected — and expensive — spectrum assets, he said, because there were no guarantees that the government would not take them away, in the same way it “took away mineral rights”.

“People stopped investing in mines. How can telecoms be immune to that sort of risk? It’s not.”

The interference problems common in unlicensed bands could be addressed, he said.

Like most Wisps, HeroTel will take advantage of unlicensed bands — the free-for-all bits of the radio waves where almost anything goes. This spectrum is freely accessible. But unlike licensed spectrum bands, for which telecoms operators cough up billions so they have exclusive access, no one is protected from interference.

For Knott-Craig, this is no big deal because in many of the smaller towns there is not huge pressure on the unlicensed bands. In the big cities, he believes HeroTel can help Wisps to coordinate their use of the spectrum to minimise interference problems.

What do Wisps get in return for signing up for Knott-Craig’s “Hero Alliance”?

“They make more money,” he said. “If you are not taking home more money from month one, you shouldn’t join Hero.”

HeroTel would help Wisps increase their sales, he said, by giving them access to a national brand.

They would also have to go through a process to “fix their internal processes” to ensure HeroTel’s reputation is not “tarnished” by poor customer service.