Competition key to cutting telecoms costs

Communications Minister Siphiwe Nyanda has warned that if discussions with the operators do not bring prices down, the government will resort to legislation.

The industry has reacted with scepticism to his plan to appoint experts to recommend “appropriate interventions”, as that retreads old ground. But there is optimism too that at least he recognises the problem and may begin to fix it.

Endless reports from analysts, including Gemini Consulting and the World Economic Forum, already highlight the fact that SA's main fault lies in failing to liberalise the market.

Moreover, the Independent Communications Authority of SA (Icasa) has held countless enquiries yet rarely taken action. It examined handset subsidies, and decided little had to change. It scrutinised the fees that operators pay to link a call from one network to another, but has not forced them down. It also talks of letting all operators share the copper lines that give Telkom exclusive access to customer premises. The industry is still waiting.

Yet most players believe the answer is competition, not regulation, and that is something the government has stifled. Efforts to control broadband infrastructure through state-owned Infraco and its refusal to let Sentech raise private cash to fund its broadband services are prime examples.

More damaging was its long protection of Telkom's monopoly through laws quashing other players.

Optimism that Nyanda will liberate what the late communications minister Ivy Matsepe Casaburri paralysed gives cause for hope, but the methods may need refining. Although he acknowledges that more competition may be needed, he emphasises a need for intervention in forcing the operators to bring down costs.

Cell C's regulatory affairs executive, Nadia Bulbulia, says it is important to recognise the complexity of the industry and the interdependencies between operators. Addressing pricing is an intricate project requiring thorough consultation to ensure the measures enhance rather than harm the market.

Progress towards regulating the interconnection fees was slow, but the process is not yet finalised and Cell C is looking forward to further engagement with Icasa regarding the issue, she says.

Vodacom is working to empower people by making it possible for everyone to access mobile telecoms, says chief communications officer Dot Field.

Vodacom has made it easier to get online via a cellphone or a PC, and innovative tariffs offer discounts of up to 99% on a call, she says.

This week Telkom lodged its proposed fees for the coming year, seeking an overall rise of just 1.7%. That was not from fear that the government would look at its fees harshly, but as a direct result of competition.

Albert Schuitmaker, director of the Cape Chamber of Commerce, says it is clear that real rivalry rather that the regulator is finally cutting costs. Economic growth and job creation have suffered as restrictive laws have kept SA technologically stagnant and made broadband services painfully slow and expensive, he says.

New undersea telecoms cables — funded by the private sector — and competition will do what Icasa failed to do, he says.

Telkom's head of national sales and marketing operations, Godfrey Ntoele, says it has been aligning its prices to be more competitive and to take into account the related costs and business and economic needs.

The problem is that Telkom must reinvent its business to face fresh competition, and adding services such as mobile coverage is costly. The same applies to the mobile players, which are spending billions of rands to boost capacity after scathing criticism from users sick of congested networks.

Which proves that once customers have more choice, their voices are finally heard. That takes competition, not legislation.

Source: Business Day

Published courtesy of