The Independent Communications Authority of SA (ICASA) is set to investigate the entire communications chain to determine why SA's telecoms prices are so high.
Recent research has pointed to the fact that the cost of communicating in SA is higher than in other African countries. Research ICT Africa's latest report found that, among the 46 African countries studied, SA ranks poorly for prepaid mobile telephony affordability.
Last year, research from Ovum showed the local cost of fixed and wireless broadband is as much as 20 times higher than offerings from providers in 18 other emerging markets.
ICASA GM for markets and competition division, Pieter Grootes, says SA has a high cost to communicate. He says ICASA will investigate whether the telecoms sector faces high input costs and what causes these costs. He says the entire value chain will be probed.
The investigation will determine whether ICASA needs to intervene in the sector, and whether it needs to impose cost controls, or assist operators in rolling out infrastructure investments.
Grootes explains that potential drivers of high cost to the end-user include the high cost of infrastructure, import taxes and potential monopolies. He adds that geographic coverage “comes at a price,” pointing out that SA has better coverage than Tanzania and Kenya.
Benefits seen
ICASA has intervened in the past two years through mobile termination rate reductions, which will reach 40c per minute at the end of the glide path next March. In addition, it recently said that Telkom would cut the cost of IP Connect by 30% from this month.
The reductions in interconnect led to “a large number” of on-net promotions covering voice, data and SMS bundles, notes Grootes. He says there was a 30% reduction in the cost of mobile data in the 2011/12 financial year.
In addition, says Grootes, the lower rates did not lead to a reduction in infrastructure investment as the mobile operators are rolling out improvements to their networks.
Grootes says lower termination rates also made it easier for smaller players to enter the market as they no longer require a large bank guarantee to cover interconnect costs, but can now use a prepaid model instead.
Unbundling
In November this year, Internet service providers (ISPs) will be able to move a step closer to consumers as bitstream access will come into effect. Bitsream, which forms part of local loop unbundling, allows ISPs to connect into Telkom's digital primary switch unit.
Currently, ISPs connect into Telkom's network through IP Connect, which is their single biggest network cost.
Grootes says the reduction in IP Connect has already led to improved offerings for consumers, such as increased data bundles. He expects further end-user benefits, including lower prices, in the current financial year.
However, the bitstream product will include an access line deficit recovery scheme. Grootes says ICASA concurs with Telkom that the cost it charges end-users to access copper is less than the cost of the line, although the quantum of the deficit has yet to be worked out.
Bitstream access should promote innovation, improve competition and increase the rollout of fixed broadband, says Grootes.
Because of the access line deficit, end-users may not benefit from being able to lease just a broadband line, but will have to continue to rent a voice line as well, explains Grootes.
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