The Internet Service Providers Association (ISPA) has expressed its opposition to Telkom`s bid to purchase Tiscali SA.
According to ISPA - an industry body representing more than 82 Internet service providers in SA - it is concerned about the potential impact on both the industry and consumers if Telkom`s bid is accepted.
Tiscali SA, the fourth largest ISP in SA`s dial-up market with around 100 000 subscribers, is for sale as a result of the Italian-owned group`s re-focus on its core European markets.
ISPA claims that the more than R400 million Telkom has allegedly bid for Tiscali is central to industry concerns, as if this figure is correct, it means in all likelihood that Telkom has valued Tiscali at this inflated price by factoring future interconnect revenue into the valuation.
The organisation argues that in the absence of fixed-line competition, Telkom`s monopolistic position enables it to calculate the value of the revenue it will derive from call minutes generated by Tiscali subscribers in the future.
"This is potentially another anti-competitive ploy by Telkom, particularly against the background of the recent Competition Commission ruling where Telkom was found to be engaging in prohibited practices," says ISPA co-chairman, Greg Massel.
"The impact of this, 'has been to chill competition in the value-added network services (VANS) market`, to quote the commission`s own words."
Massel says the incumbent has been preparing for competition in both the fixed-line and VANS markets by entering into long-term contracts with corporate customers. "Now it appears to be targeting the residential market," he says.
He says that should Telkom acquire Tiscali, this would further cement its strategy, as it would deny the SNO potential call minute and facility leasing revenue, which in turn would weaken the impact of much needed competition in the fixed-line market.
ISPA management committee member Ant Brooks says that globally, vertical integration by dominant players has had a detrimental effect on competition, and that the impact of the monopoly owning multiple elements in the value chain can clearly be seen in the way it has rolled out ADSL.
"It is worth noting that in a report compiled for the Competition Commission by the UCT School of Economics, it is stated that 'the key position that Telkom holds as the only provider of lines to all these (VANS) operations, raises concerns over whether it is favouring its own companies in these markets`," says Brooks.
"If Telkom does buy Tiscali, we will not be surprised if ISPA members start queuing at the doors of the Competition Tribunal. We hope that the authorities urgently take note of our grave concerns and intervene while the opportunity still exists to do so."
Telkom says it plans to comment on the issue later today.
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