Subscribe

Zero competition in local telecoms

By Siyabonga Africa, ITWeb junior journalist
Johannesburg, 02 Oct 2008

The telecommunications sector is characterised by high prices and a lack of competition, states the Competition Commission's annual report. The commission says it has 11 complaints before it concerning telecoms.

The annual report elaborates on how the local telecoms sector lends itself to anti-competitive practices. It points to Telkom and Neotel (the national fixed-line operators) as the main culprits.

As a former state-owned entity, Telkom is still dominant in the fixed-line industry despite Neotel's entry as the second national operator (SNO) in March 2006. The SNO has made it clear it will not compete with Telkom on pricing, and this, the Competition Commission says, creates a duopoly.

Competition Commission head of telecoms and business services Avish Kalicharan says the industry needs to be regulated more vigorously. “A number of the complaints we receive are regulatory matters and if the Independent Communications Authority of SA (ICASA) were to monitor this, then most of the issues will fall away.”

The mobile operators are said to be more competitive, even though the firms in the market seem to work collectively. The mobile market is dominated by Vodacom, which has a market share of 55%, while MTN has 35% and Cell C 10%. The Competition Commission complains South African mobile prices are high by international standards.

Pending MTN verdict

The commission says one of its major cases involves interconnection fees charged by mobile networks. Interconnection fees are charged to connect calls between numbers from different networks.

The report points to Cell C's complaint against MTN for the charges levied by the major cellular operator for Cell C's community service telephones.

In July 2007, the commission found MTN guilty of price discrimination and referred the case to the Competition Tribunal, where it may be slapped with a multimillion-rand fine if found guilty.

Kalicharan says the commission has taken a decision on the matter and will soon announce its verdict.

The other side

Telkom says it is committed to the process of consistently adjusting its pricing model in order to make telecoms more affordable and accessible to business, as well as the broader South African public.

To this end, price adjustments are filed with ICASA on an annual basis, it notes. Telkom's price adjustments are effected in compliance with the price control formula implemented by ICASA. The aim of the formula is to limit the extent of the price adjustments using the formula: Consumer Price Index minus 3.5% plus carry-over.

BMI-TechKnowledge maintains bandwidth prices will fall with the arrival of fibre optic cables in major metropolitans and also when the undersea cables land, starting with Seacom early next year.

“Probably the best example of competition starting to really bite in SA has been in the broadband Internet services arena,” says BMI-T analyst Brian Neilson. “Until recently, this competitive behaviour has been largely driven by the mobile operators, which have introduced globally competitive mobile data prices in SA.”

Related stories:
Tribunal to review Oger merger
Cell C wants a go at MTN
MTN scuppers Huge deal
Vodacom's spin wobbles
Cell operators are unfazed by VOIP

Share