There has been a market failure in the telecommunications sector and direct state intervention is required, particularly on the policy level, says Department of Communications director-general Mamodupi Mohlala.
Speaking today before the Parliamentary Portfolio Committee on Communications, Mohlala presented the department's International Peer Benchmarking Study on SA's ICT sector as well as a programme of action to reduce telecoms prices and speed up competition in the market.
The benchmark study compared telecoms prices in SA with Chile, South Korea, India, Brazil and Malaysia. The study looked at fixed and mobile telecoms, as well as Internet usage and prices.
The countries were selected as peers to SA because they share several characteristics, such as dominant incumbent operators and similar regulatory environments. Fixed local call rates per minute on Telkom's prepaid service proved to be the highest, at more than 10 US cents per minute, followed by Telkom's postpaid service at eight US cents per minute. Brazil came in at six US cents per minute, followed by Chile, Malaysia, India, and South Korea.
In terms of fixed business baskets, excluding taxes, Telkom Business proved to be the most expensive, at $160.39, followed by Brazil at $123.55, then Malaysia, Chile and South Korea, with India coming in cheapest, at $36.98.
The summary of findings of the mobile market showed SA has the most concentrated mobile market, and that Brazil and India have a larger number of mobile groups, although not all operate nationwide.
High penetration
Mohlala said mobile penetration has grown impressively in SA, as it has risen from the fourth-ranked country among the benchmarked nations in 2000, to first in March 2008.
“This despite SA having high tariffs, while usage in SA is low,” she said. Mohlala added that mobile broadband tariffs for high volumes that are greater than 2Gbps are expensive in SA, due to the lack of uncapped plans, which are available in other benchmarked countries.
As far as SMS is concerned, SA has the second-highest prices after Brazil, despite SA having a higher usage of the service.
The study found that SA's Cell C BusinessChat Standard had the highest tariff, followed by Neotel Lite2Gb, then followed by Brazilian packages. Vodacom Talk 120 and MTN ProCall 120 were ranked fourth and fifth highest out of the nine packages surveyed.
With regards to Internet speed, the study found SA has the slowest broadband speeds of all the countries. The study also revealed that SA's fixed and mobile termination rates are high and that the country has the highest price for international-private leased lines of 2MBps. However, it has very low international bandwidth costs compared to the benchmarked countries.
It also showed SA has low Internet penetration, and the market has grown slowly compared to other countries. Mobile and DSL broadband is expensive, at high usage (more than 3GB).
Mohlala recommended to Parliament that competition needs to be promoted and that government must actively support initiatives arising around municipal and provincial networks, which must be focused on government service provision and digital inclusion goals.
She also suggested that the local loop unbundling process be accelerated, that the country develops a local broadband policy, and that it regulate mobile termination rates. Mohlala said the role of the state is to act in instances of market failure.
“The mere fact that we are here today discussing this shows that market failure has occurred.”
Enable competition
Mohlala said the state should focus on creating an enabling environment for services and application development, selecting open access, whole provision of essential facilities, and addressing the digital divide.
She argued that the state's role is not to operate in retail services, but to enable competition.
The DOC has developed five programmes of action that it hopes will transform the market and reduce telecoms costs. Mohlala added.
Among these is to get the Independent Communications Authority of SA (ICASA) to fast-track the finalisation of interconnection and facilities leasing regulation, to review the Electronic Communications Act and the ICASA act.
The third programme of action is to reduce local and international broadband prices by 30% and 15%, respectively, by March 2011.
The fourth programme involves increasing mobile telephony and Internet access and usage by 10%, particularly in rural and underdeveloped areas. The fifth is to increase domestic and foreign investment in the sector.
Deputy communications minister, Dina Pule, said in response to a question from Independent Democrats leader Patricia de Lille, that it would consider getting the minister of communications a direct policy intervention to get ICASA to drop mobile termination rates as soon as possible. “Now that you raise the question we will consider it,” she said.
ANC MP Johnny de Lange proposed earlier during the hearings that the network operators appear before this committee to explain why interconnection rates were so high. He suggested the committee make as much time available in October for this.
Representatives of the mobile network operators who attended the hearings agreed they needed to put forward their side of the issue.
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