ICASA, the Independent Communications Authority of SA, has in the space of two weeks delivered two rulings that spell trouble for former monopoly Telkom in a variety of fields.
Both rulings, in separate complaints the company made against Internet Solutions (IS) and AT&T, completely vindicated the defenders, but also hold implications on the technologies Internet providers can use and go a way towards finding Telkom guilty of acting anti-competitively.
Telkom filed both the complaints in late 2000. It claimed that a service IS was providing essentially used the Internet to provide a private telecommunications network (PTN) and allowed winemaker KWV to avoid international telephone costs by using the data network to carry voice. It is illegal in SA to carry interactive voice over a data connection.
The argument against AT&T was similar, with Telkom saying it had provided IBM with an illegal PTN. AT&T lodged a counter-claim, saying Telkom had illegally withheld the infrastructure it needed to run its business.
In both rulings ICASA slammed Telkom for faulty logic and spurious complaints, and found that neither AT&T nor IS had contravened the telecommunications law or the Telkom exclusivity that expired in May.
The IS service, branded IP-Net, used multiprotocol label switching (MPLS). ICASA found that protocol switching was part and parcel of what a value-added network services (VANS) provider such as IS could do and did not create a PTN, even though it may look that way if a company uses the Internet only to communicate to one or two computers instead of hundreds or thousands.
It made a similar finding in the AT&T case, where Telkom argued that a virtual private network (VPN) is pretty much the same thing as a PTN. It also said that VPNs infringe on its exclusive rights as a public telecommunications provider.
"The argument that VPNs are public switched telecommunication services is not altogether clear and would appear to conflict with the argument that VPNs are private telecommunications networks," the authority commented.
While the regulations around VPNs have been clarified since the original complaints were filed, the ruling significantly finds that managed data network services (MDNS) were not in conflict with the law. Telkom had argued that VANS providers such as AT&T use MDNS as a "guise" to provide VPNs, which turn out to be PTNs.
ICASA treated this assertion with scorn, saying "there is no suggestion that an MDNS or a VANS has anything whatsoever to do with a PTN".
Another Telkom argument dismissed was that protocol conversion, central to both MPLS and MDNS, makes it easier for companies to transmit voice calls over their data networks, circumventing a legal ban on doing so and costly international telephone charges by Telkom. ICASA not only disagreed, but ruled that it is not required of a VANS provider to monitor the data flowing across its network to policy the voice ban.
In AT&T`s counter complaint that Telkom had withheld infrastructure on the mere suspicion that it could be used illegally, the operator was again harshly treated. In an opinion the regulator received from the Competition Commission, Telkom was identified as a competitor to AT&T, and its withholding of infrastructure (which AT&T could not legally get from any other source) was found to be anti-competitive.
"By withholding the provision of telecommunication facilities from AT&T which Telkom has a statutory obligation to provide ... Telkom has taken an uncompetitive action ... which is likely to have the effect of giving an undue preference in the VANS market to its own VANS supplier," ICASA says.
Various VANS providers recently filed a complaint with the Competition Commission alleging much the same thing. Should the commission find against Telkom, it could take steps including imposing massive fines.
Joy from VANS
VANS providers have reacted to the rulings with relief and renewed confidence that their long battle against Telkom was nearing an end.
"We have been vindicated in a massive way," says IS legal head Marc Furman. "We can now go back to market with IP-Net as a service. But the impact is more far-reaching, because Telkom used its monopoly against us, unfairly we believe, and this severely undercuts that strategy."
He says IS will consider going to court to claim damages from Telkom, with its legal costs in the matter a first priority.
"Services that were impeded before can now hopefully be offered without hindrance," says Mike van den Bergh, chairman of the SA VANS Association. "It would be positive for the industry if Telkom for once accept a ruling like this, accepted the role of the regulator and moved on. We can`t keep on tying up these processes in endless litigation."
Telkom has said it is taking legal advice on both rulings and could ask for a judicial review. It has refused to comment further on the matter.
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