The proposed settlement between the Competition Commission and Telkom should, in theory, lead to lower fixed-line prices for consumers if it is accepted by the Competition Tribunal.
Yesterday, the tribunal heard the proposed settlement, which moots a functional separation of Telkom into a wholesale and retail arm, and the payment of an administrative fine of R200 million in three tranches. As part of the agreement, the telco will also implement wholesale and retail pricing commitments for the next five years that should yield R875 million in savings.
The tribunal, while welcoming the speedy agreement, has yet to rule on whether the settlement will be accepted. Internet Service Providers' Association regulatory advisor, Dominic Cull, says this is an indication that it wants to read the proposed settlement with care.
Cull says, in principle, as the price reductions affect both wholesale and retail offerings, they should lead to a cut in the cost to communicate for consumers using fixed-lines.
Telkom will, over the 2014, 2015 and 2016 financial years, trim the price of wholesale services in areas such as undersea cable international lines, national high bandwidth transmission lines, access to ADSL lines via the IP Connect service and Diginet leased-line access, as well as related retail products, Telkom's VPN Supreme and Internet Access.
The price reductions are weighted more heavily in favour of wholesale services, at a minimum of 70%, to bring about a more competitive market, says the commission in its statement. Telkom will also ensure any price reductions are not reversed in the 2017 and 2018 financial years.
More competition
Cull says these reductions should be passed onto consumers and should lead to a more competitive market, as the proposed settlement forces Telkom to be more transparent. He notes the heart of the complaint was that Telkom was discriminating in favour of itself.
The settlement follows five complaints lodged between June 2005 and July 2007, by several Internet service providers (ISPs) and the Internet Service Providers' Association. The commission determined Telkom was squeezing margins and acting in an anti-competitive manner.
Telkom has admitted that, during the complaint period, first-tier ISPs had to use Telkom's services to build or gain access to backbone networks, but that the pricing charged by Telkom was higher than it charged its own retail arm.
Cull notes, however, that it is impossible to say whether the settlement will be a success as it must be enforced. He adds it goes beyond a fine, and tries to facilitate a more competitive market.
Telkom will only comment on the merits of the agreement after the tribunal has confirmed it.
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