Fixed-line giant Telkom is considering its options after the Supreme Court of Appeals upheld an appeal by the Competition Commission on Friday.
The company has declined to comment on the situation, which could see it hit with one of the largest fines ever to be enacted by the commission, saying only it is reviewing the reason for the court's decision.
“Since Telkom is considering its options in view of the court's decision, we cannot comment further at this stage,” says Anton Klopper, Telkom's group executive for legal services.
The Supreme Court's landmark ruling last week could finally put an end to telecoms companies hiding behind sketchy jurisdictional issues that have plagued the Competition Commission and the industry regulator.
Despite a tight memorandum of understanding between the Competition Commission and the Independent Communications authority of SA, telcos have dodged prosecution on competition issues using jurisdiction as an excuse.
The commission has been sitting on complaints against all the operators since 2004, with no conclusions. The commission has blamed the jurisdictional trouble for the delays.
The culprit
The fixed-line operator last year used the jurisdictional confusion to challenge a matter that the Competition Commission had referred to the Competition Tribunal. At the time, Telkom said the “competition authorities lack the competence to rule on a market dominance complaint lodged by the value-added network service providers”.
The actual ruling by the commission began in 2004 and stemmed from a complaint laid by the then value-added network services providers (VANS). The providers accused the fixed-line operator of abusing its market dominance by refusing to supply them with backbone and access facilities, unless they met Telkom's conditions.
VANS also complained that Telkom would not peer with AT&T, and refused facilities for AT&T to peer with satellite networks. The operator allegedly refused to lease access facilities to VANS directly and charged them more than Telkom's own customers.
Telkom is likely reeling from the Appeals Court ruling, since it had safely dodged any fines relating to the matter. The ruling also opens the floodgates for a second referral by the Competition Commission made last month, which could see Telkom pay the highest fine ever to come out of the competition authorities.
Biggest ever
At the end of October, the Competition Commission recommended the fixed-line operator be fined 10% of its annual turnover for the year ended 31 March 2009, which is the maximum the commission can fine.
The commission has never recommended the maximum fine, and the largest ever handed out by the authorities was the R600 million fine steel producer Mittal was slapped with a few years ago.
With Telkom's revenue for the year sitting at R33.7 billion, Telkom's fine would be in the region of R3.37 billion - almost five times the amount paid by Mittal (5.5% of its turnover).
The Competition Commission's Telkom fine will still have to pass through the Competition Tribunal's halls before it will be given the go-ahead. It is unclear how the next aspect of the process will play out.
The commission was not available for comment at the time of publication.
Meanwhile, local service providers are feeling vindicated. The Internet Service Providers' Association, one of the drivers of both complaints against Telkom, says: “This important decision paves the way for the Competition Tribunal to finally examine Telkom's conduct in the Internet services market during the early part of this decade.”
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