The only government policies that have ever met with any success in South Africa's telecoms sector were accidents. One example is the award, way back when, of two mobile telephony licences to make luxury toys for a few thousand rich people. Another is the loophole that permitted Altech to go to court to demand the right of self-provision, which essentially turned every ISP into a potential telco.
The major policies that have attempted to open up the market, increase competition, improve network capacity and reduce prices, have all failed.
Take Infraco. I have yet to see anyone outside of government who believes the billion or so spent on this broadband network will have any measurable impact on either access to, or pricing of, broadband. The significant downward pressure on data prices that we've seen in the last year or two has been almost exclusively the result of private sector initiatives, including the Seacom undersea cable and wider competition between telcos previously limited by licence conditions.
Or take Cell C. Since it received its licence in 2001, it has had little noticeable impact on either the availability or price of mobile telephony. It appears to be undergoing a welcome revitalisation just at the moment, but the promise of greater competition has made little real difference to consumers or business in the intervening decade.
Take Neotel. The less said about that, the better. Telkom exploited the delay in its licensing to pick all the low-hanging fruit. Neotel gamely launched a haphazard collection of products, aimed at business and high-end consumers. However, its annual results since then were staggering only by the increasing scale of its losses, which are now counted in billions per year. Meanwhile, it has had to admit to poor governance and regulatory compliance. Its survival isn't even certain, let alone its power to have a real impact on the market.
These are all examples of big policy decisions in which the government has followed its tradition of hand-selecting one or two favoured bidding consortia to receive its patronage, in the form of a licence that is not available to anyone outside the existing cartel.
Besides the obvious objection of crony-capitalism, what is missing from this process is the ability of investors and consumers to choose who wins and who loses in the open market. There must be more than three horses in a race if the betting is to be fair. New competition should always be a threat to incumbents. Business failure should not be a crisis of policy, but an ordinary event that weeds out weaker players but creates space for competitors who deliver better products at better prices.
Government appears to persist with policies that have failed so dismally in the past.
Ivo Vegter, ITWeb contributor
With yesterday's budget announcement, government appears to persist with policies that have failed so dismally in the past. Another R450 million has been allocated to deliver broadband infrastructure and services in under-serviced areas. Ask those under-serviced areas how well the government's mandate that Telkom provide them with lines has worked. Ask them about the plan to issue a dozen-odd regional operators to cover them. Why would a national broadband strategy be any different?
If history is any guide, that R450 million budget item is money down the drain. Might as well pay teachers or nurses or police officers with it.
Alternatively, there's a compromise approach. In the absence of a truly free market - telecoms remains one of the most heavily regulated sectors outside banking - the government could meet its stated socio-economic objectives simply by subsidising the services it would like to see.
Take school connectivity, for example. The policy to date has been to punish companies by requiring them to offer deep discounts. Not surprisingly, the result is that nobody wants to sell Internet connectivity to schools. That's called bad policy.
Instead, give schools cash to pay for their own connectivity. Let them decide how best to spend this money. There are plenty of private ICT companies and charities that will be happy to help schools with how best to invest their tech subsidies. Accounting for the subsidy isn't that hard, since it can be linked to easily measurable metrics, such as the number of computers, available bandwidth, or bandwidth used.
Ask anyone who is involved in educational charity work, and you'll hear the complaint that both children and teachers have no access to technology resources. So fund those resources, and let those who complain advise the objects of their charity on how to spend the money.
This will help schools by offering them the ability to tailor-make solutions to their specific circumstances and needs. It will help the ICT industry by making the education sector a profitable market to address. It will bring access to technology and education to millions of children who are desperate for it. It's a win-win for everyone except the taxpayer, but the taxpayer is already numb.
Or take under-serviced regions such as townships and rural areas. Offer incentive subsidies to companies that connect under-serviced areas and keep them connected. Let the market decide what to offer and how to offer it, and offer a long-term reward scheme for successful offerings that otherwise might not have been sufficiently profitable to bother.
The upside? Stimulating the market, while leaving it truly free to innovate and compete, as opposed to trying to “harness” it for purposes dreamed up by central planners, or worse, becoming both player and referee.
The downside? You're still spending R450 million. Let's call it evens, then.
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