Telkom fends off Parliamentary anger

Cape Town, 13 Oct 2009
Read time 3min 00sec

Telkom this morning had to fend off angry questions and comments from Members of Parliament who attacked its high interconnection, termination and line charge rates.

On the first day of the Parliamentary Portfolio Communications Committee hearings into interconnection rates, members of the telecommunications sector were packed in for the public hearings.

Parliament has asked for public comments on whether interconnection rates should fall from 125c per minute to 60c per minute, whether a staggered reduction in interconnection rates would be appropriate, and if retail rates should be regulated.

“With all your high charges, I have paid for your salaries several times over. I couldn't care if you went out of business today,” MP Niekie van den Berg told the Telkom delegation.

In response, Telkom SA MD Pinky Moholi said the company supported the reduction in interconnection rates and agreed they were too high.

“However, we cannot charge less than the prevailing rate of 125c per minute, otherwise we would go out of business,” she said.

Moholi went on to say line rental charges were there for the maintenance of the line and this is not a situation SA needs. She said that with copper cabling “...a truck had to roll every time there was a line break. That is why we welcome the ability for us to provide wireless networks. Wireless makes it cheaper for us because we do not have to send out a truck for maintenance.”

Scholarly perspective

In his presentation, Petrus Potgieter, professor of economics at Unisa, said there is no doubt interconnection rates are excessively high, because of the lack of competition in the market.

“The situation is much older than the three years people have been talking about. Telkom's fixed-line termination rates are also exorbitant, at 30c per minute, compared to such countries as Australia, where they are less than one Australian cent per minute.”

Calls for choice

Potgieter said the local telecoms sector is less competitive than the postal sector, as in the latter the sender of a parcel had a choice from a number of courier companies other than the South African Post Office.

“In the telecommunications sector, the call originator has no choice but to use the network you have and the originator carries the cost of the entire call. Price regulation in the sector has not happened and so there are very few players,” he noted.

Potgieter explained it was not Parliament's role to look at the profitability of the telecoms company as the first duty of the telco is to its shareholders and not necessarily to consumers.

“These shareholders include government in many instances and there has been no pressure from the side of government as a shareholder to reduce these prices,” he said.

Potgieter said the suggestion to lower interconnection rates to 60c per minute from 125c per minute is laudable, but he expressed disappointment that ICASA is talking about 95c per minute.

“It seems that ICASA is treating all of this as business as usual,” he said.

Potgieter added that the current interconnection rate of 125c per minute in consumer price inflation trends had the same purchasing power parity as the 1994 rate of 25c per minute.

“However, looking at the technological environment, if one thinks that it is the same rate then they are living in a very bad dream,” he concluded.

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