The rejection of both licensee applications for the second national fixed line operator (SNO) came as no surprise to Gartner analyst Bhawani Shankar, who says it emphasises that greater legislative clarity is needed.
"If one has a muddled regulatory process, as South Africa currently has, then only weak bids will be attracted as the real players will rather stay away until they feel comfortable with the environment," he says.
Shankar, who authored a controversial report last year about the SA telecoms environment, was reacting to last week`s rejection by the Independent Communications Authority of SA (ICASA) of the two bidders - CommuniTel and Two Consortium - both of which had been on the Department of Communications` short list.
"However, I am glad that ICASA has taken a rather radical approach and this means that SA now has to go back to the drawing board in terms of examining its approach to deregulating the telecoms industry," he says.
This is the second time that ICASA has rejected bids for the SNO out of hand and after the last time the Department of Communications took over the process of screening the applicants. However, this created some confusion in the minds of potential international investors over which body regulates the industry.
"The question that government must try and address is 'what is going to now happen to the long-term structure of the telecommunications strategy?` I want clear answers," Shankar says.
He says that it doesn`t matter just what kind of structure the SA government wants to put in place for the industry - whether it is highly centralised or totally decentralised - "just as long as there is some clarity."
A potential solution to the current impasse would be for the Department of Communications and ICASA to grant the license to a local company.
Bhawani Shankar, analyst, Gartner
Shankar says, however, that it is not unusual for emerging economies to go through several rounds of deregulation before coming out with the most equitable and optimum solution.
"In developed economies the infrastructure was largely in place and so deregulation could take place on purely commercial lines. However, in emerging economies the potential funds raised from deregulation are often needed for other social delivery projects," he says.
A potential solution to the current impasse, Shankar says, would be for the Department of Communications and ICASA to grant the license to a local company so that the appearance of competition into the industry can be speeded up.
Telkom`s state-granted protection ended in 2002, but it has remained in a de facto monopoly with the failure by SA to grant the SNO licence.
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