Telkom’s charmed life is over

What a week it has been for Telkom. On Wednesday, a day after its exclusivity deal from the government expired, it was taken to the Competition Commission for discriminatory pricing, illegal bundling of services and cross-subsidisation of competitive services.

The South African Value-Added Network Services’ Association and the Internet Service Providers’ Association, who lodged the complaint, have long been critics of Telkom. They represent a wide spectrum of disgruntled Internet Service Providers and other suppliers of value-added services that have been forced by five years of legislated exclusivity to deal with the utility’s crippling legislative gift from the government essentially in return for rolling out telephone lines to the country’s rural areas.

Many Internet service providers were forced to buy their international bandwidth from Telkom instead of from other big-name global suppliers; while emerging technologies, such as voice-over Internet protocol, were quickly included in the definition that covered Telkom’s revenue streams.

The latter uses the IP protocol that computers use to connect and transmit data over the Internet and can as easily be used as a voice carrier ideal for companies with satellite offices in other cities that have the spare bandwidth and want to cut phone costs.

But while it is the end of an era for the national telephone utility, it is in the context of a more complex situation. The current state of the South African telecommunications industry is a bit like the parlous state our rugby, cricket and soccer fraternities are in. Instead of the players, coaches and administrators pointing fingers and blaming each other, it’s the government, regulator and incumbent that are at odds over who is to blame.


Telkom has led a charmed life so far. Until its five-year exclusivity deal expired on Tuesday given to it by former telecommunications minister Jay Naidoo in exchange for a 30% sale to Malaysian and United States investors, and a few million public-service installations – it had to fulfil a range of customer satisfaction and social responsibility targets. Considerable doubt has been expressed about how many phone lines remain active after installation, with non-payment and therefore disconnection thought to be rife.

Now Telkom has passed, in the words of a columnist last week, from a regulated monopoly to a de facto one.

The second national operator was meant to have been licensed a year ago, but was repeatedly delayed.

In the meantime, Minister of Posts, Telecommunications and Broadcasting Ivy Matsepe-Casaburri has blundered back and forth into the public domain with flawed legislation, the Telecommunications Amendment Act.

First, the government was going to license one additional operator, then decided on two. But when Telkom’s foreign consortium, renamed Thintana, made threatening noises about disinvesting, it was back to only one.

Another legal conflict that forms a backdrop is that the Independent Communications Authority of South Africa (Icasa) has been embroiled in an ongoing court case with Telkom over its latest round of rates increases.

The playing field is as turbulent as that of the national sports. There are realistic public expectations of performance and the government has insisted on a degree of representation that reflects the demographics of the country telephone lines in the oft-ignored rural areas.

However, the player has complained of too much pressure while the regulator, Icasa, has cried foul repeatedly. In the meantime, the foreign contracted “coach” (Telkom’s partner Thintana) threatened to withdraw when legislation didn’t seem to be going its way.

When the regulator was setting new legislation last year, the minister weighed in, publicly chastised them and did not approve it. This left the door open for Telkom to unilaterally increase its own rates in a regulatory vacuum. The rates increases in January are 5%, they say, but consumer lobby groups say the figure is more like 24%. The Advertising Standards Authority has already ruled against Telkom, saying its figures are misleading.

And every time one of these participants sneezes, the whole lot erupts into another media maul over who is responsible. The dark horse in this week’s events is Sentech, the state-owned broadcast signal distributor. Until now it broadcast television and radio, but overnight was transformed into a telecommunications operator with two licences one to operate a multimedia service and the other for an international gateway so it can act as a carrier-of-carriers, selling international bandwidth to operators such as Telkom.

The government has already ensured it has a stake in the second national operator, through Eskom and Transtel, which will provide services as part of the licence.

Interestingly, and almost prophetically, Icasa and the Competition Commission last month announced they had reached an agreement that defines their respective jurisdictions. Icasa will continue to be responsible for specific complaints about the actual telecommunications licences or legislation, while the commission will handle complaints about telecoms licensees abusing their dominant position.

Additional reporting by ITweb

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