A new study commissioned by the South Africa Foundation into the cost of telecommunications in South Africa has highlighted the ‘excessive” pricing structures of Telkom and has recommended an increase in competition and regulation in order to bring South Africa in line with international best practice, promote economic growth and create jobs.
Khulile Boqwana, a financial and economic analysis manager for the Independent Communications Authority of South Africa (Icasa), said that the report was spot on and ‘very much in line with how we see things”.
‘It is vital that competition be introduced. However, history tells us that it takes a while for competition to be effective,” said Boqwana.
The report, titled Telecommunications Prices in South Africa: An International Peer Group Comparison, describes the regulatory changes that came into effect on February 1 as ‘a step in the right direction”, but finds that the high price of international bandwidth is an issue that needs ‘urgent attention”.
Internationally leased lines that allow business to transport data and voice communications outside South Africa are almost 400% more expensive than the average of the 11 countries surveyed. These prices have an impact on the cost of the Internet, private data networks and Voice over Internet Protocol (VoIP).
VoIP, which offers substantial cost savings for businesses, is dependent upon international cable bandwidth, and while Telkom holds the mono-poly and continues with its ‘exorbitant pricing” these savings will be severely limited, the report says.
Of the 10 product sectors studied, the only category where South Africa is cheaper than the average is international business calls. Local business calls are 200% more expensive than the average, and business asymmetric digital subscriber line (ADSL) costs are 147% above average. ADSL provides broadband using existing phone lines.
In five of the 10 product ranges surveyed, South Africa has the most expensive product.
The report says that high telecom prices are inhibiting the growth of the call centre industry, which the Department of Trade and Industry singled out as a potential growth area in 2002.
Telkom spokesperson Xolisa Vapi disputed the report, claiming that its ‘shortcomings and incorrect assumptions” compromise its credibility. He did acknowledge that Telkom is aware of the need to lower its tariffs for its voice and data services.
Previous reports by the Yankee Group and NUS Consulting reflected roughly similar findings. Telkom released excerpts from a report by Tarafica which suggested that Telkom’s prices were reasonable. The full report has not been made publicly available.
Boqwana told the Mail & Guardian that Icasa does not regulate the data sector ADSL falls within.
‘There is new legislation going to the minister for promulgation that will recommend that ADSL is regulated,” said Boqwana
Boqwana said that Telkom also had a policy of double-charging for ADSL connection that did not occur in international markets.
‘To use ADSL you have to have a voice line, so you are paying a rental for the phone and then you have to pay a rental for the ADSL modem as well and this is double-charging.”
The report also shows that Telkom shot itself in the foot during its exclusivity period between 1997 and 2003. It found that Telkom rolled out 2,8-million new lines, but the massive increase in local call charges resulted in 70% of these new lines being disconnected because of non-payment, causing the number of lines per 100 people to drop from 6,5 to 5,3.