The government talks the talk; Deputy President Phumzile Mlambo-Ngcuka in a briefing at Parliament announced that cheaper broadband was a pillar of its growth strategy.
But it is walking the walk too; soon-to-be promulgated legislation taking on Telkom’s SAT-3 monopoly states that the Minister of Communications, Ivy Matsepe-Casaburri, will declare any exclusivity provision contained in licence agreements invalid.
The Electronics Communication Bill would as a result allow the government to end Telkom’s exclusive access and landing rights to the undersea submarine cable SAT-3/WASC/SAFE, which critics argue has allowed the fixed-line operator to charge exorbitant access costs and has left a substantial proportion of the cable’s capacity underutilised.
The competition manager for the Independent Communications Authority of South Africa (Icasa), Vuyo Batyi, says the Department of Communications has expressed its intention to declare landing rights for undersea submarine cables an essential service and Icasa is currently conducting a study into the legality of such an action.
Bandwidth — its high cost and seeming scarcity — is now one of the prime evils that the government has identified as preventing the country from reaching higher levels of growth.
Mlambo-Ngcuka, tasked with coming up with a plan to grow the economy at 6% annually, this week announced a plan to roll out a wireless broadband network in conjunction with telecoms parastatal Sentech.
The deal forms part of the Accelerated and Shared Growth Initiative for South Africa (Asgisa) in which the government plans to spend R370-billion on infrastructure roll-out.
Mlambo-Ngcuka said the move was part of a plan to reduce rapidly telephony costs in South Africa, which included the completion of a submarine cable project that will provide competitive international access to Africa and will help stimulate investment in call centre operations.
This follows earlier moves that allow municipalities from this year to offer spare bandwidth capacity to consumers via Internet service providers.
But the primary bandwidth constraint remains the chokehold that monopolist Telkom has on international bandwidth, and specifically the SAT-3/WASC and SAFE undersea cables, which connect the country to Europe and Asia.
The 14 350km SAT-3/WASC cable, which runs along the west coast of Africa, was launched in 2002 and funded by a consortium of 36 telecoms companies.
Telkom South Africa is the largest investor, contributing $85-million of the total $650-million development. This entitled it to 20% of the cable’s 40 gigabyte per second capacity, which can be upgraded to 120 gigabytes per second.
Critics argue that Telkom’s controlling interest in bandwidth access and landing rights for the cable, as the only South African investor, has allowed it to charge exorbitant access costs and has left a substantial proportion of the cable’s capacity underutilised.
A report titled Telecommunications Prices in South Africa, which was prepared for the South Africa Foundation by Genesis Analytics, compared South African telecoms prices with those of 14 other peer-group countries and found that South Africa had the highest monthly asymmetric digital subscriber line (ADSL) fees, 148% higher than the average.
The report stressed that, because of the substantial costs of laying a submarine cable system, investors tended to maximise returns by attempting to “light” the cable as quickly as possible by on-selling bandwidth.
The report highlighted the fact that despite this trend the SAT-3/WASC and SAFE cables were operating well below potential capacity and stated that if Telkom’s high international bandwidth prices could not be justified by cost conditions, the issue of excessive pricing must be raised.
Attempts by the Mail & Guardian to ascertain from Telkom what portion of its SAT-3 capacity is currently underutilised were rebuffed by Telkom, which declared the information “commercially sensitive”.
Similarly, attempts to gain access to its bandwidth rental costs were declined by Telkom, which merely stated that its costing and pricing techniques were based on international accounting practices.
But the potential for greater competition is on the horizon with negotiations taking place for the development of the 9 900km East Africa Submarine System (EASSy) cable, which will run along the east coast of Africa and is expected to be operational by mid-2007.
Unlike the case with the SAT-3 cable, a number of South African telecom operators are investigating a potential investment. Telkom and Vodacom, which is 50% owned by Telkom, have already expressed an interest in the development, while parastatal Sentech is also set to invest.
The Second National Operator (SNO) is also said to be investigating the development but has refused to confirm any investment, stating that it is currently looking at a number of options in relation to international bandwidth access.
SNO spokesperson Rajeev Sinha said that it was still early days and the SNO was yet to announce a formal approach to invest in the EASSy cable. The SNO does have access to the SAT-3 cable through Indian conglomerate Tata’s subsidiary VSNL, which invested in the cable’s development.
The SAT-3 members’ agreement , however, prevents VSNL from building a landing point in South Africa however. The result is that the SNO would have to pay its fixed-line competitor, Telkom, for landing rights to access the SAT-3 capacity owned by VSNL.
Sinha points out that this is set to change in March next year when changes in the SAT-3 regulations are expected and there will be a move to a partly open-access cable, allowing greater flexibility for the SNO when negotiating landing rights for access to the VSNL SAT-3 capacity with Telkom.
What the Bill says
Section 43 of the Bill stipulates:
(10) An electronic communications network service licensee may not enter into any agreement or other arrangement with any person for access to, or use of, any international electronic communications facilities, including submarine cables and satellites, that —
(a) contains an exclusivity provision;
(b) contains provisions that create undue barriers to access to and use of such international communication facilities; or
(c) otherwise restricts any party to such agreement or other arrangement from —
(i) leasing;
(ii) selling; or
(iii) otherwise entering into an agreement with any licensee under this Act or person providing services pursuant to a licence exemption for access to, and use of, such international electronic communications facilities.
(11) Any exclusivity provision contained in any agreement or other arrangement that is prohibited under subsection (10) is invalid from a date to be determined by the minister after consultation with relevant parties.