This year’s state of the nation address was the fifth in which the president, like his predecessor, rightfully lamented the high cost of communications in the country.
This was echoed in the budget vote of the minister of communications a week later. Why, if this issue is so important, have we been unable to do anything about it in the past five years?
Pricing colloquiums have been held, threats have been made and moral suasion has been used on telecommunications companies, but little has changed.
The fact is that prices remain high because they are not acknowledged as the direct, if unintended, outcome of policy choices in the past 15 years.
The protection of incumbents through limitations on market entry and the absence of effective regulation has often resulted in a reduced or delayed range of services, generally at high prices. This has prevented South Africa from achieving the kind of cost competitiveness that would make it globally competitive.
It is clear from the presidency’s ”15-Year Telecommunications Policy Review” that the problems of low penetration rates of services other than mobile — and now most critically broadband — and the high charges for communications services across the board may well have been overcome by different policy decisions. But this evidence has not been used to inform policy reforms.
If we wish to optimise the potential of this sector to contribute to the economic turnaround of this country, to the improved quality of education and health, to the better delivery of public services and to the creation of decent jobs, now is the time for evidence-based policy.
Globally and locally, the benefits for all segments of society of effectively regulated, competitive teleÂcommunication markets is irrefutable. Despite early commitments to market liberalisation, South Africa never really embraced the reform model, neither did we develop an effective alternative.
Guided by reform orthodoxy of the time to modernise our indebted incumbent, we focused on privatisation rather than liberalisation of the market, maximising the sale price in exchange for high levels of protectionism. After the exclusivity period South Africa opted for a duopoly in the fixed network, despite considerable evidence at the time — globally and locally — in our own mobile sector of the negative competitive outcome.
More has been achieved by the threat of competition than by the limited competition introduced in the mobile and fixed-market segments in a weak regulatory environment.
Despite the relatively small market share that the third mobile entrant has gained, and the continued dominance of the incumbent mobile operators, the massive thrust into pre-paid services seven years ago that created a genuine mass market in this country was prompted by the threat of competition from aspirant new mobile entrants, all of which claimed to be able to service segments of the market regarded as uneconomic by the incumbents.
But their arrival as a marginal new entrant, roaming on the network of an incumbent, has not allowed them to challenge prices set by the dominant operators. If we are to reverse this suboptimal outcome and address our developmental challenges, the ideological baggage, of both unfettered markets and direct state control of services, which have polarised policy debates, must be ditched.
Although arguments for the reduction in the state where it is bloated or unproductive remain sound, this should not be confused with diminishing the strength of the state. Contrite former proponents in multilateral agencies of a reduction of the state across the globe have now warned against the dangers of reducing the state’s ability to implement the very economic and political reforms being proposed.
It is not a matter, then, of state involvement in the sector or not, but the nature of its involvement that will determine the success of the sector. The appropriate question is not ”How much state?” but ”What kind?”
Those calling for unfettered markets fail to acknowledge the complex mechanisms required to ensure successful ICT sectors across the globe.
In modern regulatory states, with the shift to an alternative mode of delivery in which the risk of investment and ownership of infrastructure was placed in private hands, public control was not relinquished. The conduct of private owners was subject to rules enforced by specialised agencies capable of managing this complex and dynamic sector. The result was the separation of public ownership and public control.
The imperfect nature of the teleÂcommunications market — with its high barriers to entry, the inherent bottlenecks and the required co-operation among competitors for seamless communications — makes the case for social and economic regulatory intervention indisputable.
The institutional arrangements to achieve this within the sector are critical to its success or failure. The roles of policy-making, implementation or regulation and operations need to be separated to avoid conflicts of interest. The independence of the various institutions from one another and their accountability within a common value system and policy framework is what ensures the functioning of the system and safeguards the institutions from abuse of powers or process.
Institutional dysfunctionality has resulted in the courts having to provide policy and regulatory clarity, not only administrative justice. This was evident in the recent Altech judgment, which broke the deadlock on licensing transfers and self-provisioning by Vans (value-added network service) operators that had immobilised the sector for years.
The failure by the Independent Communications Authority of South Africa to introduce the pro-competitive measures required of it by the Electronic Communication Act intended to open up the sector has had a chilling effect on new and aspirant entrants to the market and is a major contributor to the high cost of communications in the country.
Their efforts have been hampered by the contradictions and complexity of the law. In the short term, if the opportunities created by 2010 are to be optimised by the sector, the legal and regulatory bottlenecks in the law urgently need to be removed.
In the longer term the new administration needs to regain its credibility by engaging in a consultative and participatory policy review that will produce an environment conducive to investment, job creation and innovation and that will enable the sector to perform its backbone role in the national economy.
Alison Gillwald is the director of Research ICT Africa. This is an edited version of a recent Mail & Guardian/Neotel Thought Leader breakfast address in Cape Town