| South Africa has decided not to allow potential competitors to Telkom to build their own networks despite an industry restructuring intended to end Telkom’s monopoly.
Communications Minister Ivy Matsepe-Casaburri said value-added network service providers (VANS) would still have to purchase access to the telecommunications network from Telkom or other operators, rather than building their own infrastructure.
The decision will make it much more difficult for VANS providers to make money in South Africa, and will likely draw criticism from consumer groups who say competition is vital to reduce prices. However, the decision will benefit Telkom, which faces a threat to its fixed-line monopoly starting on February 1 when VANS providers are allowed to provide cut-price phone calls over the Internet.
"It looks like the government has been pushed into a corner where it has had to compromise," said Citigroup analyst Rhys Summerton. "It would be strange for them to come out with harsh restrictions on Telkom when they are still stakeholders."
Summerton, who says deregulation is much less of a threat to Telkom than competition from mobile telephony, said the impact on Telkom would be minimal since few VANS would be able to afford to build their own networks. VANS will still have to use Telkom's lines, or rent network capacity from other operators like mobile operators and power and railway companies Transtel and Eskom. Under the new rules, mobile operators MTN, Vodacom and Cell C would be allowed to provide their own links connecting base stations, instead of paying Telkom, the minister said.
The main issue for VANS seeking to lease facilities from other network providers will be obtaining a fair price that allows effective competition. Such pricing is unlikely to exist without a carefully constructed regulatory regime from the regulator ensuring a level playing field.
The latest developments in South Africa’s telecommunications sector make a compelling case for independent regulatory bodies. The government controls Telkom and through the Communications Ministry, they are taking regulatory actions which will not diminish Telkom’s business, potentially at the expense of the end-users of telecommunications services – businesses and consumers in both urban and rural areas.
Intelecon Research & Consultancy Ltd. 01/02/2005
Source: Reuters |