Telecommunications in South Africa - Reaction, but not enough real action
(This article was first published on the SANGONeT NGO Portal on 6 September 2006).
The cost of telecommunications services in South Africa, and specifically the role of Telkom, has been the target of intense public scrutiny and criticism in recent years. Much attention has been focused on the quality and cost of Telkom’s services, public complaints about poor customer support and its excessive company profits. Various local and international studies have confirmed that South Africans pay some of the highest tariffs in the world for basic telephony and Internet access, directly impacting on the competitiveness of the local economy and the ability of the country to respond to its vast socio-economic challenges.
At the same time, Government and the Independent Communications Authority of South Africa (ICASA) have been ineffective in addressing this situation.
With the frustrations of South Africans regarding the costs of telecommunications and Internet services reaching a critical point, the long-awaited second national operator, Neotel, was officially launched on 31 August 2006 in Midrand. The launch of Neotel is recognised as an important development in reshaping the local telecommunications environment. Starting with the immediate provision of international wholesale services, Neotel aims to launch retail national and international fixed-line services by the end of March 2007. Its strategic objectives are to become the preferred provider of leading-edge telecoms in South Africa, to reduce the cost of doing business in the country, to bring the benefits of communications to the poor and to support and promote developing industries.
South Africans have been longing for an alternative to Telkom and the introduction of competition in the fixed-line environment. However, Neotel faces a number of serious challenges in meeting its licensing obligations, achieving its target of securing approximately 15 per cent of the local market in the next three to four years and responding to public expectations for improved services and reduced cost.
Based on experiences in other parts of the world, SNOs have struggled to make a meaningful impact in a market dominated by the incumbent provider. Neotel should therefore expect very little sympathy and support from Telkom. Interestingly enough, Telkom has announced that it is embarking on a major initiative aimed at improving customer service levels throughout the company, while it has also made a concerted effort in recent months to enter into longterm agreements with key clients.
Ultimately, Neotel might be the intervention that South Africa was waiting for. Unfortunately, it just arrived a few years too late. The introduction of three mobile operators has yet to result in significant competition on price, and the launch of Neotel creates a duopoly in the fixed-line environment with potentially the same outcome.
The launch of Neotel comes in the wake of the Electronic Communications Act that was passed earlier in 2006, creating a new licensing framework for the telecommunications sector, entrenching a regulatory model designed to promote competition and to limit the abuse of market power. These issues once again raise concerns about the ability of ICASA to play a meaningful role in this regard.
The Parliamentary Portfolio Committee on Communications conducted interviews with shortlisted candidates for vacant ICASA councillor positions last week in Cape Town. Riddled with internal problems in the recent past, ICASA’s failure to act decisively in response to the high tariff structure of Telkom is one of the main reasons for the unacceptable high costs of telecommunications in South Africa. In the past month ICASA once again missed an important opportunity to influence developments in the broadband market when it released new ADSL regulations without specifying a price ceiling for ADSL services or calling for the introduction of a single price structure based on international pricing models.
Furthermore, reports presented at the Convergence, Broadcast and Telecommunications Summit held in Johannesburg last week highlighted the problems experienced by underserviced area licensees (USALs), raising important questions about the viability of these initiatives in their current format.
The need for introducing more competition in the telecommunications market and reducing the cost of services, especially broadband, also received special attention during the annual meeting of the Presidential International Advisory Council on Information Society and Development that was held during the past weekend in Mpumalanga. Even President Mbeki acknowledged the need to address these issues as a matter of urgency, but no time frameworks for action were finalised.
Lastly, to further highlight public concerns and frustrations with the slow progress in transforming the local telecommunications environment, the Telecoms Action Group launched its national consumer advocacy campaign last week. The campaign calls on South Africans to donate money in support of a full-page advert in a national newspaper to protest the lack of alternatives in the local telecommunications sector.
Reflecting on all these developments, there is no shortage in awareness and understanding about the challenges facing the telecommunications environment in South Africa. However, it seems that the same mistakes are made repeatedly - either a lack of action or delayed action with limited results.
South Africa needs bold steps to be taken in transforming the telecommunications environment in the best interest of the future development of the country. The problems are well defined, political will by government and entrepreneurial intent by service providers are the missing ingredients.
The cost of telecommunications services in South Africa, and specifically the role of Telkom, has been the target of intense public scrutiny and criticism in recent years. Much attention has been focused on the quality and cost of Telkom’s services, public complaints about poor customer support and its excessive company profits. Various local and international studies have confirmed that South Africans pay some of the highest tariffs in the world for basic telephony and Internet access, directly impacting on the competitiveness of the local economy and the ability of the country to respond to its vast socio-economic challenges.
At the same time, Government and the Independent Communications Authority of South Africa (ICASA) have been ineffective in addressing this situation.
With the frustrations of South Africans regarding the costs of telecommunications and Internet services reaching a critical point, the long-awaited second national operator, Neotel, was officially launched on 31 August 2006 in Midrand. The launch of Neotel is recognised as an important development in reshaping the local telecommunications environment. Starting with the immediate provision of international wholesale services, Neotel aims to launch retail national and international fixed-line services by the end of March 2007. Its strategic objectives are to become the preferred provider of leading-edge telecoms in South Africa, to reduce the cost of doing business in the country, to bring the benefits of communications to the poor and to support and promote developing industries.
South Africans have been longing for an alternative to Telkom and the introduction of competition in the fixed-line environment. However, Neotel faces a number of serious challenges in meeting its licensing obligations, achieving its target of securing approximately 15 per cent of the local market in the next three to four years and responding to public expectations for improved services and reduced cost.
Based on experiences in other parts of the world, SNOs have struggled to make a meaningful impact in a market dominated by the incumbent provider. Neotel should therefore expect very little sympathy and support from Telkom. Interestingly enough, Telkom has announced that it is embarking on a major initiative aimed at improving customer service levels throughout the company, while it has also made a concerted effort in recent months to enter into longterm agreements with key clients.
Ultimately, Neotel might be the intervention that South Africa was waiting for. Unfortunately, it just arrived a few years too late. The introduction of three mobile operators has yet to result in significant competition on price, and the launch of Neotel creates a duopoly in the fixed-line environment with potentially the same outcome.
The launch of Neotel comes in the wake of the Electronic Communications Act that was passed earlier in 2006, creating a new licensing framework for the telecommunications sector, entrenching a regulatory model designed to promote competition and to limit the abuse of market power. These issues once again raise concerns about the ability of ICASA to play a meaningful role in this regard.
The Parliamentary Portfolio Committee on Communications conducted interviews with shortlisted candidates for vacant ICASA councillor positions last week in Cape Town. Riddled with internal problems in the recent past, ICASA’s failure to act decisively in response to the high tariff structure of Telkom is one of the main reasons for the unacceptable high costs of telecommunications in South Africa. In the past month ICASA once again missed an important opportunity to influence developments in the broadband market when it released new ADSL regulations without specifying a price ceiling for ADSL services or calling for the introduction of a single price structure based on international pricing models.
Furthermore, reports presented at the Convergence, Broadcast and Telecommunications Summit held in Johannesburg last week highlighted the problems experienced by underserviced area licensees (USALs), raising important questions about the viability of these initiatives in their current format.
The need for introducing more competition in the telecommunications market and reducing the cost of services, especially broadband, also received special attention during the annual meeting of the Presidential International Advisory Council on Information Society and Development that was held during the past weekend in Mpumalanga. Even President Mbeki acknowledged the need to address these issues as a matter of urgency, but no time frameworks for action were finalised.
Lastly, to further highlight public concerns and frustrations with the slow progress in transforming the local telecommunications environment, the Telecoms Action Group launched its national consumer advocacy campaign last week. The campaign calls on South Africans to donate money in support of a full-page advert in a national newspaper to protest the lack of alternatives in the local telecommunications sector.
Reflecting on all these developments, there is no shortage in awareness and understanding about the challenges facing the telecommunications environment in South Africa. However, it seems that the same mistakes are made repeatedly - either a lack of action or delayed action with limited results.
South Africa needs bold steps to be taken in transforming the telecommunications environment in the best interest of the future development of the country. The problems are well defined, political will by government and entrepreneurial intent by service providers are the missing ingredients.
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