Lesley Stones
2 October 2007
Johannesburg — THE government's policy of managed liberalisation for the telecoms sector has failed so badly that the gap between SA and the rest of the world is widening, say analysts.
While almost every other country was seeing a noticeable reduction in state intervention, SA was suffering increased state intervention in the telecoms, technology and broadcasting sectors. As a result, the country had slipped down several global benchmarking indices because of its high-priced telecoms and internet access, said Alison Gillwald, a research director at Wits University's Learning Information Networking and Knowledge (Link) Centre.
"Compared with the rest of the world we are not catching up, the gap is getting bigger," she said. "Increasing government ownership in the sector isn't inherently wrong but evidence is showing it isn't working."
SA was "performing dismally" in the telecoms stakes, especially for broadband access and affordability, she said. The cost of fixed- line calls was extremely high and companies paid "exponentially" more for Telkom's leased lines than companies elsewhere.
The cost of cellular services was also extraordinarily high and more tariff regulations were required to break the effective duopoly of Vodacom and MTN. The cellular operators indulged in price-matching rather than real competition, Gillwald said at a media briefing last week.
James Hodge, a director of Genesis Analytics, said MTN and Vodacom were not a complete cartel, but their rates were higher in SA than in the other countries where they operated.
"If MTN can offer Uganda lower prices than they are offering us, you have to question whether there is enough pressure on them to bring down prices."
Instead of gradual price cuts every year, consumers in SA needed the regulator to impose a one-off major price cut, he said.
Gillwald said the government's desire to control the telecoms infrastructure through Telkom, Infraco and now through undersea broadband cables was a conflict of interest when the state was the policy maker as well as an industry player.
The latest decision by the communications department to ban undersea cables from landing in SA unless they were majority locally owned could prevent cheap bandwidth from reaching the country, particularly since the regulatory environment was already not conducive to foreign investment, she said.
Indian professor Mukul Gupta of the Management Development Institute in Gurgaon said SA could learn from India. Reforms to India's telecoms sector had a direct effect on slashing the cost and increasing the penetration of telephony. The resulting economic surge had moved 103- million people out of poverty.
Specific steps had been to encourage foreign investment, to ensure there were at least four cellular operators in each region, and to force down the price of bandwidth by 25% overnight.
Together, Indian operators were signing up 5-million more users every month, and customers paid the lowest call fees in the world, Gupta said.
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