ICASA ENQUIRY INTO TELKOM’S SAT-3 MONOPOLY AWAITS GOVERNMENT RESPONSE

February 5, 2006

An enquiry into whether Telkom should be allowed to retain its monopoly on an undersea cable that provides most of SA’s international bandwidth is on hold, pending clarification from government. A decision on whether Telkom’s stake in the Sat-3 cable should be declared an essential service is crucial to the cost of voice and data services.

Telkom now sets its own fees for other operators buying bandwidth on Sat-3. Internet service providers claim the fees are six or seven times higher than they should be. Since the cost is passed on to consumers, voice calls and internet access are artificially expensive for everyone. If Sat-3 was declared an essential service, Telkom’s fees would be capped by the Independent Communications Authority of SA (Icasa).

Sentech, the state-owned signal carrier, told Parliament in 2004 that Telkom’s monopoly over the cable hurt everyone’s ability to enjoy affordable high-speed internet access. But it took until March last year before the communications department asked Icasa to investigate.

This week, an Icasa official said they were back in limbo. "We have drafted a discussion document but we are waiting for formal approval on whether to go ahead," she said.

"There are rumours that the (communications) minister will soon issue a declaration that it is an essential facility. We continued to draft the documents looking at the issues and the legal position for an inquiry, but now it’s a matter of whether there will be a ministerial determination."

Icasa wrote to the communications department in October asking for clarity, but has not had a reply. Last week the department said the minister would issue a policy statement after President Thabo Mbeki’s state of the nation address.

Telkom vehemently opposes Sat-3 being declared an essential service, arguing its investment cannot be recouped if its fees are capped. Telkom has a 13% stake in the 27450km cable linking Africa to Portugal, and paid $85m of the $650m project as the largest of 36 shareholders. But as Telkom was state-owned at the time, it was using public money.

The question of whether Sat-3 is a national asset is back in the spotlight because of a meeting in Johannesburg this week to discuss a new undersea cable around Africa’s east coast.

The $200m Eastern Africa Submarine Cable System (EASSy) will run from Mtunzini in SA to Port Sudan, with landing points in seven other countries. A back-haul system will provide inland links to countries including Botswana, Burundi and Rwanda.

So far 24 telecoms companies from Africa and abroad are in the consortium, including Telkom and Sentech. Telkom looks set to continue with its investment, despite the risk of having its profits from Sat-3 slashed.

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