Debbie
27-09-2005, 09:09 AM
I am sending the following to Proudly South African via post. It is long, but the gist of it is to question Telkom's membership of PSA, and point out that Telkom is partly the reason for the lack of credibility of the PSA brand.
Dear Proudly South African,
I am writing to Proudly South African as I wish to question the criteria that PSA uses in admitting members to the campaign. The case of Telkom provides an excellent example for me to illustrate my concerns, as well as lodge a complaint about Telkom’s membership of PSA.
Job Creation Criteria
The Department of Trade and Industry has said that South Africa has lost the business of 32 international companies (nine of which were major multinationals) due to Telkom’s prices. The refusal of international companies to continue to invest in South Africa has clearly cost our countries thousands of jobs. Telkom is directly responsible for the loss of jobs in SA, yet they continue to be members of PSA. Why is this?
Telkom has retrenched over 30 000 people since 1997. Telkom plans to continue to reduce their workforce by thousands once the moratorium currently in place expires. How is it that a company which has retrenched tens of thousands and plans to retrench thousands more is allowed to be a member of PSA?
Several reports such as the Yankee Group report (commission by the government) and the more recent Genesis report have concluded that Telkom’s excessive prices have prevented the creation of tens of thousands of call-center jobs. SA is an ideal location for international call centers. However Telkom’s prices are a barrier to these jobs materialising. The Genesis Report concluded that Telkom’s prices have cost SA 150 000 call-centre jobs alone. Telkom is obviously preventing job creation in certain sectors of our economy. However they are allowed to be members of PSA. How come?
The issues raised above do not even take into account the economy-wide down-stream effects of Telkom’s excessive prices. Report after report (NUS, Efficient Research, Yankee Group, Genesis, LINK Center) continue to say that Telkom’s prices are holding SA’s economy back and massively harming SMMEs and entrepreneurs in SA. In fact I challenge PSA or Telkom to show me one academic study which concludes that Telkom’s prices are NOT bad for our economy. If an elementary principle of PSA is job creation and the boosting of SA’s economy, then how can Telkom be allowed to be a member of PSA? This has led me, amongst others, to question how committed PSA is to job creation in SA.
Business Abuse
In 2003, a number of Value-Added Network Services (VANS) companies complained to the Competition Commission about Telkom. VANS depend on Telkom for infrastructure, and Telkom has a legal duty to meet the VANS’ requirements. The complaint alleged that Telkom was, amongst other things, forcing VANS into unfavourable, discriminatory and uncompetitive terms and conditions of service. In February 2004, the Competition Commission (CC) found that:
Telkom has abused its dominant position by engaging in a pattern of uncompetitive practices. These include Telkom imposing unreasonable conditions for it to provide telecommunication services to the VANS. Telkom refuses to provide… facilities unless the VANS providers conclude contracts which subject them to Telkom’s dictates. As the VANS cannot operate without these facilities and must obtain them from Telkom, they have no choice but to subject themselves to Telkom’s dictates.
…
This anti-competitive conduct is likely to have a serious impact on both the ICT sector and broader economic development. [Telkom’s actions have been] to the detriment of the development and growth of the ICT sector generally.
The CC was so perturbed by Telkom’s abuses that they recommended the maximum fine they were allowed to under the Competition Act (over R3 billion, or 10% of turnover).
Again, I question why a company who’s actions have been projected by the CC as likely to have “a serious impact on… broader economic development” is allowed to be a member of PSA. Dos PSA support this kind of behaviour? If not, then why has PSA not yet stripped Telkom of their membership?
Consumer Abuse
Further abuse by Telkom is found in the contract that they force telephone line owners to enter into. When one applies for a Telkom phone line, one is required to sign away the Constitutional right to have ordinary disputes with Telkom resolved in a court or similar forum which is open to public scrutiny. If one amends Telkom’s Standard Terms and Conditions to reassert the supremacy of the Constitution’s Bill of Rights (Chapter Two), Telkom refuses to provide a telephone line. (More information on this can be found at xxxx). In other words, unless one consents to giving up a particular Constitutional right, one cannot have a telephone line. If PSA recognises the Constitution of the Republic of South Africa as the highest law of the land, then why does PSA allow one of their members to force consumers into contracts whereby a Constitutional right is signed away?
More than 2 million telephone lines have been disconnected in South Africa since the year 2000. Residential teledensity (i.e. the number of telephone lines per 100 households) in SA is shockingly low (less than 6%), one of the lowest in the world for a middle-income country. In fact, South Africa is one of only a few countries in the entire world where the number of fixed telephone lines is on a general downward trend. People simply cannot afford Telkom’s phone lines. In addition to this, Telkom is one of the only phone companies in the entire world to keep increasing the price of basic telecommunications services. Why does PSA allow a company which is:
1) abusing its monopoly position;
2) carrying out actions, against worldwide trends, which are to the detriment to the development of South Africa
… to retain PSA membership?
Wasting Taxpayer’s Money and Deliberately Stalling Beneficial Competition through Litigation Techniques
Telkom is wasting South Africa’s monetary resources by engaging in litigation in attempts to slow down the introduction of competition in the telecommunications sector. Telkom is also using unnecessary drawn-out litigation processes to protect their profits, and this is coming at the expense of the consumer. Even President Thabo Mbeki has recognised these tactics used by Telkom. In his 2005 State of the Nation speech, President Mbeki blamed the delay in introducing greater competition into the telecoms sector on “legal processes beyond government’s control”. Furthermore, Telkom continues to act as if they are above the laws of South Africa. For example, I refer you to the 2002 Price Cap debacle, where Telkom blatantly refused to file their new rates in accordance with the ministerial-approved new regulations (the matter landed up in court, and after months a compromise was struck with ICASA). Another example is the Least-Cost Routing affair, where Telkom tried (but failed) to use the courts to force consumers to remove cellphone services from switchboards (this is a service which helps reduce the costs of communicating in SA). Yet another example is Telkom’s attempts to challenge the jurisdiction of the Competition Commission and the Competition Tribunal. In an attempt to get out of the recommended fine suggested by the Competition Commission to the Competition Tribunal, Telkom is basically alleging that they are not subject to the Competition Act. Telkom also continues to gain exemption from the Public Finance Management Act, an Act which seeks to ensure the accountability and good corporate governance of state and partially state owned institutions. These are the actions of an abusive, bullying corporate; and I ask why is it that this company is allowed to be a member of PSA while it continues to behave in such a manner?
Making Super-Profits at the expense of all South African
Telkom made a net profit of over R6,8 billion in the financial year to March 2005. In the same time period, they increased the prices of their most basic services. Despite making these super-profits, Telkom also decreased the number of public payphones in operation. These are evidently anti-South African activities. International telecommunications industry analysts, such as Ewan Sutherland, have slammed Telkom and accused Telkom of super-exploiting consumers for super-profits. How can PSA let this company, whose actions scream ‘anti-consumer’, be a member of PSA?
Dear Proudly South African,
I am writing to Proudly South African as I wish to question the criteria that PSA uses in admitting members to the campaign. The case of Telkom provides an excellent example for me to illustrate my concerns, as well as lodge a complaint about Telkom’s membership of PSA.
Job Creation Criteria
The Department of Trade and Industry has said that South Africa has lost the business of 32 international companies (nine of which were major multinationals) due to Telkom’s prices. The refusal of international companies to continue to invest in South Africa has clearly cost our countries thousands of jobs. Telkom is directly responsible for the loss of jobs in SA, yet they continue to be members of PSA. Why is this?
Telkom has retrenched over 30 000 people since 1997. Telkom plans to continue to reduce their workforce by thousands once the moratorium currently in place expires. How is it that a company which has retrenched tens of thousands and plans to retrench thousands more is allowed to be a member of PSA?
Several reports such as the Yankee Group report (commission by the government) and the more recent Genesis report have concluded that Telkom’s excessive prices have prevented the creation of tens of thousands of call-center jobs. SA is an ideal location for international call centers. However Telkom’s prices are a barrier to these jobs materialising. The Genesis Report concluded that Telkom’s prices have cost SA 150 000 call-centre jobs alone. Telkom is obviously preventing job creation in certain sectors of our economy. However they are allowed to be members of PSA. How come?
The issues raised above do not even take into account the economy-wide down-stream effects of Telkom’s excessive prices. Report after report (NUS, Efficient Research, Yankee Group, Genesis, LINK Center) continue to say that Telkom’s prices are holding SA’s economy back and massively harming SMMEs and entrepreneurs in SA. In fact I challenge PSA or Telkom to show me one academic study which concludes that Telkom’s prices are NOT bad for our economy. If an elementary principle of PSA is job creation and the boosting of SA’s economy, then how can Telkom be allowed to be a member of PSA? This has led me, amongst others, to question how committed PSA is to job creation in SA.
Business Abuse
In 2003, a number of Value-Added Network Services (VANS) companies complained to the Competition Commission about Telkom. VANS depend on Telkom for infrastructure, and Telkom has a legal duty to meet the VANS’ requirements. The complaint alleged that Telkom was, amongst other things, forcing VANS into unfavourable, discriminatory and uncompetitive terms and conditions of service. In February 2004, the Competition Commission (CC) found that:
Telkom has abused its dominant position by engaging in a pattern of uncompetitive practices. These include Telkom imposing unreasonable conditions for it to provide telecommunication services to the VANS. Telkom refuses to provide… facilities unless the VANS providers conclude contracts which subject them to Telkom’s dictates. As the VANS cannot operate without these facilities and must obtain them from Telkom, they have no choice but to subject themselves to Telkom’s dictates.
…
This anti-competitive conduct is likely to have a serious impact on both the ICT sector and broader economic development. [Telkom’s actions have been] to the detriment of the development and growth of the ICT sector generally.
The CC was so perturbed by Telkom’s abuses that they recommended the maximum fine they were allowed to under the Competition Act (over R3 billion, or 10% of turnover).
Again, I question why a company who’s actions have been projected by the CC as likely to have “a serious impact on… broader economic development” is allowed to be a member of PSA. Dos PSA support this kind of behaviour? If not, then why has PSA not yet stripped Telkom of their membership?
Consumer Abuse
Further abuse by Telkom is found in the contract that they force telephone line owners to enter into. When one applies for a Telkom phone line, one is required to sign away the Constitutional right to have ordinary disputes with Telkom resolved in a court or similar forum which is open to public scrutiny. If one amends Telkom’s Standard Terms and Conditions to reassert the supremacy of the Constitution’s Bill of Rights (Chapter Two), Telkom refuses to provide a telephone line. (More information on this can be found at xxxx). In other words, unless one consents to giving up a particular Constitutional right, one cannot have a telephone line. If PSA recognises the Constitution of the Republic of South Africa as the highest law of the land, then why does PSA allow one of their members to force consumers into contracts whereby a Constitutional right is signed away?
More than 2 million telephone lines have been disconnected in South Africa since the year 2000. Residential teledensity (i.e. the number of telephone lines per 100 households) in SA is shockingly low (less than 6%), one of the lowest in the world for a middle-income country. In fact, South Africa is one of only a few countries in the entire world where the number of fixed telephone lines is on a general downward trend. People simply cannot afford Telkom’s phone lines. In addition to this, Telkom is one of the only phone companies in the entire world to keep increasing the price of basic telecommunications services. Why does PSA allow a company which is:
1) abusing its monopoly position;
2) carrying out actions, against worldwide trends, which are to the detriment to the development of South Africa
… to retain PSA membership?
Wasting Taxpayer’s Money and Deliberately Stalling Beneficial Competition through Litigation Techniques
Telkom is wasting South Africa’s monetary resources by engaging in litigation in attempts to slow down the introduction of competition in the telecommunications sector. Telkom is also using unnecessary drawn-out litigation processes to protect their profits, and this is coming at the expense of the consumer. Even President Thabo Mbeki has recognised these tactics used by Telkom. In his 2005 State of the Nation speech, President Mbeki blamed the delay in introducing greater competition into the telecoms sector on “legal processes beyond government’s control”. Furthermore, Telkom continues to act as if they are above the laws of South Africa. For example, I refer you to the 2002 Price Cap debacle, where Telkom blatantly refused to file their new rates in accordance with the ministerial-approved new regulations (the matter landed up in court, and after months a compromise was struck with ICASA). Another example is the Least-Cost Routing affair, where Telkom tried (but failed) to use the courts to force consumers to remove cellphone services from switchboards (this is a service which helps reduce the costs of communicating in SA). Yet another example is Telkom’s attempts to challenge the jurisdiction of the Competition Commission and the Competition Tribunal. In an attempt to get out of the recommended fine suggested by the Competition Commission to the Competition Tribunal, Telkom is basically alleging that they are not subject to the Competition Act. Telkom also continues to gain exemption from the Public Finance Management Act, an Act which seeks to ensure the accountability and good corporate governance of state and partially state owned institutions. These are the actions of an abusive, bullying corporate; and I ask why is it that this company is allowed to be a member of PSA while it continues to behave in such a manner?
Making Super-Profits at the expense of all South African
Telkom made a net profit of over R6,8 billion in the financial year to March 2005. In the same time period, they increased the prices of their most basic services. Despite making these super-profits, Telkom also decreased the number of public payphones in operation. These are evidently anti-South African activities. International telecommunications industry analysts, such as Ewan Sutherland, have slammed Telkom and accused Telkom of super-exploiting consumers for super-profits. How can PSA let this company, whose actions scream ‘anti-consumer’, be a member of PSA?