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Telkom attacked from all sides
Ana Monteiro
Posted: Tue, 22 Mar 2005 18:00 | © Moneyweb Holdings Limited, 1997-2005
State telecommunications company Telkom has come into the firing line once again with regards to its pricing policies.
A report by Reuters on Tuesday quoted the company’s CEO Sizwe Nxasana as saying that prices for local calls would be increased in order to compensate for the fall in profits likely to be experienced because the fixed-line operator cut prices in its long-distance national and international offerings at the beginning of the year.
Telkom spokesperson Xolisa Vapi told Moneyweb that international and long-distance calls were cross-subsidising the cost of carrying local calls and line rentals, and that with the cut in longer distance call charges, it may have to consider price increases.
Dobek Pater of Africa Analysis says through a combination of a lack of competition in the local-call market, and Telkom’s company structure, cross-subsidisation has resulted.
“This is an issue related to the need to create distinct divisions within Telkom along the lines of wholesale, retail, Internet and international services. Doing this would probably go a long way towards preventing cross-subsidisation between the different services. As long as this is legal, we cannot blame Telkom for using such tactics to compete in the market,” says Pater.
The lack of competition in the local call market means that there is no incentive for Telkom to lower rates, says Pater: “Carrying voice over Internet protocol (VoIP) is not going to pose any threat to Telkom in the local-call market. Telkom is now a public company with its primary responsibility to its shareholders, as expected. Yet, some stakeholders would want it now to behave more like a charity than a profit-orientated company.”
Pater says the responsibility of determining the competitive environment in the sector lies with the department of communications and parliament, and not with the state telecoms operator. “Telkom has lowered prices already in areas where competition is emerging – namely international and (to an extent) long-distance national calls and broadband. The way to ensure a reduction in local prices is to ensure sufficient competition in the market,” he says.
As if leaving consumers disgruntled again was not enough, Telkom has received news that its link to the undersea telecoms cables that connect Europe, Africa and Asia’s telephone and Internet traffic may be declared a national asset.
This week, the Financial Mail quoted the deputy director-general of communications, Pakamile Pongwana, as saying the Independent Communications Authority of SA (Icasa) had been approached by his department to review who has access to the Sat-3/Wasc/Safe cable.
Should the cable be declared a national asset, Internet service providers would be able to offer cheaper services, as they would no longer have to go through Telkom to obtain the link.
However, Pater warns against nationalisation as the answer to solving Africa’s bandwidth and pricing problems: “The more competition we have, the better. Major global investors around the world are private companies and governmental institutions, which prefer to invest in the private sector, as it is better known for efficiency and accountability. If the message we now send to the world is that South Africa is prepared to nationalise private assets, we may see a dwindling of investment in Africa not only in telecoms, but also other sectors of the economy.”
A project to install a similar cable on Africa’s eastern seaboard, labelled EASSy (East African Submarine Cable System), is underway, with both Telkom and the second national operator (SNO) expressing interest. Should Telkom no longer be able to claim the western cable as its assets, says Telkom’s Vapi, it would “think twice about investing in the Eastern seaboard project”.
Telkom is currently in court with Internet Solutions (IS), a subsidiary of Dimension Data, over a dispute concerning the state operator’s refusal to pay a share of the costs of upgrading peering networks. IS says that this is resulting in poor performance and higher costs. A decision on the matter is expected on Wednesday, says Vapi.
Telkom attacked from all sides
Ana Monteiro
Posted: Tue, 22 Mar 2005 18:00 | © Moneyweb Holdings Limited, 1997-2005
State telecommunications company Telkom has come into the firing line once again with regards to its pricing policies.
A report by Reuters on Tuesday quoted the company’s CEO Sizwe Nxasana as saying that prices for local calls would be increased in order to compensate for the fall in profits likely to be experienced because the fixed-line operator cut prices in its long-distance national and international offerings at the beginning of the year.
Telkom spokesperson Xolisa Vapi told Moneyweb that international and long-distance calls were cross-subsidising the cost of carrying local calls and line rentals, and that with the cut in longer distance call charges, it may have to consider price increases.
Dobek Pater of Africa Analysis says through a combination of a lack of competition in the local-call market, and Telkom’s company structure, cross-subsidisation has resulted.
“This is an issue related to the need to create distinct divisions within Telkom along the lines of wholesale, retail, Internet and international services. Doing this would probably go a long way towards preventing cross-subsidisation between the different services. As long as this is legal, we cannot blame Telkom for using such tactics to compete in the market,” says Pater.
The lack of competition in the local call market means that there is no incentive for Telkom to lower rates, says Pater: “Carrying voice over Internet protocol (VoIP) is not going to pose any threat to Telkom in the local-call market. Telkom is now a public company with its primary responsibility to its shareholders, as expected. Yet, some stakeholders would want it now to behave more like a charity than a profit-orientated company.”
Pater says the responsibility of determining the competitive environment in the sector lies with the department of communications and parliament, and not with the state telecoms operator. “Telkom has lowered prices already in areas where competition is emerging – namely international and (to an extent) long-distance national calls and broadband. The way to ensure a reduction in local prices is to ensure sufficient competition in the market,” he says.
As if leaving consumers disgruntled again was not enough, Telkom has received news that its link to the undersea telecoms cables that connect Europe, Africa and Asia’s telephone and Internet traffic may be declared a national asset.
This week, the Financial Mail quoted the deputy director-general of communications, Pakamile Pongwana, as saying the Independent Communications Authority of SA (Icasa) had been approached by his department to review who has access to the Sat-3/Wasc/Safe cable.
Should the cable be declared a national asset, Internet service providers would be able to offer cheaper services, as they would no longer have to go through Telkom to obtain the link.
However, Pater warns against nationalisation as the answer to solving Africa’s bandwidth and pricing problems: “The more competition we have, the better. Major global investors around the world are private companies and governmental institutions, which prefer to invest in the private sector, as it is better known for efficiency and accountability. If the message we now send to the world is that South Africa is prepared to nationalise private assets, we may see a dwindling of investment in Africa not only in telecoms, but also other sectors of the economy.”
A project to install a similar cable on Africa’s eastern seaboard, labelled EASSy (East African Submarine Cable System), is underway, with both Telkom and the second national operator (SNO) expressing interest. Should Telkom no longer be able to claim the western cable as its assets, says Telkom’s Vapi, it would “think twice about investing in the Eastern seaboard project”.
Telkom is currently in court with Internet Solutions (IS), a subsidiary of Dimension Data, over a dispute concerning the state operator’s refusal to pay a share of the costs of upgrading peering networks. IS says that this is resulting in poor performance and higher costs. A decision on the matter is expected on Wednesday, says Vapi.
