HELL BENT ON CHANGE

Government says it is determined to push ahead with significant reforms to telecommunications policy in an effort to drive down prices.

Among other things, it has proposed allowing value-added network services (Vans) licensees (Internet service providers) to build their own networks independently of Telkom, and opening the local loop – the telephone lines that link consumers with Telkom’s telephone exchanges – to rivals.

It also wants to revisit SA’s radio frequency spectrum plan to ensure that more companies, including Vans operators, have access to spectrum, and to regulate access to the undersea cables that link SA with the world.

Sceptics say this isn’t the first time government has promised far-reaching changes to telecom policy. To date, though, little has been done to deal with the uncompetitive nature of the sector.

But communications department director-general Lyndall Shope-Mafole promises the process will be fast-tracked. The FM asked her about the planned changes to policy:

FM: Many critics say government’s 38% equity stake in Telkom is a conflict of interest given that if government were to implement policies that introduced greater competition, the dividends paid to it by Telkom would probably decline.

Shope-Mafole: I don’t think it’s a conflict. It’s not as if the dividends are pocketed by the ministers. There would be a conflict if it were just a few people benefiting; if the money were not used to build more schools and hospitals.

FM: Historically, there has been a reluctance to open the market to more competition. Why the sudden shift?

Shope-Mafole: I don’t think it’s a change as such. It’s just that there are certain policy determinations you have to take at certain points in time. Why were we protecting Telkom? [It was] so that we could get big value for it because it was going [public on the stock market]. It had to do with bringing investors into a company that is South African.

FM: But is it government’s responsibility to look after the shareholders of a private company?

Shope-Mafole: You must remember that government is a shareholder, too.

FM: Ah, but there’s the conflict.

Shope-Mafole: It’s not a conflict. Some of the public, very poor people, invested in Telkom. It got lots of people into the economy.

FM: In January, the minister clarified an earlier policy determination and stated that Vans operators could not build their own networks by self-providing telecom facilities. Now that looks set to change.

Shope-Mafole: Self-provisioning by Vans is not necessary in light of the Convergence Bill [proposed new legislation designed to govern the sector]. If Vans want to apply for a licence to provide infrastructure, they can do so.

FM: But the minister will still have to issue an invitation to apply for an infrastructure licence.

Shope-Mafole: Yes, but it’s not as tight as it was in the previous act. The minister gets involved to ensure that the economy is able to handle it, if I can put it that way. But as a Vans operator you will be able to apply for [an infrastructure] licence.

FM: But would it be issued?

Shope-Mafole: Why not? I have no doubt it would.

FM: So, once the Convergence Bill is enacted, anyone may apply for a licence to offer infrastructure services?

Shope-Mafole: Yes.

FM: And it’s unlikely they would be turned down?

Shope-Mafole: It’s unlikely, yes.

FM: In other words, the market is being opened to full-scale competition?

Shope-Mafole: Yes.

FM: Is it not going to be a case of the minister waiting another two or three years before deciding to issue a licence for a third network operator? Could we have 20 infrastructure operators by the end of next year?

Shope-Mafole: If we feel the market can bear it, yes.

FM: Who will determine that?

Shope-Mafole: Icasa can make recommendations and the minister can issue any policy directives she wants.

FM: Why not allow the market to determine the number of competitors?

Shope-Mafole: Some governments give everything to the market. Others don’t. We have taken the middle course. You don’t want an economy where 50% of your companies fail. Different governments impart their policies in different ways. We have decided on the middle road – we call it managed liberalisation.

FM: What’s the advantage of managed liberalisation?

Shope-Mafole: Often you have to cushion the negative impact of liberalisation.

FM: Such as what?

Shope-Mafole: Such as people who get laid off.

FM: But in a competitive market, other operators would snap up those people.

Shope-Mafole: No, they wouldn’t.

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© Financial Mail

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HELL BENT ON CHANGE