Court heralds big bang in SA telecoms
Altech CEO Craig Venter is ecstatic. In a landmark judgment, Pretoria high court acting judge Norman Davis found in favour of the JSE-listed telecommunications company last Friday in a case that has thrown government’s policy of “managed liberalisation” of the telecom sector out the window. (Full Judgement available here: http://www.ellipsis.co.za/?p=239)
Barring a successful appeal, it heralds the introduction of full-scale competition in SA telecoms.
Government had wanted the industry opened gradually, with the idea of attracting deep-pocketed investors to build networks of national scale. The theory is that investors will be willing to spend billions of rand on new networks only if they are shielded to some extent from market forces. Telkom rival Neotel was licensed in this way.
But Davis’s ruling throws open the market to virtually anyone who wants to build a communications network.
Altech had served papers on communications minister Ivy Matsepe-Casaburri, the Independent Communications Authority of SA (Icasa) and Icasa chairman Paris Mashile. It argued that its value-added network service (Vans) licence gave it the right to build a network. There are hundreds of Vans licensees, most of them Internet service providers.
In finding in favour of Altech, the court has transformed SA into one of the most liberalised telecom markets in the world, with all Vans licensees potentially able to bypass Telkom and other licensed infrastructure operators.
Of course, government and Icasa could appeal. Some industry players think this is inevitable. “I don’t think an appeal will be successful,” says Edwin Thompson, Verizon Business SA’s executive for operations and legal & regulatory affairs. “But the [current] ruling would not be in force until the appeal is heard.”
Venter (pictured above) feels vindicated. Speaking on the ZA Tech Show podcast earlier this week, he said Altech had been “unfairly criticised” for potentially delaying the process of liberalisation – Icasa had already begun the process of converting Vans licences under the Electronic Communications Act.
Some industry players accused Altech of holding up the licence conversion process because it was selfishly worried that it would not be issued with the infrastructure licence it would need to build a broadband network.
The industry now agrees that Altech took the right action. “All credit to Craig Venter and Altech for starting this process,” says Vox Telecom executive chairman Tony van Marken. “This is the best possible result. It means everyone can be treated equally. I’m just hoping Icasa and the minister don’t appeal.”
Nashua Mobile MD Mark Taylor says if government contests the ruling, people will ask serious questions about whether Matsepe-Casaburri has the interests of consumers at heart. “If the minister appeals, you’d have to question what her real intentions are,” he says.
But not everyone is convinced that the judgment is good news. Kristoff Puelinckx, managing partner of emerging-markets telecom advisory firm Delta Partners, says it could do the country more harm than good. He is concerned that it could undermine foreign investment. “You don’t want too much competition in too short a period of time,” he says. “Whenever a country liberalises too quickly it raises eyebrows.”
Puelinckx says he’d be concerned about Neotel potentially cutting back its investment plans because of the judgment.
Both Icasa and the department of communications have raised the spectre of hundreds of Vans operators digging up the roads to lay fibre-optic cables.
But Van Marken says this was never going to happen. All but a handful of companies — Vox, Altech, MWeb and Dimension Data’s Internet Solutions (IS) — lack the financial backing to build networks of any real scale.
The fact that incumbent operators are also already spending billions of rand on national backhaul and metropolitan fibre networks will serve to discourage new entrants from building additional capacity, for fear of not seeing a return on their investment.
The issue will now shift to the allocation of spectrum, particularly in frequency bands that are used to deliver broadband services. Because spectrum is scarce, Icasa will need to find a fair way of divvying it up. But the authority has already courted controversy by saying it will provide spectrum only to black-controlled companies when it comes to the lucrative 2,6GHz band.
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