Telkom’s recent designation as “lead agency” for the South African government’s national broadband network has stirred up quite a controversy.
Terms like “monopoly” and “market failure” are being thrown around by ANC and opposition politicians, with neither side demonstrating any real understanding of South Africa’s broadband landscape.
While the DA claims the government handed Telkom a broadband monopoly in South Africa, Minister of Telecommunications and Postal Service Siyabonga Cwele said “the market” had failed the poor.
For this reason, Cwele said the government took a decision to intervene in the rollout of broadband to “bridge the digital divide”.
What the government seems to forget is that it is thanks to its “interventions” that South Africa’s broadband market is not in a better state.
The ANC tried to kill Vodacom, MTN
The desire of the ANC to control telecommunications in South Africa dates back to before 1993, when it threatened to revoke the cellular licences granted to Vodacom and MTN as soon as it came to power.
In his book Second is Nothing, former Vodacom and Cell C CEO Alan Knott-Craig said the ANC wanted cellular telecommunications to be a separate, autonomous parastatal service offered by Telkom.
According to a paper by Professor Robert Horowitz entitled South African Telecommunications: History and Prospects, the ANC believed the National Party government was unilaterally restructuring the telecoms industry – “a form of privatization through the back door”.
The ANC also did not support the adoption of the GSM standard, but reportedly preferred the American Mobile Phone Standard (AMPS), and the old Scandinavian analogue system.
Had the ANC won its battle against the GSM standard, it may have set South Africa back many years in the rollout of mobile networks and delivering communications services to citizens.
Horowitz wrote that the battle over cellular licences and standards was eventually defused after former presidents Nelson Mandela and FW de Klerk met over the issue.
In the end, the ANC agreed to not oppose the granting of the cellular licences, and in exchange the NP government agreed to back down on planned amendments to the Post and Telecommunications Act.
Trying to monopolise the Internet with Telkom
Some years later, after the ANC had been voted into power, Telkom tried to convince the South African Telecommunications Regulatory Authority (Satra) that its state-sanctioned monopoly over voice services should extend to the Internet.
Mercifully, in 1997 Satra announced that the Internet is an area of competition in terms of the Telecommunications Act, blocking Telkom’s bid to control access to it.
However, this did nothing to address Telkom’s almost total monopoly on fixed-line infrastructure.
The government granted Telkom an “exclusivity period” for 5 years from 1997 to 2002, during which time it had to prepare for competition that would explode onto the scene.
No competition to Telkom launched in 2002.
This was despite the Minister of Communications at the time, Ivy Matsepe-Casaburri, publishing a policy stating that two additional network operators would be licensed to compete with Telkom.
It is also interesting to note that between 1997 and 2004 Telkom was 30% owned by an overseas consortium called Thintana Communications.
Thintana, which was 60% SBC (now AT&T) and 40% Telekom Malaysia, bought its stake in Telkom for $1.26-billion (around R5.45-billion at the time).
In a 2007 paper titled Another instance where privatisation trumped liberalisation: the politics of telecommunications reform in South Africa – a ten year perspective, SBC is said to have played a major role in the failure of South Africa’s telecoms policy to develop a competitive telephone service.
The authors of the paper are Robert Horowitz and Willie Currie, a former councillor at the Independent Communications Authority of South Africa.
Currie and Horowitz wrote that the government allowed Thintana to put itself above the law.
It did so by including clauses in the shareholder agreement stating that once the Telecommunications Act was in place, neither Telkom nor Thintana would be compelled to follow any legislation that violated the shareholders’ agreement.
Thintana sold its stake in Telkom in two tranches in 2004 for a total of R12.7-billion, with the final transaction going through in November.
Neotel, which was formerly referred to as the “Second Network Operator”, finally launched in August 2006.
Sadly it did not introduce the residential fixed-line competition so many thought it would, though it did take Telkom on in the business sector and long-distance terrestrial backhaul market.
Promises of liberty
By 2005 talk of further “liberalising” South Africa’s telecommunications market had started, with the government promising everything from local loop unbundling (LLU) to allowing entities other than Telkom to roll out networks.
LLU refers to giving operators access to Telkom’s “last-mile” of copper lines that run into homes and networks, and despite initial promises that the unbundling would be finished by 2011, LLU has yet to begin.
Similarly, the government wasn’t too keen on backing up its rhetoric about a liberated telecommunications sector by allowing companies to build their own networks.
The legislation was put in place in 2005, but the government refused to grant the necessary licences until a High Court ruling compelled Icasa to effectively automatically “upgrade” Value Added Network Services licencees.
Now known as The Altech Case, the ruling gave licenced service providers the right to “self-provision”, or roll out their own networks, in addition to the rights their existing licences already provided.
In 2007, Matsepe-Casaburri also announced that all undersea cables landing in South Africa must be majority-owned by South African companies. This would have effectively blocked both Seacom and EASSy from landing in South Africa.
Had the government succeeded in blocking the cables, South Africa’s broadband landscape would probably look very different.
The competition Seacom introduced for Telkom’s SAT3/SAFE undersea cable system, combined with the competition stimulated thanks to the outcome of the Altech case, are credited with the dramatic reduction in ADSL prices that South Africans saw in 2009.
The digital dividend: another squandered opportunity
Besides the government’s direct interference in South Africa’s broadband and telecommunications sectors, the massive delay in our migration from analogue to digital terrestrial television (DTT) also has an impact on broadband.
Among the benefits of migrating to DTT is that substantial chunks of spectrum will be freed, all at lower frequencies than South Africa’s mobile operators currently use.
This is called the “digital dividend” and due to the characteristics lower frequencies offer wireless network operators, it would be ideal for covering under-serviced areas with high-speed broadband services.
It has not been released due to inaction from, and delays caused by, the government.
The first major delay was caused by the Department of Communications when it called for a standards symposium in April 2010 to reinvestigate the available DTT standards.
This move confused and infuriated the broadcasting industry as it came long after former Minister of Communications Ivy Matsepe-Casaburri had officially adopted a DTT standard.
A policy document dated September 2008 called the “Broadcasting Digital Migration Policy for South Africa” named DVB-T using MPEG–4 compression as the country’s chosen standard for digital TV broadcasting.
Sentech had also been running DVB-T trials since 2008, and the self-imposed deadline for switching off South Africa’s analogue TV signals was November 2011.
The DoC’s announcement threw all of the effort poured into adopting DVB-T out the window, and cast doubts about our ability to meet the November 2011 deadline.
It later emerged that the DoC had thrown the whole broadcasting sector into turmoil to accommodate a request from Brazil to reconsider our chosen broadcasting standards.
Some good came from the political interference, as the new Minister of Communications, the late Radhakrishna “Roy” Padayachie, used the opportunity to have South Africa leapfrog DVB-T and go straight for DVB-T2.
However, South Africa missed the original November 2011 switch-off date.
Thanks to the governments ineptitude and inaction we then went on to miss a December 2013 analogue switch-off deadline.
This is in part due to a fight over a feature called set-top box (STB) control, which initially saw E-tv at loggerheads with former Minister of Communications Dina Pule in 2012.
When the battle was resolved, no further progress was made on digital TV under Pule’s watch.
Only when Yunus Carrim took over in 2013 did the wheels begin turning again, but it wasn’t until 2014 when any real progress was made and a new dispute over STB control emerged between E-tv and MultiChoice.
This dragged on through 2014, and appears to have finally been resolved on 5 March 2015.
All hope of meeting the ITU’s analogue switch-off deadline of 17 June 2015 has been abandoned.
How serious is the government about broadband for the poor?
If the government was serious about providing connectivity for the poorest citizens of South Africa it should first recognise the harmful effects its own “interventions”, inability to meet deadlines, and unwillingness to truly liberalise the telecoms sector had on broadband in South Africa.
To begin correcting its mistakes, it must release the precious frequency spectrum that operators have been begging for.
This spectrum, especially the frequencies currently locked in the digital dividend, could be used to build better networks – such as those based on Long Term Evolution technology.
It is wireless networks, particularly those built by mobile operators, that have brought telecommunications services to the masses. Government should be incentivising investment in such networks to better serve poor and under-serviced communities.
When one looks at the government’s history in telecommunications, such an approach would be a far more effective way for it to achieve its “noble national objectives”.
In spite of the government’s best efforts to suppress it, the private telecoms sector has flourished. Instead of blaming the market, the government should be enabling it.