Telkom’s infrastructure division, Openserve, must substantially reduce the price of its IP Connect product within the next two months.
This is according to the Data Services Market Inquiry Final Report, which was published by the Competition Commission on 2 December 2019.
Openserve’s IP Connect product allows ISPs to offer fibre and ADSL products by paying to move traffic over Telkom’s network.
“Telkom Openserve must reach agreement with the Commission on substantial reductions in the price of IP Connect to remove excessive pricing concerns within two months,” the Commission said.
Benefit of state investment
The Commission said it requested Telkom to provide it with the cost of providing its IP Connect service, after which it found that it constitutes a case of “excessive pricing”.
“Applying the price-cost mark-up assessment used in excessive pricing investigations, the results for the 2018 financial year as calculated by FTI Consulting on behalf of Telkom were positive and significant.”
“Given Telkom Openserve has benefited from prior state investment and a licensed monopoly position, the Commission is of the view that a prima facie case of excessive pricing exists for this level of mark-up,” the Commission said.
The Commission added that its conclusion is strengthened by the fact that prices for the service had been decreasing over time, indicating that mark-ups viewed over a longer period would be found to be even higher.
It also found that the high price of mobile data was “anti-poor” and noted that networks such as MTN and Vodacom offer lower prices in the other African countries they operate in.
The Commission also proposed a number of changes to South Africa’s mobile data landscape which it said would improve access to mobile Internet.