The case for Icasa
We are not alone, however. Several other governments have attempted similar exercises with even more disastrous results. Think of British Rail or Thames Water in the UK. Both are examples of this type of market failure and left the consumer worse off.
However, from a theoretical point of view, European governments got it right with telecoms. About eight years ago, markets were liberalised and the rules of the game were clear and well enforced, which resulted in competition flourishing and prices for phone calls and broadband falling sharply. Of course, this was followed by the 3G spending orgy that brought many incumbents close to collapse, a situation from which they are only now starting to recover.
These players, which include Deutsche Telekom, France Telecom, Telefónica of Spain and the UK’s BT, have all started adopting similar strategies. They are looking abroad for growth and are embracing the convergence trend domestically, so are offering a single bundle of services made up of television, broadband, fixed-line and cellular phones. As they move into each other’s markets, competition will intensify, and while that may spark a round of consolidation, it’s all good news for consumers.
Sadly, the same cannot be said for SA. Today, we still have excessively high prices for fixed-line calls and broadband access as Telkom continues to hold a dominant position in the market. The origin of this is generally traced back to 1998, when government agreed to give Telkom a five-year monopoly in return for US and Malaysian investors buying a 30% stake in the organisation. And while the monopoly period was certainly a contributing factor, the current dysfunctional telecoms market actually had its genesis in the Telecommunications Act of 1996.
The act governed SA’s telecoms market during the critical Telkom monopoly period, and the subsequent introduction of fledgling competition. The act failed to fully empower the regulator or to fiercely entrench its independence — as was envisaged in the white paper on telecoms. This allowed Telkom to repeatedly challenge the authority of the Independent Communications Authority of SA (Icasa), often to the detriment of consumers.
Last year, President Thabo Mbeki posed the question of what SA needed to do to catch up with its emerging-market peers, notably India, where communications costs are comparatively low and services have been spread to millions.
The answer is a strong regulator and much more competition. And in the absence of the latter, as seems likely for some time to come, it is imperative that SA has at the very least an empowered and well-functioning regulator, which implements a clear set of rules.
Icasa has suffered many blows this year, having to face down allegations a few months back about a lack of leadership, incompetence and institutional collapse. The regulator’s woes extend to the top, with CEO Jackie Manche having only recently returned to office after being suspended for almost a year for alleged misconduct. This comes as new legislation will expand its mandate, including taking over the regulation of the Post Office.
Icasa has to get its act together if it is to perform its existing tasks properly and deliver on its new responsibilities. It is good to see the body is looking for experienced managers to fill its ranks. This is part of a plan to start the new year with a revitalised public profile.
In the absence of a fully liberalised telecoms market, Icasa is SA’s only hope of cheaper, broader and better telecoms services.
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