South Africa’s dark telecoms past

On 31 March 2014, the South Gauteng High Court ruled that the 2014 Call Termination Regulations were unlawful and invalid, vindicating Vodacom and MTN’s argument that the regulator did not follow the proper processes to reach its termination rates.

Icasa should have expected this challenge. It is certainly not the first time that the telecoms regulator’s procedures and processes were questioned when its findings does not suit a company. In fact, this has been happening since the regulator started operating.

Icasa’s predecessor, the South African Telecommunications Regulatory Authority (Satra), was established in February 1997 – and within weeks, it had to face the might of Telkom’s regulatory and legal team.

When Satra ruled in October 1997 that Telkom did not have a monopoly on Internet services, the company was not happy.

Telkom challenged the ruling in court, arguing that Satra had no legal basis for its decision and that the process was marred by procedural irregularities.

While this legal battle did not play out fully, all stakeholders agreed that the process which was followed by the regulator was flawed.

This bears a striking resemblance to the recent court ruling, which found procedural issues with Icasa’s call termination regulations.

Battles in the South African telecommunications market

However, the battles in the South African telecommunications market are not limited to operators which were unhappy with the regulator.

Over the last two decades there are many examples where the large telecommunications companies, political parties and even unions used their legal, political or financial muscle to try to influence decisions in the lucrative telecoms market. Here are some examples.

ANC tried to stop the licensing of Vodacom and MTN – 1993

Shortly before taking power in 1994, the ANC tried to stop the licensing of Vodacom and MTN. The ANC was against the privatisation of telecommunications, and wanted cellular to be a separate, autonomous parastatal service offered by Telkom.

More here: How the ANC nearly killed Vodacom and MTN

Telkom and its shareholder SBC’s lawyers helped to write SA’s Telecommunications Act – 1995, 1996

Robert Horwitz and Willie Currie wrote in an academic paper that SBC, before it became a Telkom shareholder in 1997 through Thintana, temporarily transferred its entire corporate office legislative team to South Africa to help draft SA’s Telecommunications Act. This was “to make sure the legislation comported with the company’s requirements”.

According to the paper, the Department of Communications’ poor skills meant that “SBC and Telkom lawyers and advisers—pointedly not Government officials—wrote Telkom’s 25-year Public Switched Telephone Service (PSTS) license”.

More here: Telkom history

Telkom tried to gain monopolistic control over SA’s Internet – 1997

In 1997 Telkom claimed that Internet services in South Africa’s falls under its telecoms monopoly. When the regulator (Satra) ruled that no single entity would have control over the country’s Internet, Telkom approached the Pretoria High Court to challenge this ruling.

The ruling was indeed procedurally correct, but the legal battle fizzled out.

More here: ISPA response to Telkom stance on SATRA ruling

Telkom’s monopoly and affordable telecoms for all did not happen as planned – 1997 to 2002

In 1997, Telkom was then given a five year exclusivity in the fixed line market in exchange for assisting with capacity building targets – such as the role-out of 2.8 million lines.

During this period many people felt that Telkom was delivering unaffordable telecoms services.

Telkom’s number of fixed lines peaked in 2000 at 5,493,000, but quickly started to plummet because people could not afford Telkom’s services.

In Telkom’s 2002 Annual Report, then-CEO Sizwe Nxasana explained that, while Telkom connected 2.8 million fixed lines over the “past 5 years to meet their license rollout obligations,” their net line growth over the license period was only 665,819.

“Our net fixed-line growth over the five- year period was disappointing. While we succeeded in connecting millions of customers, we were adversely impacted by a high rate of disconnections,” said Nxasana.

More here: Telkom fixed line numbers history

Vodacom, MTN increasing mobile termination rates before Cell C launched – 2001

When Vodacom and MTN launched mobile services in 1994 they agreed on an interconnect rate of 20c per minute. However, when talks started of introducing a third mobile player (Cell C) things changed quickly.

In July 1999, Vodacom and MTN increased the MTR to 50c, and continued to increase this rate to R1.25 (for peak time calls) on 1 November 2001.

Cell C and Telkom (the smaller players) therefore had to pay MTN and Vodacom (the larger players) R1.25 to terminate a call on their network. This regime continued for nearly a decade.

More here: Vodacom, MTN increase termination rates before Cell C launched

Government protecting Telkom to increase shareholder value – 2002 to 2005

Government (through the Department of Communications) protected Telkom against competition, partly to maximise returns for Telkom’s shareholders.

DoC director general at the time, Lyndall Shope-Mafole, explained their position in an interview with Financial Mail at the 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,” she said.

When asked whether it is government’s responsibility to look after the shareholders of a private company, Shope-Mafole answered “You must remember that government is a shareholder, too”.

More here: Government protecting Telkom

VoIP basically outlawed until February 2005

In September 2004, the late communications minister Ivy Matsepe-Casaburri announced that Value Added Network Suppliers (VANS) will be entitled to carry voice over any protocol.

This new law kicked in on 1 February 2005 – before that VoIP services were basically outlawed in SA to protect Telkom’s monopoly.

More here: VoIP legality

Telkom’s anti-competitive actions in the Internet market – 2005

In December 2005, the Internet Service Providers’ Association (ISPA) lodged a broad-ranging complaint with the Competition Commission regarding Telkom’s anti-competitive activities in the Internet services market.

This ultimately led to a R200-million settlement agreement between Telkom and the Competition Commission.

More here: Telkom competition settlement and ISPA launched complaint with Competition Commission

Former Communications minister fighting to block competition – 2008

In 2008 the late communications minister Ivy Matsepe-Casaburri was involved in numerous legal battles to try to stop Internet service providers and other companies from building their own networks.

The minister ultimately lost this battle, paving the way for more competition, lower prices and better telecoms services in the country.

More here: Altech wins case against minister

Cosatu and Icasa try to prevent Vodacom’s JSE listing – 2009

Only days before Vodacom was set to list on the JSE in 2009, Cosatu and the Independent Communications Authority of South Africa (Icasa) launched an urgent court application to try to prevent the listing.

The High Court in Pretoria dismissed the application. The DA suggested that possible corruption and interference was behind this court challenge.

More here: Cosatu and Icasa tries to prevent Vodacom JSE listing

Vodacom and MTN fight Icasa’s 2014 call termination regulations – 2014

Vodacom and MTN launch separate court battles against Icasa’s 2014 call termination regulations, citing procedural mistakes from the regulator.

The two mobile operators were mainly unhappy with the large asymmetry afforded to Cell C and Telkom Mobile. The court ruled that the regulations were unlawful and invalid.

More here: Vodacom and MTN fight Icasa call termination regulations

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South Africa’s dark telecoms past