South Africa’s new data rules will do more harm than good: Telkom CEO

Telkom CEO Sipho Maseko has warned that the Competition Commission’s ‘blunt and archaic’ attempt to introduce price controls will hurt the telecommunications industry and ordinary South Africans.

Writing in a column for BusinessDay, Maseko said consumers win when prices are as low as possible and service quality as high as possible.

However, he noted that these factors are driven by fair competition, not ‘regulatory diktat’.

“Any company that overcharges for its goods and services will be hit by its competitors and consumers in any industry where the competition dynamics operate the way they should,” he said.

“But if that company is a monopoly or part of a market-controlling duopoly, this does not happen. Controlling the duopoly’s pricing may be popular and even appear temporarily effective, but it is tantamount to prescribing a cure for symptoms while leaving the disease intact.”

Instead, Maseko believes that the Independent Communications Authority of SA (Icasa) – which is responsible for regulating the telecoms industry – has been ‘asleep at the wheel’ when it comes to stopping Vodacom and MTN’s duopoly.

He added that that the success of Vodacom and MTN is the result of deliberate legislative, policy and regulatory action to redesign the landscape of the telecom sector from one dominated by Telkom (then a fixed-line state monopoly).

To this end, Maseko believes that stronger and clearer regulation is the correct way forward – not harsher rules.

“Price regulation is not the answer,” he said. “It is an ineffective instrument and may ultimately have unintended and deleterious consequences on employment and future levels of investment. It may ultimately even push smaller players out of the market completely.”

Data inquiry

The Competition Commission published its final report on the Data Services Market Inquiry at the beginning of December.

The Commission characterised the data services market as highly concentrated with a duopoly in the form of MTN and Vodacom, which enjoy significant market power relative to smaller competitors.

To remedy this, the commission’s final package of recommendations comprises a combination of immediate and intermediate measures to reduce the cost of high data prices.

These include:

  • All networks should offer all prepaid subscribers a ‘lifeline package’ of daily free data to ensure all citizens have data access on a continual basis, regardless of income levels;
  • Vodacom and MTN must independently reach an agreement with it on ‘substantial and immediate reductions on tariff levels’ within the next two months. It added that preliminary evidence suggests that there is scope for price reductions in the region of 30% to 50%;
  • It also called for the two operators to reduce the cost of all sub-500MB 30-day prepaid data bundles as well as the ‘cessation of partitioning strategies that contribute to anti-poor pricing and/or inferior service’;
  • All mobile operators must reach agreement within three months to zero-rate content from public benefit organisations and educational institutions to ensure broad application;
  • All mobile operators must inform each subscriber, on a monthly basis, of the effective price for all data consumed by the customer;
  • Telkom Openserve must reach an agreement with the Commission on substantial reductions in the price of IP Connect to remove excessive pricing concerns within two months.

Read: Here’s what you need to know about South Africa’s new report on mobile data

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South Africa’s new data rules will do more harm than good: Telkom CEO