The war at home government and the broadband debacle

South Africans are used to paying over the odds for services. Bank fees have been in the spotlight for years, motor cars are more expensive here than in Australia and fixed-line telephone costs, mobile phone charges and broadband access are among the most

This is according to Trade and Industry Minister, Mandisi Mpahlwa, who said: "These are some of the areas where we see concentration which has an impact on pricing and an impact on downstream industries which we are trying to promote." In other words, government is trying to improve the competitive environment to reduce prices and promote economic growth. Or is it?

Some time ago, government started making positive mutterings about increasing competition in the telecoms industry. They planned to lower communication costs by licensing a second national operator to compete with Telkom in the supply of fixed-line and broadband services to local consumers. And consumers were overjoyed that government was finally doing something to encourage competition in an industry that had been dominated by a single player for so long.

Unfortunately government's implementation lagged its intentions by some way. Both telecoms industry players and consumers stood by as the Department of Communications and the Independent Communications Authority of SA (Icasa) spent years deciding who would emerge as the second national operator in the South African telecoms industry. And although Neotel's license was granted in December 2005, consumers are still in the dark as to what has become of the flood of eagerly waited competition.

State is ready to torch consumers again

The struggle to escape the grip of high fixed-line telecoms costs brought on by the Telkom monopoly is hardly over and government looks intent on burning consumers once again. As far as broadband services go, government looks set to make a staggering blunder that could have long-term implications for the prices of broadband access for all South African citizens. The reason is that the South African government wants control of proposed private data cables along the East coast of Africa.

Government has already laid the foundation for more industry interference, passing legislation to create a state-owned telecommunications cable provider which will use the fibre-optic cables presently owned by Eskom and Transnet. Although Infraco will not be granted an automatic license to operate in the telecoms industry, analysts believe that in a free market Infracos function is best performed by private companies.

The problem is now that government has a hand in the telecommunications industry they have to look at ways to ensure their 'business' operates efficiently. And the first hurdle to be addressed is the giant submarine cable network planned for the East African coastline. The East African Submarine Cable (EASSy) is a private partnership which should significantly reduce the cost of broadband services to South Africa. Once their cable hits our shores, the price of broadband access in particular and telecoms in general will come crashing down.
 
Quashing broadband competition

On the one hand, government appreciates the serious need for cheaper telecoms. "We are underserved by cable so pricing reflects this shortage of cable," says Portia Molefe, Deputy General of public enterprises. She believes that government should do as much as possible to provide cost effective communications infrastructure.

Yet a few doors down, the Department of Communications is set to block the landing of the East African Submarine Cable (EASSy). They want to force local ownership of EASSy assets and have already canvassed other African signatories to the deal to lend support to a new protocol through NEPAD. Talk about conflicting strategies!

EASSy believes the protocol is flawed, if not dangerous. They say that while the protocol's "aim is to rally governments into facilitating the development of broadband infrastructure; it goes beyond this by entering into the realm of operations and attempting to micromanage the industry." In addition "the protocol will unnecessarily force countries to change regulatory policies, which will discourage investment and may be contradictory to commitments made to the World Trade Organisation. EASSy also believes that Nepad should not even be involved in project implementations of this nature.

No winners but one sure loser in this technical knockout

Other commentators note that attempts by the Department of Communications to squeeze more control from the project on an ownership basis are misguided. South African private companies already enjoy solid representation in EASSy through Telkom, MTN and Neotel. A Special Purpose Vehicle (SPV) was also negotiated at the outset of the deal to ensure open access...

We cannot see any winners emerging from this wrangle. One definite loser sticks out like a sore thumb. You can be sure that if the Nepad protocol holds sway we will either be paying more than necessary for broadband access, or not benefit at all.

Editor's thoughts:
The South African government already has influence over the local telecoms environment through the Independent Communications Authority of SA. Their attempt to gain control over additional data capabilities landed at our shore appears senseless and could jeopardise the delivery of a better broadband solution. Is government justified in trying to wrest control of private telecommunication assets? Send your comments to gareth@fanew.co.za