Competition in the telecoms or ICT business is a huge issue around the world – in the United States, for example, there is a great deal of dissatisfaction with low levels of competition at the local and national levels, limited consumer choice, rising prices, and poor service. However, getting the right balance is tricky. Regulators want companies to invest in hard infrastructure like cabling and towers, so they feel pressure to create an environment with predictable returns – in SA, for example, there are only a handful of licences cellular carriers (8ta/Telkom, MTN, Vodacom, Virgin, and Cell C), which more-or-less guarantees those carriers a certain level of profit and market share, and thus encourages them to invest in cellular infrastructure. On the other hand, consumers and government want the best possible service levels and the lowest possible prices, which implies pressure to have more competitors in the market.
It’s a very difficult balance to achieve, and not many countries do it well – some parts of Asia, some parts of Europe, and that’s about it. What’s more, given the importance of telecoms to modern economies, the stakes in setting regulations and organising the industry are very high. This is why the SA regulator ICASA is launching an in-depth probe into competition in the ICT industry in South Africa, in the hopes of understanding where the innovation and bottlenecks are, and how they can balance the demands of consumers, industry writ large, and ICT companies. It’s not a job I would want. – FD
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GUGULETHU MFUPHI: The Independent Communications Authority of South Africa plans to launch a high-level inquiry into the state of competition in the information and communications technology sector. Joining us now for more is Jubie Matlou, Senior Manager Communications & International Relations at ICASA. Jubie thanks so much for joining us. When news broke of the inquiry that’s going to be launched, many people raised their eyebrows at the timing, especially after the mobile termination rate cuts with mobile telecoms operators.
JUBIE MATLOU: It’s my pleasure, and thank you very much for your invitation. The timing of the announcement of the inquiry…you can view it in various ways but primarily, it has to do with the technological changes that are taking place in the information and technological communications sector. The Internet is becoming a platform for all sorts of communication. You can do your voice or telephone over the Internet and you can do your video and broadcasting, so that has bearing on how the market develops in terms of consolidation and in terms of mergers and acquisitions. As a result, we had to take a holistic view. In the past, we’ve been regulating this market per segment: the voice market, the data market, and the broadcasting market. With the unfolding technological changes, it has become imperative that we have an overarching birds’ eye view, if we’re looking at competition, ‘what are the issues that need to be addressed?’
ALEC HOGG: So it’s not a witch-hunt for MTN and Vodacom. It’s a research report to actually understand how things have changed.
JUBIE MATLOU: Absolutely. Now, we have the call termination – the phase two – that was supposed to come into play, but if you look at it, the voice market is no longer the source of revenue. All the focus is moving towards data. With new changes in technology, therefore the focus is on how best to regulate services across the Internet Protocol platform. There, you have completely different considerations. Interconnection for that Internet platform is completely different. Issues of quality, of service are completely different. Your dial-up speed…the speed at which you are able to download the data on the Internet – those are issues related to quality of service.
ALEC HOGG: Jubie, who do you look at in other parts of the world to help guide you on this? Clearly, you don’t want to reinvent everything and there are other countries, who have developed perhaps, to a closer stage in the regulation than we have. Where do you get your ideas from?
JUBIE MATLOU: Depending on the subject, we look at the quality of service. Depending on the subject, we look at Tanzania. We look at Kenya – they have good data to compare with -south-to-south regulators: Brazil, Spain in Europe, OFCOM, and the FCC. We look at quite a wide spectrum of sister agencies.
ALEC HOGG: What about the market leader in Korea? They’re so far ahead in this field. Do you visit there and see what they’re doing?
JUBIE MATLOU: We hosted the Koreans – I can’t remember the name of the regulator – two years back and they came to share with us issues in terms of economic regulation of the sector.
ALEC HOGG: So you’re really well integrated into the global environment, so those people who are fighting you or are not happy about it; they should perhaps look elsewhere.
JUBIE MATLOU: Absolutely. There’s a lot that needs to be done, and I think that with this public inquiry, we’ll be able nail down the issues once and for all.
GUGULETHU MFUPHI: If we could perhaps take two steps back to the mobile termination rates calculation – the calculation to move it down to 20 cents – if we could move back to when it was a little higher than that Alec, what was the justification behind that?
ALEC HOGG: Well, it started at 20, and then it went all the way up. We were talking about it earlier. Why go up and now you guys are bringing it down again – why even move it in the first place?
JUBIE MATLOU: Look, the matter is a subject of court inquiry. It’s going to court next week. I wouldn’t like to comment much on it. We had the first phase, which reduced the cost from 2010 to 2013, and this was going to be the second phase. Depending on the outcome of the court case next week, we’ll take it forward.
ALEC HOGG: We get that, Jubie. What we don’t get, is that it was 20 cents years and years ago and there was a reason, presumably, for increasing it to the way you did, by a multiple of that. Now, we think that you’re doing the right thing as people who use cell phones – and everybody – would agree. Why did it have to go up in the first place, or was that before your time?
JUBIE MATLOU: I wouldn’t know the actual details per project, but the rationale for the project was that we have to reduce the cost of communication. Interconnection has been identified as one area with high costs and it is an area, in which we have to make interventions at a wholesale level, hoping that the benefit trickles down to the consumers at the retail level.
ALEC HOGG: So you don’t know why they went up so high in the first place.
JUBIE MATLOU: No, from where I’m sitting now, I wouldn’t have those details. I would need to probe to be able to answer that aspect.
GUGULETHU MFUPHI: Jubie, the issue of spectrum: that’s another big debate. Is it still on the table for ICASA, freeing up that spectrum?
JUBIE MATLOU: Yes, we have around 400 licensees with service and network licenses, and the issue of releasing spectrum is central to the creation of competition in the market. We’re waiting for the Minister to issue a directive on the licensing of high-demand spectrum and it is one of the issues identified in the public inquiry, as ‘requiring to be addressed’.
ALEC HOGG: Will you then be investigating the dominance that the SABC has over the spectrum for instance, in the broadcast field? If you want to create competition, there’s an obvious opportunity.
JUBIE MATLOU: The broadcasting market was also identified as befitting some inquiry. The authority has tried to license additional subscription broadcasting services. Only one was promising to take off and now it’s under Business Rescue, so we are saying to stakeholders and licensees ‘come and share with us how best to unlock competition in not just the subscription television market, but also in the broadcasting market itself’. Those are therefore some of the issues that will be…
ALEC HOGG: Jubie, you have the State. There’s so much spectrum, the state has so much of it, and you give the private sector that little bit. If you want to increase competition, it’s very easy. Cut the SABC down or the radio stations, for instances. It’s not rocket science, but there are politics that come into it, I guess, and that makes it more difficult.
JUBIE MATLOU: Well, issues would be put to us. There is a period of 60 months, in which stakeholders and the public can make written submissions, which will be followed by a process of public hearings, whereby people can make oral presentations, and we can pose questions as a partner. Thereafter, the submissions will be consolidated into a position paper, which will also be subject to another round of public scrutiny and input before coming up with the final regulations as to how competition going forward, needs to be regulated.
