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Playing Monopoly

by Arthur Goldstuck

A few days from now, on May 7, Telkom’s monopoly on fixed telephone services in South Africa comes to an end. No, really…

The fact that Telkom will still appear to be the sole fixed telephone network will merely be an illusion, brought on by our blind lack of faith in the structures of government.

On May 8, Telkom will be able to say, seemingly truthfully, that it is not up to them to ensure the end of their monopoly. It is up to the state structures responsible for processing the applications for the Second National Operator (SNO) licence. As far as Telkom is concerned, its monopoly ends on May 7.

This means we move from a legal monopoly to a de facto monopoly. Which means that, in terms of competitive practises, Telkom is entitled to continue behaving like a monopoly.

Why does this sound like an attack on Telkom when it has no responsibility for the situation? Probably because, when you look behind these monopoly games, Telkom bears the entire responsibility for the situation.

Over the five years of its exclusive ownership of fixed telephony in this country, Telkom has fought every conceivable attempt to introduce competitive practises in any industry related to telecommunications. From denial of service to court action, it has been the bullyboy of local telecommunications. Indeed, it has done its international investor consortium, Thintana, who themselves enjoy a legacy of monopolistic practises, proud.

When the Department of Communications on July 27 last year announced the regulatory structure that would govern the issuing of new licenses, it proposed two new national operators, and laid out a framework for a more customer-oriented telecommunications industry. While the public welcomed the news, Telkom fought tooth and nail against the provisions for added competition. Moreover, it’s international investors, SBC (holding 19%) and Telkom Malaysia (12%), held the South African government to ransom, with SBC even threatening to divest from Telkom. On August 15, the government capitulated.

This once again threw the licensing process into disarray. The long-term consequence? The government has to walk on eggshells to keep foreigners happy with the way South Africans are provided with communications services.

It therefore became inevitable that May 7 would arrive with little immediate prospect of a new operator being licenses, let alone operating.

Little wonder that Telkom declared some time ago that it would not exercise the right to extend its monopoly by a year. It knew that, de facto, it would get that extension anyway.

The bitter irony is that, in the first place, Telkom earned that right by sleight of hand. It was required to meet certain quotas in terms of providing universal access to previously disadvantaged communities. it beat those quotas handsomely, providing connections in the remotest of areas and the poorest of communities.

And there’s the rub. The regulations required Telkom only to install the lines – and not to ensure that they remained installed. Due to the high costs of telephone connections, let alone the cost of local calls, a disastrously high proportion of Telkom’s beneficiaries eventually lose their lines. Between 30% and 60% of new connections are not maintained.

In other words, Telkom’s claims of meeting its quotas were a farce. They met the letter of the regulations, but certainly not the intent.

Rather than having a right to another year, they should have been severely penalised.

In this light, their “generosity” in forgoing their extra year of exclusivity was just another exercise in playing monopoly.

The recent revelation by Financial Mail (March 29) that Thintana has expressed deep unhappiness over SA’s regulatory environment merely adds salt to our consumer wounds. Thintana is now lobbying government to scrap draft regulations that will allow customers to choose a new operator as their preferred long-distance and international carrier while using Telkom for other services.

In other words, even as they were set to see the life of their exclusivity prolonged, they were still playing monopoly with our economy.

* Arthur Goldstuck is editor of The Big Change and author of more than a dozen books on the Internet and urban legends. He runs the independent research and strategy consultancy, World Wide Worx.

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The Big Change is a business strategy blog and newsletter published by Arthur Goldstuck, managing director of World Wide Worx, a leading technology research organisation based in Johannesburg, South Africa.

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