Broadcasting and telecommunication
History in the USA and Europe has shown that the government owned telecommunication sector, as a public monopoly, made structural changes during the time towards a more liberalized and harmonized market. Reasons for those structural changes are developments such as “technological innovation, increasing demand for services, globalisation of business, international deregulation and integration”[1]. Over the time the liberalisation process of the telecommunication market in Western-Europe, such as Britain, Netherlands and France have taken various developments and a variety of policy measures, for example as a non-decision making in one country, incremental adjustments in another and policy innovations in the third country[2].
The South African telecommunication industry has already taken the first step in the direction to liberalize and privatise the state controlled telecommunication monopoly.[3]
The question is at what speed the monopoly will liberalize in South Africa?
In the case of the case of South Africa there has been four different impacts on the development of the telecommunication and internet from the early 1990s to 2005 which are first signs in the direction of a beginning liberalisation:
- Access to facilities
- Competition between ISP’s and IAP’s (Internet Access Provider)
- Licensing procedures to other ICT companies since 2006
- E-commerce policies [4]
These points are first signs or movements towards a more competitive telecommunication industry in South Africa.
Sources:
[1] Cp. Hulsink, Willem (1999), p. 2.
[2] Cp. Hulsink, Willem (1999), p. 1.
[3] Cp. Hulsink, Willem (1999), p. 1.
[4] Cp. Mit Press Journal (2006), online.
Comparison of telecommunication pricing structure
Figure: Telecommunication pricing strucuture of South Africa
- Comparison of Telecommunication costs in Brazil and South Africa 2006/07
The Figure shows a comparison of telecommunications pricing structure of South Africa and Brazil has not only similar relevant characteristics such as geographical dispersion of population, income dispersion, market structure, GDP and Gini-coefficient[1] of 0,58 but has also advanced telecommunications sector.
The figure illustrates and shows clearly that South Africa has exorbitant telecommunications fees in all sectors, for instance Asymmetrical Digital ubscriber Line, mobile and fixed line calls. This is one reason for slowdown of growth rates in internet usage and penetration during the last years.
However, the decrease of internet fees in 2006 by approximately 10 % led to an increase of internet users in the year 2006 to almost 30 % [2]. That shows that South Africa has a great demand for internet access. Nevertheless, for many individuals and for businesses the high costs were still not affordable in the last years.
Source:
[1] Gini coefficient is a measure of inequality of a distribution and is between 0 and 1. It is a key figure for the disequilibrium of income and capital. In the year 2006 South Africa has a Gini of G= 0,59.
[2] Cp. Budde - Independent Global Telecommunication Research Company (December 2006), online.
Figure: Telecommunication pricing structure in South Africa in comparison to other countries
- Business ADSL - monthly fee for approximately 512 kilobytes per second
Referring to the research it is obvious that there is a tremendous room to drop bandwidth prices as they currently are in South Africa without endangering Telkom’s ROI (Return on Investment). A simple back-of the-envelop calculation shows; the total investment of the undersea cable to the South and Europe (AT-3<//font>[1]) was $ 650 million, which Telkom was only moderately liable for. The current annual price per 2mbps line costs about $ 300.000 rent in the international comparison. Assuming that Telkom sell or rent out about 2200 2mbps private lines or approximately 11 % of the total line capacity Telkom would cover the total investment in only one year.<//font>[2]
Telkom is currently the only operator authorised to provide the following services and elements of the public switched telecommunication services:
- National long-distance telecommunication service
- International telecommunication service
- Local access telecommunication service
- Telecommunication facilities to be used for the provision of certain private telecommunication networks<//font><//font>[3]
Due to these points it is obvious that it is not possible for competitors to provide land-line telecommunication services without the agreement of Telkom. However, current developments and legislative changes referring to announcement of the Minister of Communication in September 2004 indicates that from August 2005 following points are now possible:
- mobile operators can install lines themselves or rent lines from another operator
- VANS (Value Added Network Services) can offer VoIP in competition to Telkom, which offers companies substantial cost savings
- VANS can operate, acquire and lease their own telecommunication infrastructure to other VANS
- Private telecommunication network (PTN) license holder are able sell and provide data services<//font><//font>[4]
This development makes it now possible to buy licences from Telkom and provide as a “competitor” internet access services to companies and individuals as the first time in the history of South Africa. As a result of that benchmark-research it becomes obvious that at present there are no reasons why South Africans should not have access to cheaper or to the same price level telecommunications services as for example Brazil. <//font><//font>
Business data products relating to broadband<//font>[5] offering and leased line[6]South Africa had the most expensive broadband of all fifteen countries and was about twice as expensive as in the USA. Out of twelve countries South Africa was the most expensive one referring to leased line.
Source:
[1] AT-3: The South African Telecommunications Cable No. 3 runs up the west coast of Africa and provides the principal telecommunications connection between South Africa, Europe and USA.
[2] Cp. Genesis Analytics (2005), Telecommunication prices in South Africa, p.5 - 7.
[3] Cp. Bowman, Gilfillan (2006), p. 63.
[4] Cp. Genesis Analytics (2005), p. 4 - 7.
[5] Average downstream speed of 512 kbps (kilobytes per second) or more.
[6] Annual fee 2mbps line to the Unites States