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It`s a duopoly!

In a classic case of stating the obvious, the Competition Commission says there`s no competition in the local telecoms space.

BY  Samantha Perry , 1 November 20080 comments

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The Competition Commission's annual report, released in early October, delivers a scathing indictment on the state of the local telecommunications sector, and the lack of competition therein.

According to the report, the local telecoms market structure lends itself to anti-competitive practices. "Telkom belongs to the category of firms that are formerly state-owned and is super-dominant, even with the entry of Neotel. Neotel has already stated publicly that it will not be competing with Telkom on pricing and its entry simply creates a duopoly."

Neotel has vigorously denied this, stating in a press release shortly after the report was made public that it has always been very outspoken about the need for a competitive market to benefit the South African public. "After all, we are a beneficiary of the introduction of competition in the telecoms sector, so we cannot be seen to be adverse to it all of a sudden.

"Neotel," the statement said, "has positioned itself as shifting paradigms in the sector, which alludes to more than just a price war, but a fundamental shift in the service and product offering that speaks of value rather that just price."

The company has, in fact, been undercutting Telkom on pricing despite its coyness in this regard.
 

Contradiction


Firm's in that [cellular] market seem to behave collectively and are... dominated by Vodacom. Competition Commission
Orion Telecom managing director Jacques du Toit, who spoke to Brainstorm recently about the local call centre and BPO market, says: "Until now, we've paid Telkom R3 000 [per month] for a 128k link. Neotel offers a 2MB link for the same price. No one in their right mind is going to stay with Telkom if they can get that amount of bandwidth for the same price. And, of course, this is linear, so if you're talking [about a] 150Mb link, the same thing applies."

On the other hand, Neotel's statement doesn't contradict the Competition Commission's note that its entry has created a duopoly, and consumers can merely, at this stage, count themselves lucky that Neotel is being Mr Nice Guy.

Had the licence gone to a company with the same attitude as Telkom's (we have the market, let's milk it!), things would be even more dire than they currently are. The mobile operators, the Commission says, are not much better.

"The mobile operators are somewhat more competitive, although firms in that market seem to behave collectively and are, in any event, dominated by Vodacom, which has a market share of approximately 55 percent... South African mobile prices are high by international comparison, and while moderately good access has been achieved through the mobile operators, utilisation rates remain relatively low."

In addition to this, interconnection rates between operators remain a problem, and the Commission has referred a case concerning these to the Competition Tribunal. Another issue not yet on the Commission's radar is prepaid cellular charges - the poorest pay the most for access, community service phones notwithstanding.