Telkom wants duopoly until 2007

By Phillip de Wet for Telkom
Johannesburg, 02 Feb 2001

Telkom CEO Sizwe Nxasana today outlined the main issues the company will raise at the telecommunications colloquium, which will be held in Midrand over the weekend.

[AUDIO]The main thrust of the submission is a call for a single new national fixed-line operator, which is to share Telkom`s social obligations and should build its own network from scratch. Full competition, the company believes, should wait until 2007.

Telkom would also like to see a cost-based interconnect framework emerge from the consultation process.

"This is by no means comprehensive, but these are the main points," Nxasana said.

Telkom sees a duopoly as the only manageable market structure while the local telecommunications market develops.

"A big bang, immediate liberalisation will not serve the country," said Nxasana. "We have seen in situations where multiple licences are issued, as many as 20 or 30, that people cannot make those licences work financially."

This, he said, leads to a recreation of the original monopolies as smaller players are swallowed by larger operators with the financial muscle to survive.

[AUDIO]"In the short-term, it may look attractive [to issue multiple licences], but in the long run the fallout causes damage to the country`s economy."

The argument for facilities-based competition, instead of services competition where both parties use the existing Telkom network, centres on capacity, foreign investment and job creation.

"The capacity we have created up to date [in our network] is not enough for others to come and buy it for resale," said Nxasana. "We do not believe we have the capacity; services-based competition will not encourage foreign direct investment and it will not create as many jobs locally."

Telkom will also advocate technology neutrality in licensing, with fixed and mobile licences issued without limiting the technology to be used to provide services.

[AUDIO]Interconnection, it said, should be regulated at a "price recovery plus" basis, and should not favour the new player.

Nxasana also said a decision of whether Telkom would apply for an optional year of exclusivity, which would stretch its monopoly to the first quarter of 2003, would be made closer to the May application deadline. He said the targets to be met before such an application can be made are "easily achievable", and that the final decision will be a business one.

"We have to weigh the cost and the benefits of the extra year. Our roll-out obligations, particularly our social obligations, are expensive. It becomes a question of economics. Is it worth it to shoulder the obligations alone, or do we allow another player to come in and share the burden?"

The telecommunications colloquium this weekend, organised by the Department of Communications, is aimed at gathering public input on the shape of the market after Telkom`s exclusivity ends, with the view of amending the Telecommunications Act.