ICASA: Fair process was followed

Johannesburg, 21 Aug 2006

Chairman of the Independent Communications Authority of SA (ICASA) Paris Mashile has rejected criticism that the regulator failed to address SA`s broadband costs by effecting no material change in Telkom pricing structures.

In terms of "the principles of approach", the proper course was followed, says Mashile. "We had a public consultation process. The public hearing process is there to allow ICASA to find the optimum solution based on the evidence - and I feel this has been done."

However, ICASA may "consider" regulating the actual pricing (rather than the pricing structures), says Mashile. "ADSL could be one of a basket of services that could be subject to a price cap."

However, the introduction of the second national operator will likely cause pricing issues to be resolved through a fair market mechanism, he notes. "Competition is the best form of regulation."

Questions have been raised about how much faith the industry will have in a regulator that seems to have spurned the opportunity to lower broadband costs which have been quoted as 1 000% more expensive than many developed countries.

"The only entity that is favoured by these regulations is Telkom," says Geoff Rehmet, senior consultant at Internet Solutions` New Business Development division.

He says while ICASA`s decision that local bandwidth will no longer be subject to the cap is "well intended", it could create more problems than it solves, putting commercial pressure on ISPs.

"It may well prevent ISPs from bringing lower-end products into the market," he says, adding the effect on Telkom is limited since the cost of local bandwidth is negligible to the fixed-line operator.

However, he reasons that ICASA is in a very difficult position, explaining it has publicly admitted to being understaffed, it seems to have a shortage of technical experts, and it seems to be bullied and threatened by certain larger industry players.

More muscle needed

BMI-TechKnowledge telecoms analyst Richard Hurst says ICASA`s decision is what the industry was expecting from a regulator trying to be balanced. He claims ICASA is protecting new entrants into the market, where too stringent regulations on price might hamper their economic viability.

"You don`t want to license new operators and then leave them with a market that is unworkable," he says.

MD of research house World Wide Worx Arthur Goldstuck says he had expected ICASA to force Telkom to remove one of the cost components in the pricing structure.

However, he cautions that one should not overlook the many positives to emerge from the new regulations, describing the removal of the local cap, the disallowing of the 24-hour reset and the shaping of traffic, the mandate to Telkom (and the SNO) to install within 30 days, and transparency of contention ratios and minimum throughput speed guarantees as "steps forward".

"The regulator is moving forward, but we need to see a more muscular approach," says Goldstuck, adding that decisions such as this raise questions over how progressive it may be with the deregulation of the SAT3 cable.