Dangers of ICT managed liberalism

I am currently spending a few days in Singapore before I proceed to Kuala Lumpur, Malaysia, where I will be one of the speakers at the Second International Conference on Cyber Security, Cyber Warfare and Digital Forensic. I am able to do lots of work in my hotel room and coffee shops because of my access to speedy broadband. My excitement at this abundant broadband was crudely tempered by my lovely wife who quipped: "Enjoy it while it lasts!" This is very true, as back home in South Africa I will have to contend with poor information and communication technology (ICT) services, especially the Internet.

Singapore and Malaysia, which were at some point peers with South Africa in terms of ICT services, have made more progress than South Africa by deregulating their ICT industry and allowing competition.

Two weeks ago, I wrote in this space how the needy people in rural areas and other underserviced areas in South Africa are struggling to have access to ICT services. Truly speaking, even those of us who live in leafy suburbs receive erratic and poor Internet connection.

There has been a stream of calls to radio stations and letters to newspapers by frustrated cellphone users in South Africa, grumbling about the quality of cellphone services since South Africa embraced the Global System for Mobile network in 1994. The abysmal quality of service escalated drastically at the beginning of 2009. Although the Independent Communications Authority of SA (ICASA) gazetted the regulations setting out minimum standards for the End-User and Subscriber Service Charter on 24 July 2009, the problem of poor quality ICT services persists.

Other than the Gauteng e-tolls and chaotic Joburg City billing shenanigans, what irks us, the chattering class, is the fact that ICT services in South Africa are some of the most expensive in the world. The poor network service exacerbates the situation since over and above the exorbitant telecommunications fees, consumers are now paying for services they did not benefit from due to the poor quality; in a voice call, you constantly have to ask the person you are speaking with to repeat what they are saying - it is such an annoyance.

On the other hand, when consumers complain about bad ICT services, operators reluctantly admit there were some problems on their network. The operators ascribed their network problems to the capacity overloads which are sometimes precipitated by a flood of consumers who wanted to take advantage of new free airtime promotions. Meanwhile, users were losing money while operators were raking in huge profits and pleading innocence. Perhaps for the past several years, network operators were relaxed because ICASA largely slept on the job and there was little competition. The operators and ICASA cannot solely be blamed for the exorbitant ICT fees and poor services; the government has let us down by its reluctance to allow competition. The government's policy regarding competition can be described as managed liberalism.

Within the next five years, the cost of ICT services will go down while at the same time the quality will increase substantially.

Dimension Data's CEO was quoted by the Sunday Times (25/01/2009) as saying the slow pace of telecommunications deregulation has left South Africa eight or 10 years behind the rest of the world, observing that the CEO of his Asian operation has more bandwidth in his house than any one of the South African banks. He felt that South African children are being left behind by their Asian counterparts and this was a major concern.

It is important to reflect on how government went about implementing its 'managed liberalism' policy. Firstly, the government went out of its way to protect the then incumbent and sole fixed-line operator, Telkom, against competition. According to the provisions of the Telecommunications Act No 103 of 1996, no operator could provide telecommunications services without a licence. This Act gave Telkom an exclusive operational licence to provide Public Switched Telecommunication Services. This protection of Telkom prevented competition and to date consumers are paying heavily for this poor policy formulation.

In a policy announcement issued by communications minister, the late Dr Ivy Matsepe-Casaburri, on 2 September 2004, the minister promised the liberalisation of the telecoms industry. As part of the determination on changes to the Telecommunications Act, the minister declared that value-added network providers (VANS, also know as Internet service providers) would be allowed to self-provide their own network infrastructure from 1 February 2005. The regulator, ICASA, then officially endorsed this amendment. However, a few hours before the due date, the minister changed her declaration by claiming the self-provisioning would apply only to the mobile cellular operators and only a few VANS. The rest of the VANS would lease the facilities of any licensed operator as specified in the determinations.

In effect, this announcement was a dent on the competition imperative because the VANS were then being compelled to buy all the network services from the same operators that were their main competitors. In addition, the policy about-turn created an atmosphere of uncertainty, and made it difficult to trust the telecommunications policy directive in South Africa. Both the Ministry of Communications and ICASA appeared to be protecting vested interests of some established operators. Be that as it may be, the minister had to relent after being challenged and lost at the High Court.

Thirdly, the government interfered with the rollout of the undersea cables project by dictating the structure of the ownership. The Department of Communications articulated this in the draft policy published in May 2006, which stated the ownership of all broadband undersea cables that land in South African waters should be owned by the majority of South African companies. The problem with this policy stance was that it would drive away potential investors. It also brought uncertainty to the industry and threatened to shatter the hope of reducing the high cost of Internet access. There were also fears that this could jeopardise the two undersea cable projects: Eassy and Seacom. After much pressure from analysts and international investors, the government backed-off.

Having said all this, the South African government should be commended for finally ditching its managed liberalised ICT policy. Once there was only one fixed-line telecommunications operator offering expensive services in South Africa. Today, there are more than 350 licensed operators providing broadband and bandwidth services. Within the next five years, the cost of ICT services will go down while at the same time the quality will increase substantially. Telephone call and data costs will fall by more than 50%. In fact, your mobile and home fixed-line will be fixed rate - you will be calling and using data services as much as you want. There will be broadband everywhere, and very cheap. The deployment of voice over Internet Protocol and new infrastructure (fibre and undersea cables) bring light at the end of the tunnel.