Regulatory uncertainty cripples telcos

Johannesburg, 09 Oct 2007

South Africa`s uncertain telecommunications regulatory environment hinders the growth of local telecoms companies. This forces them to look towards the rest of Africa for regulatory stability and revenue growth.

This is according to Gateway Communications COO Mike van den Bergh, Internet Solutions senior regulatory officer Siyabonga Madyibi and BMI-TechKnowledge senior analyst Richard Hurst.

They say SA`s telecoms industry regulatory environment makes it far more attractive to operate in other African countries.

The believe the Independent Communications Authority of SA (ICASA) fails to provide a stable regulatory environment where the rules of play are clear and operators can get on with their business.

As a result, Gateway continues to look north for revenue growth, earning only 5% of its annual revenue from its South African operations, says Van den Bergh. Gateway has operations in 13 African countries providing carrier of carrier services and commercial TV services.

Hurst says Gateway is not alone in this move. A number of local operators have also said they are looking to growth from Nigeria, Kenya and Uganda.

Van den Bergh and Hurst argue that companies are not attracted by the larger population numbers in the rest of Africa, where they can reach critical mass quickly. Van den Bergh cites Burkina Faso, while Hurst cites Uganda as examples of countries that are more attractive to operate in, even though they are smaller.

The problem

Madyibi says the local communications environment is still tightly regulated despite the promulgation of the Electronic Communications (EC) Act in 2006. This means telecoms operators are effectively regulated by the old Telecommunications Act of 1996, he says.

He cites a regulatory stipulation that telecoms operators have to use Telkom facilities. "Telkom has not been able to scale up and if you put in a request for a circuit, it takes at least six months to be installed."

He adds that IS has more than a thousand circuit applications pending with Telkom.

"This is definitely inhibiting our growth, as every Diginet circuit that is outstanding is a potential client."

He argues that ICASA has to step up to the plate as, a year down the line, it has yet to implement "most if not all" of the practical steps that would make it easier for IS to do business.

Time for change

ICASA spokesman Sekgoela Sekgoela says when the EC Act came into effect, there was an agreed time frame of two years for the implementation of far-reaching amendments to the regulatory framework.

The regulator argues it is well within these time frames to implement the EC Act, which provides for a deregulated environment that will stimulate growth.

"The authority is working towards meeting that deadline and is well within that time frame of aligning its regulatory activities in accordance with the EC Act," he says.

ICASA will hold hearings on the interconnection and facilities regulations this week, following draft regulations that were published earlier this year.

This will be the second time that ICASA holds interconnection and facilities leasing hearings after the promulgation of the EC Act. ICASA also held one set of hearings on interconnection when SA still operated under the Telecommunications Act.

Van den Bergh says part of the problem is that ICASA is not exercising its powers fully by laying down the law and having the capacity to enforce, as demonstrated by the Nigerian Communication Commission.

As a result, the regulator lacks the capacity to regulate firmly, and is prone to being misled by other telecoms players that have a stake, he says.