South Africa needs to have at least four fixed-line operators to generate the level of competition required to lower broadband costs, said Taylor Reynolds, an economist with the Organisation for Economic Co-operation and Development (OECD).
Reynolds was speaking on the sidelines of ITWeb`s 2007 Broadband and Wireless Conference, in Johannesburg, last week.
Taylor argued that Telkom is charging South African broadband users higher than its international counterparts "because it can.
"Prices will not come down until there is pressure from other competitors to reduce prices and bring out innovative products and services," he said.
The envisaged competition between Telkom and second national operator Neotel is not enough to bring sufficient competition to lower fixed-line broadband costs, he said. More fixed-line players, as well as increased international access brought on by more players in the undersea cable arena, will help drive down costs.
Reynolds also rubbished Telkom`s argument that SA should not be compared to some international countries on the basis that SA is an emerging market and it costs more to bring broadband to consumers, and is harder to reach critical mass.
"Why would it cost an operator more in France to provide broadband services than in SA? The equipment costs are the same and they buy from the same manufacturers," he said.
Reynolds conceded that South African broadband prices dropped 19% recently, with speeds going up by 29%. However, the price drops are not enough, he said. Additionally, while mobile Internet prices are also low, and in line with international trends, it is not enough.
Reynolds compared SA`s advertised offerings with the US and France`s offerings, demonstrating that South Africans pay more for a 4Mpbs offering than Americans pay for a 30Mbps offering. "South Africans are paying too much," he said.
Local loop unbundling
One of the conference delegates argued that at 4.6 million lines, SA`s fixed-line penetration is too low to justify the cost of unbundling. The money would be better used rolling out more fixed-line infrastructure, she said.
However, Reynolds said smaller telecoms providers need the local loop to deliver more or new services and generate sufficient revenue to roll out their own infrastructure.
France`s Free Telecoms is on record saying it would not have been able to roll out additional fixed-line infrastructure if it didn`t have access to the unbundled local loop, he said.
Additionally, unbundling can cost less than anticipated, Reynolds said. Free Telecoms unbundled at the average cost of R100 per line.
Sunrise Consultants MD Robert Hall said SA could unbundle in a shorter period than by the anticipated 2011 deadline.
He presented case studies where the local loop was unbundled in shorter periods, including Lebanon and Pakistan, where it was done in seven months. "If war-torn Lebanon was able to do it quickly, what`s to stop SA from doing the same?`
Independent Communications Authority of SA councillor Tracy Cohen noted that while the conference participants had the luxury of debating whether the local loop should be unbundled, and the timeline involved, ICASA had to fulfil the legal mandate.
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