Say the magic words

Abracadabra? No. Open sesame? No. Kazaam? Definitely not. Try rather: “consumer benefit” - these seem to be the magic words driving change in SA's telecoms industry.

But is it all just an act, with the words “consumer benefit” used as a distraction for big business and government to push forward their own agendas?

Just looking at the recent revelations from the Department of Communications and Neotel, regarding the consumer market, it would be easy to conclude that this is the case.

The history of the telecoms market is one categorised by a monopoly in the fixed-line segment and exorbitant service costs on the mobile side.

Suffice to say that the victim in both market segments has been the consumer - who, faced with little choice in an anticompetitive market, simply had to settle for the high cost of communication in the country.

Soon the cracks began to show. Thus, government mobilised to rectify the situation and, born from the Department of Communications (DOC), came the Independent Communications Authority of SA (ICASA).

ICASA was mandated with constructing regulations to govern the telecoms environment, and in so doing, to create a more competitive environment that would translate into savings for the consumer.

With this shift in the telecoms landscape came buzzwords such as consumer benefit, cheaper calls and competitive markets. Government and private sector suddenly realised the value of the consumer and a revolution washed over the industry.

However, when looking over some of the change that has emerged in the industry, the disgruntled consumer has yet to see any real change to their communication costs.

Instead, the reality is that consumer benefit is years away and the concept has been nothing more than a means to an end for short-term change.

Often, for a magic trick to be successful, the magician would have to divert the audience's attention. Similarly, the idea of cheaper retail costs and consumer benefit has been the distraction driving the interconnection rate regulations.

It has been widely publicised that the main objective of reducing the cost of mobile termination rates (MTRs) would be to reduce the exorbitant cost of communication in SA, and ultimately offer savings to the consumer.

The concept of consumer benefit has simply been the dangling carrot.

Leigh-Ann Francis, journalist, ITWeb

The rates were voluntarily reduced by SA's mobile operators, from R1.25 to 89c per minute, earlier this year, at which point then chairman of ICASA Paris Mashile was quoted as saying: “I will be very disappointed if the cellular operators do not pass on the interconnection rate cut to consumers.”

The DOC reiterated this sentiment, saying the main objective of mobile termination rate cuts was to make a difference in the pocket of the consumer.

But it has been revealed that there never was any correlation between interconnect rates and the cost of cellular calls, and the DOC was simply being populist in its advocacy of having these cuts in the name of lower telecommunication costs.

The only real impact of MTR cuts would be on off-net costs, which will - in turn - create competition, eventually resulting in consumer savings, but analysts believe that this is still years away.

With little impact on retail rates, the concept of consumer benefit has simply been the dangling carrot, pushing forward the regulations, but just out of reach.

Some magic tricks rely on distorting the audience's perception and creating an illusion. This has been the tactic deployed by some of the players in the industry as well.

When Neotel first came to market, it was introduced as a second national operator and positioned to deliver a competitive alternative to Telkom's fixed-line offerings for consumers and small business.

However, Neotel has failed to make any real impact on the consumer market and now the company has confirmed that the consumer market is just not a priority for its business.

In fact, Neotel's ideal revenue mix would be divided as: 60% in the enterprise segment, 30% in the wholesale segment and 10% in the consumer market.

This revelation is indicative of Neotel positioning itself as a competitor to Internet Solutions, rather than Telkom, and while this may be positive news for the enterprise market, the consumer once again is left stranded.

Nonetheless, Neotel says it is on target with meeting its regulatory obligations regarding its consumer offering, which begs the questions as to what exactly the company's target is, especially since it has fewer than 50 000 subscribers nationwide, after four years in the market.

And if it is on target - why has the bar been set so low?

It seems fair to say that the words “consumer benefit” have been used to distract consumers into believing that the market values them.

Instead, both public and private entities seem to throw the phrase around, with reckless abandon, but no real consequence exists for poor performance and non-delivery.

All the while, consumers have been promised a great show - but no rabbit has been pulled out of the hat, and all that has disappeared is their faith in the industry.