Telkom plans to increase the rates on its exclusive services by an average of 5.5% in January, despite the threat of a competitor due to launch in May next year.
Telkom yesterday filed for the increase in what it describes as a "regulatory vacuum" and is higher than was allowed previously, and substantially higher than the cap the Independent Regulatory Authority of SA (ICASA) planned to impose.
Under previous regulations, Telkom had to cap increases on the services it holds exclusivity to, including all landline interactive voice calls, at 1.5% below the Consumer Price Index (CPI). Under new regulations proposed by ICASA, the cap would be at 3% less than CPI.
But Telkom says there are currently no rules binding it as communications minister Ivy Matsepe-Casaburri last week rejected the regulations proposed by ICASA, which would also have seen Telkom limited to a price rebalancing factor of 5%. The company could previously increase the rate on any individual service by CPI plus 20%.
Telkom argues that it did the honourable thing in sticking to CPI, as it believes the lack of regulation means it could have increased prices however it saw fit.
"We took the most fair and prudent approach under the circumstances," says sales and marketing VP Al Todd.
ICASA may not agree. The regulator is due to issue a statement on the filing later today, but is unlikely to be happy with Telkom`s position. It expressed its unhappiness with Telkom`s increases last year, when the company skirted the CPI minus 1.5% rule.
However, ICASA said at the time that it saw no valid grounds for it to reject the proposed increases, and Telkom is confident that this will again be the case this year.
"It would not be appropriate for us to speculate on what they [ICASA] will say," says deputy marketing VP Pinky Moholi. Yet she is certain that all legal requirements have been met and declines to speculate on what would happen should ICASA refuse to accept the filing.
The good news
The filing held good news for very large users of bandwidth. Telkom says the price of international private circuits via cable will decrease on average by 25%, with local Megalines decreasing by more than 13%. These services are mostly used by first-tier Internet service providers (ISPs).
The company also promised to launch rate packages specifically aimed at dialup Internet users in the first quarter of next year. It would not reveal details, but promised that regular surfers would see a price decrease.
While it is now common knowledge that a digital subscriber line (DSL) service will be launched next year, company representatives were tight-lipped on the issue.
"I can only confirm that ADSL technology will be a reality in 2002," said Todd. "Watch this space."
At the lower end of the market, Telkom is proposing a "lifeline" option to enable new subscribers from underserviced areas to join its network. It says it is willing to charge such users only half of the R239 that a new line installation will cost from January. The Universal Service Agency (USA) would pay it 40% of the cost, and Telkom would write off the remaining 10%.
Whether the USA will take up the offer is another question. Moholi says such submissions have been made for more than three years without action to date.
Universal service may seem to be more threatened by rates than by the once-off installation fee after Telkom disconnected a net number of 500 000 subscribers for non-payment in the 1999/2000 financial year. But Todd says this action will not be repeated.
"We think there was a period we had intake without the appropriate credit processes," he says. "Those have now been fixed."
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