Will deregulation be a damp squib?

Johannesburg, 31 Jan 2005

Communications minister Ivy Matsepe-Casaburri has chosen to come down on the side of the incumbent operators in the market, saying it was never her intention to allow value-added network service (VANS) players to provide their own infrastructure.

Just 24 hours before her determinations on the liberalisation of the market come into effect, Matsepe-Casaburri has made a public statement clarifying the government`s intentions and outlining the envisaged government policy in this regard.

"The issue of self-provisioning was issued in the government`s policy determinations only in relation to mobile cellular operators in terms of fixed links, to give full meaning to the intention to reduce the costs of telecommunication services in SA, it is the intention that VANS operators may obtain facilities from any licensed operator and as specified in the determinations.

"It is not the government`s intention to license every single activity that can be provided by a VANS operator, as this would lead to an absurd result. I can assure the sector that the Convergence Bill, when tabled, will bring much needed certainty to the sector in this regard."

Despite the fact that this announcement will hinder, rather than help VANS providers, the minister claims she has done this "against the imperative to avoid any delays with implementation of the determinations and the speedy introduction of competition and the lowering of prices to the end consumer".

Matsepe-Casaburri says she is confident this clarification will dispense with any doubt as to the government`s intention in this critical sector of the economy, which are, among others, the continuation of managed liberalisation and the resultant reduction of costs.

No meaningful competition

Internet Solutions (IS), one of the players in the sector that stands to benefit greatly from the liberalisation, says while it still has to try and understand the framework better, its opinion is that if the intent is to reduce prices and increase competition, then this is not really the best way to go about it.

"While we understand the minister`s attitude that it would be absurd to allow some 300 VANS players to self-provide, there are a few players in the top tier of the market who can provide competition and thus help to reduce prices, if allowed to self-provide," says Hillel Schrock, executive for new business development at IS.

"This decision means that the big players in the VANS space will not be able to provide meaningful competition, and we have to question the timing of this announcement, since the regulator was already discussing this issue last year, so why has the minister chosen to say this just one day before liberalisation comes into effect?"

He says IS does not want to set itself up as a facilities provider, but because there is a lack of viable alternatives, it would like to be allowed to provide in situations where no such facilities exist.

"If we have a customer just five kilometres away who wants our service, but does not have any Telkom lines, we cannot offer them a service, even though we have the capability of rolling out the necessary infrastructure for them. This is very frustrating for our clients," says Schrock.

"This announcement will obviously hold us back a little in terms of our roll-out plans - and we will need to differentiate between what VANS can do in terms of voice and infrastructure provision - but most importantly we hope there will be no last minute surprises on the voice side of things."