The Competition Tribunal on Wednesday appeared set to agree to the terms of a settlement reached between the Competition Commission and Telkom concerning anticompetitive abuses by the operator between 2005 and 2007.

The settlement includes payment of a R200m penalty over three years and, more importantly, “functional separation” of its retail and wholesale divisions. Telkom has also agreed to pricing commitments for the next five years, and to allow its future conduct to be monitored.

The telecommunications operator will have to institute functional, or operational, separation of its retail and wholesale arms within six months of the tribunal accepting the terms of the settlement.

Telkom must allow the Competition Commission access to its records at any time and supply it with annual reports so that it can ensure it’s adhering to the terms of the settlement and not reverting to past anticompetitive behaviour.

The tribunal will indicate whether or not it has agreed to all of the terms of the settlement in coming weeks, but on Wednesday lauded both Telkom and the commission for working out a settlement — particularly in light of the company’s proclivity to turn to the courts.

Telkom has agreed to co-operate with the commission in setting up a conflict resolution procedure so that if conduct comes to the fore that suggests it is infringing the settlement terms, this can be resolved without necessarily having to go to the tribunal again.

The commission argues that there are significant benefits for the tribunal and for consumers in concluding the settlement, both in terms of the financial and personnel resources of the commission that will be saved, and because the changes Telkom has agreed to implement will benefit end users.

As part of the settlement agreement, Telkom’s wholesale arm will, according to the commission, begin to act in a manner that treats its retail arm as “just another customer”.

Telkom Wholesale will not be allowed to prioritise line installations or services for Telkom Retail, nor will it be able to pass on sensitive information it may come across in its dealings with third parties.

Telkom Retail will pay the same tariff list price for services to Telkom Wholesale as any other third party — including international lines costs, national transmission lines costs and wholesale broadband connection (IP Connect) fees — and both divisions will have to keep internal records so that the commission can monitor the operator’s behaviour.

The commission says the pricing reductions Telkom has agreed to will be weighted 70% to wholesale and 30% to retail side. Focusing on wholesale pricing puts pressure on third-party Internet service providers to pass on cost reductions.

Telkom will pay the R200m fine in three annual installments of R66 666 666. The first payment will need to be made within 30 days of the tribunal agreeing to the settlement. The second and third payments will follow a year, and two years, after the agreement is reached respectively.

Specific details of the price reductions Telkom will undertake will remain confidential because releasing them could have implications for Telkom’s competitiveness, according to the commission. Telkom will also have to ensure that any price reductions are not reversed in the 2017 and 2018 financial years.

In April, Telkom agreed to pay a separate, R449m fine relating to earlier complaints against it in which it was found guilty of abusing its market power between 1999 and 2004. Telkom had initially appealed against the Competition Tribunal’s decision but dropped the appeal in March. — (c) 2013 NewsCentral Media