Telkom Group CEO Sipho Maseko has slammed the Competition Commission for intervening directly in prices in the data services market, warning using this “blunt and archaic” tool is an “ineffective instrument that may ultimately have unintended and deleterious consequences on employment and future levels of investment”.
Maseko’s withering criticism of the commission comes after the regulator directed Vodacom and MTN to slash data prices by up to 50% and ordered all operators to offer a free daily allowance of “lifeline” data to all consumers, among other measures meant to make data services more affordable.
The commission’s sweeping interventions “may ultimately even push smaller players out of the market completely”, Maseko wrote in an editorial published in the Business Day newspaper on Monday.
He argued that the commission found correctly that the mobile sector is constrained by the Vodacom and MTN “duopoly and that this is driving higher costs of communication, not least in mobile data services”.
“But instead of directing its remedies toward fixing the failure of competition, the commission rather went for the blunt and archaic tool of price control. As in any market, consumers win when prices are as low as possible and service quality as high as possible. Both those factors are driven by fair competition, not regulatory diktat,” he said.
“Any company that overcharges for its goods and services will be hit by its competitors and consumers in any industry where the competition dynamics operate the way they should. But if that company is a monopoly, or part of a market-controlling duopoly, this does not happen. Controlling the duopoly’s pricing may be popular and even appear temporarily effective, but it is tantamount to prescribing a cure for symptoms while leaving the disease intact.”
‘Regulatory failure’
Maseko also laid into communications regulator Icasa, calling its “regulatory failure” in allowing Vodacom and MTN to become as dominant as they are “far more egregious that that of the Competition Commission”.
“We are where we are primarily because Icasa … has been asleep at the wheel as the duopoly developed and strengthened its grip over the industry, and ultimately the economy. We should not forget that the existence of Vodacom and MTN is the result of deliberate legislative, policy and regulatory action to redesign the landscape of the telecoms sector from one dominated by Telkom (then a fixed-line state monopoly) to a diverse, innovative and prosperous sector defined by private sector participation and investment. These actions succeeded, providing the blueprint for how the state and regulators can intervene positively to change the fortunes of an industry.
“And yet the state and Icasa have failed to follow this blueprint since then, remaining static as the duopoly developed and failing to use pro-competition levers to aid the entry of the likes of Cell C and Telkom Mobile in the same way as it smoothed the path for MTN and Vodacom. This has resulted in untold harm to the South African consumer and the economy.” — © 2019 NewsCentral Media
