Telkom faces multibillion-rand fine for 'abusing dominance' - TechCentral

Telkom faces multibillion-rand fine for ‘abusing dominance’

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The Competition Commission has referred its findings of abuse of dominance against Telkom to the Competition Tribunal for adjudication, it said on Wednesday.

It had asked the tribunal to levy an administrative penalty of 10% on Telkom’s annual turnover for its financial year ended 31 March 2009, it said in a statement. This is the maximum fine the commission can prescribe and amounts to more than R3bn.

“The investigation follows five complaints that were lodged by the Internet Service Providers’ Association (Ispa) and other Internet service providers, or ISPs, namely, Verizon Business, MWeb and Internet Solutions.

“These complaints were lodged at different times during the period 2005 and 2007, but for purposes of investigation the commission combined the complaints as they raised overlapping issues.”

During the investigation, the commission engaged with and received co-operation from the Independent Communications Authority of SA (Icasa), in accordance with the memorandum of understanding between the two regulators, it said.

“The co-operation of the two regulators will continue during the prosecution of this matter, particularly with respect to remedies for the conduct,” the Competition Commission said.

In its investigation it had found that Telkom abused its near-monopoly position in the market for the provision of telecoms network facilities.

“It did this by charging excessive prices for the basic infrastructure needed by its downstream competitors, the ISPs, to access a range of telecommunications services, while keeping its own ISP service charges low.

“In this way, Telkom also raised its downstream competitors’ costs, making it difficult for them to on sell cost-effective services to end consumers.”

The commission’s conclusion was that Telkom had charged excessive prices after comparing Telkom’s prices to its costs, prices in other countries, prices of other operators offering similar services and prices to customers of Telkom who posed a competitive threat to it.

“These comparisons indicated, amongst other things, that in 2006 Telkom’s prices were more than double the average of SA’s major trading partners.

“Furthermore, in 2007, Telkom’s prices were 30% more expensive than the average of a basket of 14 countries.”

The commission also noted that Telkom’s downstream competitors had been consistently losing market share, while Telkom’s share had been increasing over time, pointing to an inability on their part to compete effectively with Telkom.

“The excessive prices charged by Telkom affect the prices which ISPs charge their customers. Given the widespread use of the Internet and the extensive use made of virtual private networks or VPNs by medium to large businesses to link various locations of a single enterprise, there is no doubt that these high prices detrimentally affect consumers and hinder economic development in SA.”

Telkom said in response that the commission had engaged with it over an extended period of time in the last two years while it was completing its investigations with regard to various complaints filed with it by a number of parties.

“The commission has clearly finalised its investigations and, in terms of the relevant provisions in the Competition Act, the commission has decided to refer certain aspects of the various matters to the Competition Tribunal for adjudication,” Telkom said.

“Telkom will prepare its response to the referral in accordance with the relevant rules and procedures applicable to proceedings before the Competition Tribunal,” the company said.  — Sapa

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  1. It is about time Telkom got slapped on the wrists, but who is to pay that R3bn? It will come from us consumers. Why can this fine not be channeled back to overcharged customers or to force Telkom into improving the service it supplies? In other words, what I propose is that Telkom increase line speeds for internet users with Telkom subscriptions for free, reduce the price of bandwidth, improve performance by joining Seacom, etc. Without its subscribers, Telkom would not be in business. It is now time for this monopoly to be sent a very clear message that it has been ripping off the public for far too long, and it’s pay back time.

  2. @Ian: What you propose is essentially a reward to Telkom for anti-competitive behaviour. They get the benefits of anti-competative behaviour and then get to improve their product offerings with the money that they should pay as a fine? Please no!

    How do you make a fine such as that help the people who where disadvantaged is an interesting question though. The EU faced a similar problem when trying to work out how to punish Microsoft for monopoly abuse around the Internet Explorer webbrowser. Its hard to craft something that is a fair punishment but that also doesn’t advantage the entity being punished.

    My guess is that this will go into the national treasury and judging by the borrowings we will make in the next 3 years that might be quite a helpful contribution.

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