TechCentralTechCentral
    Facebook Twitter YouTube LinkedIn
    Facebook Twitter LinkedIn YouTube
    TechCentral TechCentral
    NEWSLETTER
    • News

      Ekurhuleni nudges ahead in city electricity race

      25 May 2022

      Reunert would consider buying EOH:
      ‘We’d be foolish not to’

      25 May 2022

      ANC puts spectrum trading firmly back on the table

      25 May 2022

      Reunert hikes dividend in tough market

      25 May 2022

      Management shake-up at TymeBank – including a new CEO

      24 May 2022
    • World

      Big Tech’s latest dive snuffs out hopes the worst is over

      25 May 2022

      iPhone 14 development schedule delayed by China lockdowns: report

      25 May 2022

      Tesla shares continue to plunge

      25 May 2022

      Terra collapse triggers $83-billion DeFi slump

      24 May 2022

      Zuckerberg sued in personal capacity over Cambridge Analytica

      24 May 2022
    • In-depth

      Bernie Fanaroff – the scientist who put African astronomy on the map

      23 May 2022

      Chip giant ASML places big bets on a tiny future

      20 May 2022

      Elon Musk is becoming like Henry Ford – and that’s not a good thing

      17 May 2022

      Stablecoins wend wobbly way into the unknown

      17 May 2022

      The standard model of particle physics may be broken

      11 May 2022
    • Podcasts

      Everything PC S01E03 – ‘The story of Intel – part 1’

      25 May 2022

      The rewarding and lucrative careers to be had in infosec

      23 May 2022

      Dean Broadley on why product design at Yoco is an evolving art

      18 May 2022

      Everything PC S01E02 – ‘AMD: Ryzen from the dead – part 2’

      17 May 2022

      Everything PC S01E01 – ‘AMD: Ryzen from the dead – part 1’

      10 May 2022
    • Opinion

      A proposed solution to crypto’s stablecoin problem

      19 May 2022

      From spectrum to roads, why fixing SA’s problems is an uphill battle

      19 April 2022

      How AI is being deployed in the fight against cybercriminals

      8 April 2022

      Cash is still king … but not for much longer

      31 March 2022

      Icasa on the role of TV white spaces and dynamic spectrum access

      31 March 2022
    • Company Hubs
      • 1-grid
      • Altron Document Solutions
      • Amplitude
      • Atvance Intellect
      • Axiz
      • BOATech
      • CallMiner
      • Digital Generation
      • E4
      • ESET
      • Euphoria Telecom
      • IBM
      • Kyocera Document Solutions
      • Microsoft
      • Nutanix
      • One Trust
      • Pinnacle
      • Skybox Security
      • SkyWire
      • Tarsus on Demand
      • Videri Digital
      • Zendesk
    • Sections
      • Banking
      • Broadcasting and Media
      • Cloud computing
      • Consumer electronics
      • Cryptocurrencies
      • Education and skills
      • Energy
      • Fintech
      • Information security
      • Internet and connectivity
      • Internet of Things
      • Investment
      • IT services
      • Motoring and transport
      • Public sector
      • Science
      • Social media
      • Talent and leadership
      • Telecoms
    • Advertise
    TechCentralTechCentral
    Home»Opinion»Duncan McLeod»Telkom is wrong – there is no market failure in mobile

    Telkom is wrong – there is no market failure in mobile

    Duncan McLeod By Duncan McLeod16 August 2021
    Facebook Twitter LinkedIn WhatsApp Telegram Email
    It’s ironic that Telkom, a former abusive monopolist, is complaining bitterly about a “duopoly”

    There is real irony in the way Telkom is using every opportunity it gets to complain about a “duopoly” in South Africa’s mobile industry. This is, after all, the company that for years abused its once-absolute monopoly control of telecommunications to charge exorbitant prices while getting away with the most appalling service.

    So, listening to its executives last week demand that communications regulator Icasa use an upcoming spectrum auction to disadvantage Vodacom and MTN was, frankly, a little nauseating – even though these aren’t the same Telkom bosses who abused consumers for so many years.

    It’s good messaging for Telkom, of course. The company is driving hard at a narrative that its two bigger rivals in mobile are abusive monopolists, whose outrageous excesses can only be tamed by aggressive regulatory intervention. It’s working: The idea that MTN and Vodacom are a duopoly is gaining popular currency. But is it true?

    Mobile data prices are falling by perhaps 30%/year and consumers are paying much less than they used to for phone calls

    At hearings into the mobile broadband services market last Thursday, Telkom rolled out the big guns – including incoming CEO Serame Taukobong – to make the case as to why Vodacom and MTN are a threat to competition and why Telkom needs all the regulatory help it can get to see off this peril. In short, it positioned itself as the consumer champion, ready to take on the evil monopolists who want to do nothing more than exploit the downtrodden South African consumer.

    Skewed

    While it’s true that South Africa’s mobile market has historically been heavily skewed towards Vodacom and MTN – not surprising, given they were the first to be licensed by the government all the way back in 1994 – competition in the sector has intensified dramatically in recent years. This is in part due to Telkom’s decision 13 years ago (which I’m sure it rues to this day) to sell its 50% stake in Vodacom and launch its own mobile infrastructure business. Since then, Telkom has grown its market share in leaps and bounds, largely at the expense of its bigger mobile rivals.

    This growth accelerated after it adopted a data-led strategy and brought real value to the market. In short, it responded in an appropriate manner in a competitive market and was rewarded for its foresight. Today Telkom Mobile has more customers than Cell C, which was launched more than a decade earlier. Telkom took the mantle of consumer champion from Cell C, and for good reason – it met pent-up market demand for affordable Internet access that had been largely ignored up to that point by Vodacom and MTN.

    In recent years, Telkom’s two bigger rivals in mobile have responded – and data prices have tumbled and continue their downward spiral. The cost of a megabyte of mobile data has never been as cheap as it is today, especially if you buy a bundle (as most people do). Consider that 20GB of data from both Vodacom and MTN is now R199/month on a contract (and there are probably even more affordable examples); prepaid prices have fallen sharply, too. Yet Telkom is still growing faster than its rivals, although its growth has slowed recently as prices tumble across the board. It is getting harder for the company to maintain top-line growth – perhaps explaining why it is so eager now for Icasa to tilt the playing field in its favour. But the regulator should exercise extreme caution – the market is working, and, if prices, investment in infrastructure and improvement in network quality are used as the gauge, it seems to be working well.

    A technician working on the Lukasrand communications tower in Pretoria … Telkom has vast infrastructure assets and access to huge tracts of radio frequency spectrum. Image: Telkom

    Yet Telkom argues that the upcoming spectrum auction should be used to address what it perceives to be a market heavily skewed in favour of the incumbent “duopoly”. Competition, it says, is “ineffective in the retail market” and Vodacom and MTN have “significant market power” in the wholesale and retail markets. Historically, that’s true. But Telkom is not some emerging start-up – this is a giant corporation that still has access to enormous resources, including the country’s biggest fibre network and a vast array of high sites and other infrastructure. It wants Icasa to “urgently address significant market failures” and “entrenched competition problems”. It’s all a bit rich!

    Mobile data prices are falling by perhaps 30%/year and consumers are paying much less than they used to for phone calls thanks to steep cuts in interconnection rates and competition from Internet calling apps like WhatsApp. At face value, the market is not only working – it’s working exceptionally well! Why risk the heavy hand of regulation – and the myriad unintended consequences – in an industry that is functioning?

    It’s spectrum trading, not undue regulatory interference, that will ultimately ensure the maximal utilisation of this scarce resource

    One area where Telkom has a strong case to make is in sub-1GHz spectrum – frequencies that Vodacom, MTN and Cell C have had access to since their establishment. Telkom should be given priority (but not exclusivity) when it comes to licensing those bands once digital migration is completed (hopefully within the next year – ha, ha!). At the same time, though, the market should be left to sort out the optimal use of radio spectrum. Spectrum trading is prohibited in South Africa, a fact that is harming the market and preventing the efficient allocation of this precious resource. Why can’t Telkom buy Cell C’s allocation at 900MHz, for example (Cell C could always lease it back)? That it can’t is an artificial constraint on the market that harms consumers.

    Not starved

    Telkom, it should be noted, sometimes makes out that it is starved of spectrum. This isn’t true – it has access to vastly more spectrum than Vodacom, MTN and Cell C. It has spectrum assets that its rivals would pay billions of rand for. And it doesn’t seem to want its rivals to get access to more, especially for 5G, where it’s worried it will fall behind, thereby entrenching the so-called “duopoly” for the next generation of cellular technology. Icasa must allocate the spectrum in a way that maximises infrastructure competition, but it’s spectrum trading, not undue regulatory interference, that will ultimately ensure its maximal utilisation.

    In some respects, the ban on spectrum trading is already being circumvented: Vodacom’s “super-roaming” deals with Rain and Liquid Intelligent Technologies and MTN’s arrangement, also with Liquid, are in response to a lack of new spectrum assignments by Icasa and the inability to trade frequencies in an open but regulated market. That’s a failure of policy imagination (and inaction) by the government – one can’t blame these operators for striking deals to satisfy consumer demand and pressure on their networks. Frankly, Telkom probably should have cosied up to Cell C by now for access to 900MHz and pushed the legal and regulatory envelope.

    And yes, this is a highly complex subject worthy of a post-doctoral dissertation, and I know some in the industry will disagree vehemently with what I have written here (I’m happy to publish their replies), but the point I hope I’ve managed to convey is that instead of more regulation in South Africa’s telecoms industry, Icasa should not be imposing heavy-handed rules. What it should be doing is greasing the wheels of competition by making licensing easier, by allowing the free trade of spectrum (with clear rules and guidelines to prevent hoarding and other abuses), and generally getting out of the way and letting the market get on with it.

    Telkom is not correct when it argues there has been market failure. Despite everything, the market is working – and with the right policy decisions (a big ask, I know) and light-touch regulation, the industry will continue to grow, and consumers will continue to benefit as prices fall and networks and service quality improve. Heavy-handed intervention now against a “duopoly” that doesn’t exist is not justified.  — (c) 2021 NewsCentral Media

    • Duncan McLeod is editor of TechCentral

    Now read: Telkom has ‘many arrows in its quiver’: Taukobong

    Cell C Icasa Liquid Intelligent Technologies MTN Rain Serame Taukobong Telkom top Vodacom
    Share. Facebook Twitter LinkedIn WhatsApp Telegram Email
    Previous ArticleFacebook, partners expand scope of giant 2Africa cable system
    Next Article Uniswap: What it is, and how and why to invest in it

    Related Posts

    Ekurhuleni nudges ahead in city electricity race

    25 May 2022

    Reunert would consider buying EOH:
    ‘We’d be foolish not to’

    25 May 2022

    ANC puts spectrum trading firmly back on the table

    25 May 2022
    Add A Comment

    Comments are closed.

    Promoted

    Fortinet’s FortiNDR accelerates threat detection with advanced AI

    25 May 2022

    Collaborative problem solving sets our partners on a growth path

    25 May 2022

    You are the weakest link: how to stop the costliest Internet scam

    25 May 2022
    Opinion

    A proposed solution to crypto’s stablecoin problem

    19 May 2022

    From spectrum to roads, why fixing SA’s problems is an uphill battle

    19 April 2022

    How AI is being deployed in the fight against cybercriminals

    8 April 2022

    Subscribe to Updates

    Get the best South African technology news and analysis delivered to your e-mail inbox every morning.

    © 2009 - 2022 NewsCentral Media

    Type above and press Enter to search. Press Esc to cancel.