Give the markets a proper chance

To get broadband to everyone, South Africa doesn't need some complex, government-funded plan. By Duncan McLeod.

Duncan-McLeod-180-profileGovernment, well intentioned as might be, could be on the verge of committing a serious blunder in its attempts to sort out South Africa’s poor broadband penetration rates — one that could stunt and distort the telecommunications industry for years to come.

Communications minister Yunus Carrim is expected to present a final draft broadband plan to cabinet soon for approval. This plan is expected to lead next to the national treasury directing taxpayers’ money — possibly billions of rand of it — into the construction of a national broadband network (NBN) of some shape or description.

Much of this money will be used for infrastructure roll-out in rural and underserved areas.

Already, Telkom is lobbying hard to be appointed as the company that rolls out the NBN. Its group CEO, Sipho Maseko, met with finance minister Pravin Gordhan this week, presumably to press home why he believes Telkom is best placed to do the job.

This is troubling, for a number of reasons. At a debate this week, two analysts from telecommunications consultancy BMI-TechKnowledge argued the issue eloquently from opposing sides, setting out the pros and cons of having an NBN funded by national treasury and built by Telkom. But the flaws in the NBN model quickly became apparent — to me, at least — as the analysts set out their respective arguments.

The most obvious problem is that creating a monopoly supplier immediately leads to the potential for abuse. Telecoms monopolies need to be policed by a strong regulator — and South Africa doesn’t have one of those. An efficient and competitive market is always preferable to bureaucratic interference. And are we to trust Telkom, which has a history of anticompetitive behaviour, with not taking advantage of the situation, even assuming the project is carefully policed?

Even now, Telkom appears far from realising that its future success is intimately tied to close collaboration with the Internet service provider industry it’s spent so many years fighting.

Before embarking on yet another misadventure in the telecoms industry, government should consider where the real successes in the sector have come from. It should realise that its involvement in the sector is the problem.

Look at Sentech, which was granted a licence and a big chunk of spectrum in the mid-2000s to take on Telkom in the consumer market. It botched that, at huge cost to taxpayers. Broadband Infraco, also owned by the state, was licensed to compete with Telkom’s national long-distance network. It has not delivered on its mandate and, frankly, has no raison d’être. And does anyone remember former communications minister Ivy Matsepe-Casaburri’s underserviced-area licensee project? The Usals were set up to fail.

The big successes have been in mobile. Despite a somewhat cosy duopoly between MTN and Vodacom — recently made much more uncomfortable by Cell C and its CEO Alan Knott-Craig (who, tragically, suffered a stroke this week) — South Africa’s mobile penetration, as measured by active Sim cards, is approaching 140%. Even if actual subscriber penetration is closer to two-thirds of the population, as some have estimated, the enormous success of the mobile industry cannot be denied. The fixed-line market, which should be growing strongly, too — on the back of demand for broadband in urban areas — is shrinking. That’s an indictment on Telkom.

Telkom boss Sipho Maseko met last week with finance minister Pravin Gordhan

Telkom boss Sipho Maseko met last week with finance minister Pravin Gordhan

South Africans have a predilection for making things complicated, and debating the issues from every angle ad nauseam. This can be seen in the endless workshops and colloquia that achieve little.

To get broadband to everyone, South Africa doesn’t need some complex, government-funded plan. What the country needs to do is facilitate competition by making it easier for anyone to enter the sector and for private capital to invest in building both fixed and wireless networks. In other words, get rid of the red tape.

At the same time, grant access to spectrum that is in high demand to those that have the balance sheets to put it to good use. Then allow that spectrum to be traded freely. And craft regulations that encourage infrastructure sharing to reduce costs.

This is far preferable than tapping an already-stretched national budget to fund what could turn out to be a white elephant.

  • Duncan McLeod is editor of TechCentral. Follow him on Twitter
  • This column was first published in the Sunday Times

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