Title: Rethinking telecom reform model: the case of South Africa.
1Rethinking telecom reform model the case of
South Africa.
Alison Gillwaldgillwald.a_at_pdm.wits.ac.zaLINK
CentreGraduate School of Public and Development
ManagementWitwatersrand University, South
Africahttp//link.wits.ac.za
2Why is telecom reform necessary?
- Poor teledensity
- Rationale of telecommunications as natural
monopoly undermined by digitised low cost
technologies - Challenges of affordable access and accelerated
network development - Marginalisation from global economy and own
developmental objectives
3What are the key elements of the of the
multilateral reform model?
- Privatisation, with extension of monopoly
- Limited liberalisation network and service based
competition - Sector regulator
- Universal service mechanism
- Market failure mechanism to service poor
4What is privatisation and why has it been
emphasised in the reform process?
- Transfer of ownership from state to private
interests - Affordable access through improving efficiency
of incumbents - Struggle between market access desire of
multilateral agencies and maximisation of value
of state assets or instruments of income
generation
5What have some of the effects been?
- Markets structured around vertically integrated
incumbents - Creates anti competitive incentives for the
incumbent to deny access to its network - Requires complex and resource intensive access
regulation - which has had chilling effect on VANS and ISPs
6Has privatisation contributed to sector growth
and national objectives?
- In SA sector grew from R7billion in 1992 to over
R50billion in 2001 but masked policy failures - Network not doubled to 6 million, 2 million fixed
line subscribers disconnected, largely as a
result of average 24 pa increase in local
tariffs despite efficiency gains including loss
of 30 000 jobs - Monopoly chilling effect on VANS, ISP
- Unintended outcome of policy mobile platform for
universal service with 18 million subscribers
four times more than PSTN
7Size of SA Telecom Sector
Billions of Rands
Source ITU World Telecommunications Indicators
Database (2002), Telkom IPO Prospectus, 2002 MTN
Annual Report, 2002 BMI-Techknowledge
Communications Handbook
8Source Telkom annual reports
9Source ITU World Telecommunications Indicators
2003
10Source ITU World Telecommunications Indicators
2003
11Sources Residential monthly telephone rental
1997 - 2001 ITU World Telecommunications
Indicators Report 2003 2002 - 2004 Telkom Annual
Reports Residential telephone connection charge
1997 - 2001 ITU World Telecommunications
Indicators Report 2003 2002 - 2004 Telkom Annual
Reports
Cost of 10 hours worth of calls 1997 - 1999
ITU World Telecommunications Indicators Report
2003 2000 - 2004 Telkom Annual Reports Total
fixed-line telephone lines per 1000 inhabitants
Telkom Annual Reports
12Source Telkom annual reports
13Note For South Africa and Poland the data is
only up to 2001. For Argentina, there are no
stats after 1999
Source ITU World Telecommunications Indicators
2003
14Note The RHS axis denotes subscribers per 100
inhabitants
Source ITU World Telecommunications Indicators
2003
15 2004 amount is an estimate based on average
increase since 1997
Sources growth of total internet subscribers
The Goldstuck Report Internet Access in South
Africa 2004 Fixed line cost 1997 - 2000 ITU
World Indicators Report 2003 2000 - 2004 Telkom
Annual Reports Average ISP costs
www.internet.org.za
16Source World Wide Worx The Goldstuck Report
Internet Access in South Africa 2004
17What are some of the associated policy and
regulatory challenges for developing countries
undergoing telecom reform?
- Structural conflict of interest between
shareholder ministry and regulator - Stimulating long term investment while regulating
fair prices - Inability to regulate private monopoly negative
effect on wholesale and retail pricing. - Access regulation resource intensive and even
skilled and experienced regulators cannot
overcome information asymmetries requires
incentive regulation and alternatives such as
benchmarking
18How might these challenges be overcome in to
build an efficient infostructure required by a
modern economy?
- Remove artificial restraints on market that
create inefficiencies - Regulated market accompanied by innovative
deployment of universal access levies, that
stimulate market growth through innovative new
entry, increased calling opportunities and lower
costs - Structural separation creates competitive
incentives, easier to set tariffs for
non-competitive essential facilities, due to
separation of the component parts and accounts - With tariff fee structure sufficiently above cost
and no business unit to protect downstream,
incentive to encourage access. - Create conditions for development of information
infrastructure
19What are the lessons of reforms to date?
- Sequencing of reform stages privatisation,
liberalisation - Appropriateness of policy and conduciveness to
implementation - Extended monopolies chilling effect on
competitive sectors, ISPs, VANS and drag on
national economy - Demand for communications met through market
mechanisms, relieve demand on state subsidies,
which can be transparently targeted. - Efficiencies associated with vertically
integrated operations need to be weighed against
cost to industry and cost of resource intensive
regulation. - Is core infrastructure may remain natural
monopoly but demand for communications services
innovatively met through strategic regulation of
market forces.
20http//link.wits.ac.za
- Alison Gillwald
- LINK Centre
- Graduate School of Public and Development
Management - Witwatersrand University
- gillwald.a_at_pdm.wits.ac.za