No stopping Telkom bulldozer

Console Tleane

Published in Business Day, 17 November 2004

It is becoming increasingly difficult to analyse the South African telecommunications market, or should we say the shenanigans playing out at Telkom. Each day, South Africans wake up to yet another of the service provider’s super-accumulationist practices.

The latest is the intention, and notice to the regulator, to increase tariffs.

Last week Telkom told the portfolio committee on communications it found itself forced to increase prices because of the rising number of services it will have to offer and the knock-on effect that this will have on its revenue. Reference was made to how the introduction of such services as voice over internet protocol and others will lead to Telkom losing its traditional core source of revenue generation, the current normal telephone call, especially local calls. Because voice over internet protocol will make it possible for callers with access to internet to make all calls at the cost of local calls, Telkom argues that envisaged migration by many to this new mode will lead to loss in revenue.

The intention to increase tariffs was formalised this week when the telecoms provider submitted a revised price format to the regulator, the Independent Communications Authority of SA (Icasa). Will Telkom succeed in its bid? Should it be allowed to increase its prices? What are the implications if it does?

One of the most debatable telecommunications issues is that ours is one of the most expensive places to be in terms of making a call, especially a local call. In a survey of 14 countries — released in March and undertaken by the rather conservative research group NUS Consulting — SA (should we say Telkom?) moved from fifth- to second-most expensive country for local calls. Only Belgium is more expensive than SA.

SA was the only country among those surveyed to have increased its tariffs over the past year. And now Telkom wants to increase tariffs yet again.

SA also occupies the spot of being the country with the most expensive national call tariffs. Yet interestingly, its international tariffs are lower.

It is therefore interesting, and worrying, that Telkom intends to increase local call costs. First, they are already very expensive. Second, it would seem that the operator would now like to take more advantage of the benefits of services like voice over internet protocol, which are transacted at the cost of local calls. This shows that the sole motive in Telkom’s operational approach is profit maximisation and not service improvement.

Instead of affording consumers connectivity, Telkom has been active in increasing levels of churn within the telecommunications market. For instance, earlier this year the Internet Service Providers Association of SA produced a report that shows Telkom’s call charges rose from 59% of a combined telephone and internet bill in 1993 to 83% by last year, a 24% rise over 10 years.

The application for increased tariffs, and the actual increases that have taken effect over the years, have either led to or are part of Telkom’s continuing profit-making machine.

The company intends to invest more than R4,2bn of this year’s budget in new technologies to upgrade services.

On the face of it this is quite attractive. However, as many commentators have said repeatedly, this has been taking place at the expense of ordinary citizens and their right to communication.

Telkom’s workforce has also not been spared the ruthlessness of the avalanche of crude cronyism sweeping everything that stands in its way.

The seven-year monopoly period that Telkom has enjoyed has produced very little for the population to show in terms of benefits, except for the group executive and shareholders of the company.

Until 1999 Telkom employed a workforce of 61237. By September last year the number of workers at Telkom had fallen to about 33800. This means more than 30000 workers were laid off.

Of course, the company will argue that some, or even many, if not most, opted out voluntarily. We know very well what this means in the workplace for the powerless workers.

Currently the company is embroiled in what can easily be regarded as a national crisis, in that it still intends to retrench no fewer than 4000 workers.

Again, it will argue that various mechanisms are being employed to ensure these workers are given packages that will see them walking away with handsome settlements. This remains to be seen. The point constantly made about the group executive’s salary packages in contrast to the worker’s pending retrenchments is now overdone.

It is, however, in the provision of its core business — communications — that Telkom is found more wanting.

According to the 1999 October Household Survey, Telkom was able to provide 3-million houses with new telephone services. These were mainly in previously disadvantaged areas.

However, these services did not last long — 700000 of these lines were later disconnected.

Some of the reasons given for the disconnections were that users were not paying for the services — which is not entirely true.

For instance, this writer knows of areas in North West province where telephone lines have been disconnected for no apparent reason, and the operator has not provided convincing reasons why this is the case.

This obviously constitutes a clear violation of the people’s right to communicate — and this in the era where communication rights have been recognised, along with other rights, to be human rights and not privileges.

The one big question we now have to ask ourselves is whether Telkom will succeed in its quest for price increases. A dispassionate consideration of some cold facts suggests that it will be very difficult to stop the price increase. Why?

First, the cronyism that surrounds Telkom (and the embedded powers and interests that have emerged in the past week involving political interests) means that in the fight for the heart of the telecoms provider a price increase will be bulldozed through.

Second, the fact that we still have a regulator (Icasa) that is not strong enough to stand up to the two strong players of the South African communications industry — the SABC and Telkom — means that the latter will still be able to continue to stamp its “authority” in the telecommunications landscape.

And the ordinary John Citizen can forget about being the beneficiary.

Tleane is the head of the research unit at the Freedom of Expression Institute