Icasa fails to act for the poor

Console Tleane

Published in Business Day, 3 January 2005

If everything goes according to plan, the Independent Communications Authority of SA (Icasa) will today present its recommendations to the communications minister on new Telkom price controls.

There are a number of substantial issues that we need to highlight.

Although Telkom shares are on the up and up, the company frequently makes bad headline news — if not about pending retrenchments of thousands of workers, then about the exorbitant salaries of its executives, or its failure to meet its universal service obligations.

However, Icasa fails to exercise its authority in the public’s interest. Once again, it has failed to insist that Telkom put its house in order before even talking about possible price increases.

It should be a reasonable public expectation that Icasa would protect consumers from the vagaries of crude profit extraction by operators, whether they are in the fixed line, cellular, or broadcasting sectors. But, increasingly, we are faced with a regulator that, in communications jargon, has undergone “regulator capture” by the big players.

The “regulator capture” is glaring in the current discussion document that might soon become policy.

A number of broad principle matters are clear in the document.

First, Icasa has come to accept the view that fixed lines have ceased to grow (they are in fact declining in real terms, given population growth), and instead growth is replaced by the mobile sector. The regulator does not challenge the fact that this is due to Telkom’s failure to ensure affordable services to poor communities whose lines were cut off, and continue to be cut off. The much-celebrated migration to mobile communication has been exposed as wrong. A number of research studies, the most recent being a Panos report on Africa’s telecommunications capacity, show that fixed-line roll-out is still a necessity if poor communities are to be connected to the internet, for instance.

The second major point that comes out in Icasa’s document is a clear bias in favour of two main players — Telkom and the broader business community.

Let’s deal with the Telkom bias. Ordinarily, and in the face of the forthcoming second national operator, the country needs a strong national operator. This is the norm in any well-functioning democracy. However, a national operator should be one whose values, ethos, and therefore its general practice, serve and preserve that “old public good”. Telkom operates purely along the lines of any other private company that has no regard for its public mandate. Therefore, any claim of national/public interest by Icasa to protect Telkom from negative competition and ensure that it remains viable is misleading.

Icasa’s bias towards the broader business community is demonstrated by the fact that Telkom is making known its intention not to extend its roll-out of services to poorer communities. It will instead focus attention on the more lucrative business community. New users will be business or middle-class users, not working-class users. The latter are vanishing from Telkom’s sophisticated radar. Icasa has facilitated this by creating Under-Serviced Area Licences (USALs), which have been issued to a number of new operators.

Since 2001, Telkom increased public pay-phone local call prices 80%, and national call prices 150%, which hurt the poor the most. Local residential calls increased 38%.

As Icasa itself admits, “residential users were relatively worse off compared to business users”.

Throughout this period, Icasa has given Telkom permission to use consumer price index-based (CPI-based) annual mark-ups, even though its main international costs have been falling since early 2002 (with the rand strengthening), and despite the declining cost of much telecommunications technology.

The proposed move to a CPIX (consumer inflation less mortgages) pricing system also benefits Telkom in a manner not warranted by actual cost-input factors. Many of those input costs — especially imported technology, and local labour (given mass retrenchments) — have fallen.

There is also the possibility that the communications ministry will fail to approve possible progressive recommendations made by Icasa if they do not favour a regime that enhances Telkom’s profitability.

The ministry has a conflict of interests as a major shareholder — so much for recent pronouncements that state-owned enterprises must lead the way in ensuring that the poorest of the poor gain maximally from their services.

It remains to be seen if Icasa will begin exercising its authority over a sector that is increasingly interested in the bottom line instead of serving the people.

Tleane is the head of the media and information communications technology programme at the Freedom of Expression Institute.