Business Report - Watchdog finds Telkom abused dominance

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Watchdog finds Telkom abused dominance

October 28, 2009

By Justin Brown

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The competition commission has referred its findings of abuse of dominance against Telkom to the competition tribunal for adjudication.

The watchdog has asked the tribunal to levy a penalty of 10 percent on Telkom’s annual turnover for the ended March.

The investigation follows five complaints that were lodged by the Internet Service Providers Association (ISPA) and other internet service providers or ISP‘s, namely, Verizon South Africa, Multichoice Subscriber Management Services (MWeb) and Internet Solutions (IS).

These complaints were lodged at different times during the period 2005 and 2007 but for purposes of investigation the commission combined the complaints, as they raised overlapping issues.

During the investigation the commission engaged with and received cooperation from the Independent Communications Authority of South Africa (Icasa), in accordance with the Memorandum of Understanding between the two regulators.

The cooperation of the two regulators will continue during the prosecution of this matter, particularly with respect to remedies for the conduct.

In its investigation the commission found that Telkom abused its near-monopoly position in the market for the provision of telecommunications network facilities.

It did this by charging excessive prices for the basic infrastructure needed by its downstream competitors, the ISP’s, to access a range of telecommunications services, while keeping its own ISP service charges low.

In this way, Telkom also raised its downstream competitors costs, making it difficult for them to on sell cost effective services to end consumers.

The commission concluded that Telkom charged excessive prices after comparing Telkom’s prices to its costs, prices in other countries, prices of other operators offering similar services and prices to customers of Telkom who posed a competitive threat to it.

These comparisons indicated, amongst other things, that in 2006 Telkom’s prices were more than double the average of South Africa’s major trading partners.

Furthermore, in 2007, Telkom’s prices were 30 percent more expensive than the average of a basket of 14 countries.

Significantly, the commission also noted that Telkom’s downstream competitors have been consistently losing market share while Telkom’s share has been increasing over time, pointing to an inability on their part to compete effectively with Telkom.

The excessive prices charged by Telkom affect the prices which ISPs charge their customers.

Given the widespread use of the internet and the extensive use made of virtual private networks (VPN’s) by medium to large businesses to link various locations of a single enterprise, there is no doubt that these high prices detrimentally affect consumers and hinder economic development in South Africa.

SUBMIT YOUR COMMENT!

Showing page 1 of 1 comment pages, 9 total comments

12 Weeks ago Gatvol wrote :

Worms! My line's been down for three whole weeks now. No voice or data at my office. I've logged the call 13 times over the last 3 weeks without a whisper from Telkom...hey...maybe their phones are down as well!!

14 Weeks ago Citizen wrote :

You are wrong Jako. Telkom is very effective at stealing from us, their clients. They are only useless at providing a service for the money that they overcharge everyone that is forced to deal with them.

14 Weeks ago Anonymous wrote :

blood sucking vermin

14 Weeks ago Jako wrote :

FINALLY! Been waiting for this moment for years! Just hope this does not fade into the night sky again... I always said if I had Bill Gates's money I would buy Telkom and close it down... useless organisation.

14 Weeks ago Anonymous wrote :

Hurray! As someone who has had to deal with Helkom's poor service on a regular basis I am overjoyed! Suffer you worms - may your market share dwindle to nothing.

14 Weeks ago Charles Ash wrote :

Best news I've read in ages! It's about time really. Telkom has been really pillaging this country and holding us back. As an Internet entrepreneur, this finding is music to my ears.

14 Weeks ago Tired of caps wrote :

TELKOM - RESISTANCE IS FUTILE YOUR MONEY IS OURS ;( WHERE IS OUR 8MB LINE TELKOM, AND PLEASE OFFER UNCAPPED ACCOUNTS, NO NOT LOCAL, FULL INTERNATIONAL WITHOUT ANY LIMITS, WE PAY YOU ENOUGH

14 Weeks ago Anonymous wrote :

And this will also just fall by the wayside, its mostly government owned....sigh

14 Weeks ago Dave wrote :

There's a surprise?!?

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