During a recession, the importance of having a strong and competitive ICT sector in cannot be underestimated. Broadband and phone services are now the backbone of business and competing in the global marketplace is virtually impossible without them. South Africa will never be a true global force until there is broad-based access in this country - currently high costs continue to hamper broadband penetration here.
A survey conducted by Research ICT Africa! - a 18 country African research network that seeks to support evidence based policy development on the continent - found that while 14.7% of South African households have a computer, only 4.7% of households have a working Internet connection. This is compares poorly to the average world Internet penetration rate of 21.9% (www.internetworldstats.com). Over a fifth of the world's people now have access to the Internet but Africa, and indeed South Africa, is sadly well behind.
While the problem has been widely acknowledged, there is little consensus on how to achieve the vision of a digitally-empowered continent.
Here in South Africa, the telecommunications sector has been in a reform process for 15 years but fixed-line growth is stagnant, with millions of fixed-line subscriber disconnections, in some part due to mobile substitution, but largely due to the lack of affordability of the access and usage charges. Local tariffs have increased at an average of 24% per annum.
A positive point, however, is that South Africa has very healthy mobile penetration figures. Well over 30 million South Africans are mobile subscribers, according to 2006 Operator Data, but the latest survey from Research ICT Africa! suggests that high call and data costs are hampering the optimal use of mobile services. The vast majority of citizens only use their cell phones for voice calling or smsing - and do not make use of the full range of services, such as Internet access, that are available via mobile phones today. This is because South African mobile tariffs - as well as broadband and fixed-line costs - are some of the most expensive on the continent -and indeed the world.
Even when compared with other lower to middle income countries, like Poland and Turkey, South Africa's telecommunications costs, particularly leased lines essential for business to business communications and broadband ADSL lines, are still much higher.
Firstly, a failure to stick to the liberalisation timetable proposed in the policy White Paper on Telecommunications is partly to blame, as is the lack of a highly resourced and skilled regulatory body that is able to ensure competitiveness and service delivery in the sector. With an impossible to achieve statutory mandate arising from the passing of the Electronic Communications Act, the Independent Communications Authority of South Africa (ICASA) has openly admitted that it is facing internal capacity problems. Enhancing the competencies and capacity within the regulators, together with the amendment to problematic administrative aspects of the law, are critical to removing the regulatory bottlenecks plaguing the sector.
Secondly, the sequencing in which reform strategies were implemented have also proved problematic. Research suggests that, ideally, a strong regulatory body should be in place before steps are taken to privatise and liberalise the sector - which did not happen here in South Africa.
Thirdly, it seems that markets that have been liberalised prior to privatisation of the incumbent appear to produce better results in the longer term. This allows competition to enter the market before one player becomes too dominant as a result of the protections afforded it usually by privatisation deals - as we see with Telkom. Overall gains for the economy and consumers are enhanced by sequencing liberalisation before privatisation and doing it the other way around has resulted in the serious delays in sector reform that we are now experiencing.
Policy mechanisms needed to right the mistakes of the past have not been agreed upon by all parties involved. Industry players would like to see the sector fully opened up, while the state has moved cautiously on liberalisation of the sector. Most recently contrary to international trends it has increased state-ownership with in the sector. Most significantly was the establishment of the broadband network - Infraco, through the Department of Public Enterprises, with little reference to the “managed liberalisation” strategy being led by the Department of Communications.
Whatever action is taken, it needs to be acknowledged that the European reform model cannot be implemented to the letter here in Africa. We simply do not have the resources to match our Europeans counterparts and need to adapt their models to the African context. It isn't a case of reinventing the wheel, but of acknowledging that Africa requires a tailored approach.
Fortunately, some African countries are beginning to make strides in this area by implementing policies that make sense for their particular markets.
One such example is Nigeria. Despite having a massive and difficult market to regulate, the country has a very effective regulator in place and is attracting record investment into the sector, far in excess of South Africa.
Further, East Africa is demonstrating the gains made by consumers in a fully liberalised market. Here the disruptive behaviour of one new competitor - One Network - forced all other networks to drop their international roaming charges when it dropped its roaming changes for cross border calls on its East African network. This has benefited thousands of East Africans who regularly travel across borders in the region.
International bandwidth remains a major challenge across the continent where consumers are largely subject to monopoly pricing as a result of exclusivity on undersea cables and national landing stations. One light on the horizon, however, is the new Seacom cable which will partner locally with second network operator, Neotel to break Telkom's historical monopoly on backbone infrastructure.
Ultimately, broad-based access to ICTs can happen in South Africa if the evidence of unintended policy outcomes to date is acknowledged and new strategies to rectify these in the context of the constraints and opportunities of our economy and market devised. Without real progress soon, however, the challenge of catching up to the rest of the world will become more daunting than ever.
Alison Gillwald, Director of Research ICT Africa @ The Edge Institute, directs a new course at the UCT Graduate School of Business - “Connectivity and Convergence: Alternative Regulatory Strategies for Telecommunications” which takes place from 20 - 24 April 2009.
Article first published in the UCT GSB newsletter and republished with kind permission by the GSB
