A Vodacom outlet in Johannesburg. Picture: REUTERS/SIPHIWE SIBEKO
A Vodacom outlet in Johannesburg. Picture: REUTERS/SIPHIWE SIBEKO

Mobile operator Vodacom has warned that any moves to regulate infrastructure sharing in the telecoms sector will have a devastating effect on the wider economy, including employment and tax income in SA.

Parliament’s telecommunications and postal services committee concluded its public hearings on the controversial Electronic Communications Amendment Bill on Friday. One of the most contentious proposals is the establishment of a wireless open-access network (Woan), which the government says is aimed at driving down communications costs by facilitating the entry of more players. It says the bill is also intended to improve competition, regulation and infrastructure sharing in the sector amid a spectrum crunch.

The bill further proposes that a service provider with “significant market power”, or at least 25% of SA’s network infrastructure, has to share its infrastructure with competitors. According to the bill communications regulator the Independent Communications Authority of SA (Icasa) will prescribe the “cost-oriented” rates service providers can charge their rivals. The telecoms market is currently dominated by Vodacom and MTN.

In its submission to the committee on Friday Vodacom said it supports the government’s objectives of increasing broadband coverage and promoting affordable broadband and innovation and transformation in the sector.

“But, in our view these objectives can and should be achieved through promoting investment and network competition within the best practice regulatory framework in the current act and not through the changes contemplated in the bill,” the company said.

“There is no pressing need for the bill in our view and it should not be rushed through parliament in its current form. The government should pause and carefully consider the far-reaching … and we say significantly adverse implications of the bill for the sector and consumers.”

Vodacom said the bill includes a radical set of changes to impose wholesale open access on licensees. “For mobile operators, the bill includes an additional layer of intrusive and onerous provisions. These changes are disproportionate, arbitrary and intrusive. We do not agree that virtually all licensees in a competitive market should have to provide open access to all their assets [networks, systems and facilities], whether or not it is reasonable to do so,” Vodacom said.

“We do not agree that all mobile operators should provide open access at cost-oriented rates to potentially their entire mobile communications network, systems and services. This is practically the most intrusive intervention possible. It is unprecedented in any other competitive sector in SA, as far as we are aware, and is unheard of in any mobile telecommunications market around the world, where governments are aiming to incentivise investment to promote mobile broadband.”

Vodacom said it asked Frontier Economics, a consultancy firm providing economics advice to public and private sector clients, to provide an empirical analysis to quantify the economic impact of the bill. It considered the direct consumer losses in the mobile sector, but also in the wider economy, as slower growth in the mobile industry as a result of the bill will have indirect effects on GDP, employment and tax income in SA.

According to Frontier Economics if the proposals contained in the bill are fully implemented “we would expect the mobile market in SA to move towards a market outcome constrained by increased regulatory uncertainty, lower and delayed investment, and much slower deployment of new mobile technologies.

“There is still a significant risk that network competition will be distorted through a preferential treatment of the Woan at the expense of competition and ultimately SA consumers.” 

Furthermore, Frontier Economics said mobile data prices would be up to 16% higher with the bill, as a result of increased unit costs through slower migration to new technologies.

“The slower deployment of next generation mobile technologies will also have a wider negative economic impact, because of the pivotal role broadband plays in supporting economic development and growth, as recognised by SA Connect.”

In its submission, Telkom said it supports the Woan as a strategic policy intervention to deal with access to mobile wholesale infrastructure.

“In Telkom’s view, the Woan can only meet the objectives of national policy if it has access to all the unassigned high demand spectrum. If it does not, the Woan will be unable to address the high level of concentration in the mobile market and competition concerns — instead, it is likely to entrench the existing duopoly,” Telkom said.

The committee is due to meet this week to chart the way forward. However, the bill is set to be processed only after the elections in 2019. 

phakathib@businesslive.co.za