In an international comparison, South Africa has incredibly high mobile phone penetration. It is estimated that about 84% of the country?s adults are in possession of cell phones. The mobile sector has seen an enormous development, whereas fixed line telephony has hardly increased. Reportedly, there are about 5 million fixed line connections in South Africa ? a fraction of mobile phones in use.
However, it has been criticized often that the country?s mobile telecommunication costs are too high by international standards. According to the Africa Prepaid Mobile Price Index 2012, which compares the prices for mobile communication in 46 African states, South Africa is far behind many other countries, ranking 30th. The reason for the country?s high prices is a lack of competition, promoted by weak state regulations.
South Africa?s relevant telecommunication companies are Vodacom, MTN, CellC and Telkom.? However, Vodacom and MTN can be seen as sort of a duopoly, as they cover the vast majority of the market. CellC and Telkom?s mobile operator, 8ta, have tried several times to introduce lower rates, but they were unable to force the two giants in the sector to follow. The country?s regulating body, the Independent Communications Authority of South Africa, has been constantly blamed for being partly responsible for the high prices.
The country does indeed see a lack of state regulations for mobile communication. In 2011, the regulator caused a huge outcry among the two big providers when it forced them to lower their mobile termination rates twice. These are the rates other operators have to pay to other providers when their clients use the external network. Vodacom and MTN are in possession of most of the network coverage, and were upset that other providers should pay less now if their customers use the Vodacom/MTN networks. The mobile termination rates are regarded as one of the key factors hindering new players to enter the market.
Naturally, companies which want to enter the market have to struggle for their own network bandwidth. Until they are able to build one, they rely on the networks of their competitors to be able to offer their clients sufficient coverage. But if the prices that they need to pay to the established companies are too high to run an effective business, they will not enter the market at all, and monopolistic conditions endure. In addition to that, high mobile termination rates cause significant differences between on-net rates and off-net rates for customers. That means that they will have to pay significantly less for phone calls if they use the network of their provider, and as a result they opt for the companies with the greatest coverage and consolidate their monopoly position. Icasa?s regulatory measures concerning the mobile termination rates in 2011 led to a slight drop, but the rates still remain above the costs of an efficient operator.
According to Research ICT Africa, the mobile termination rates have to be lowered drastically to enable new competitors to enter the market with an efficient operation. When the ICASA introduced the new regulations in 2011, Vodacom and MTN reacted with mongering fear that it would destroy their business. In fact, those threats were idle talk; both operators were able to increase their profit in all key sectors of the business.
A main problem concerning the introduction of new measures to boost competition in the sector is the lax attitude of the Independent Communications Authority of South Africa. The reduction of mobile termination rates was carried out more because of political pressure than because of an understanding of the current situation. The authority is lacking the necessary expertise about the functioning of the mobile market. As long as mobile termination rates prevent potential new competitors from running an efficient operation, the two giants in South Africa?s mobile communication will not see a necessity to reduce their rates. Other countries have shown that it is possible to open up the market successfully by implementing the right regulations, and hopefully South Africa will follow them soon.
Source : Political Analysis
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