Op-Ed: S.A’s telecoms policy will stunt economic growth and stagnate technological development

Who benefits from South Africa’s proposed ICT Policy? Is it “radical economic transformation” or something that will benefit “white Capital”?

The introduction to the National Integrated ICT Policy White Paper refers to The National Development Plan: 2030: “By 2030, ICT will underpin the development of a dynamic and connected information society and a vibrant knowledge economy that is more inclusive and prosperous.”

Seemingly it is geared to achieve an “inclusive and prosperous society” where “opportunity is determined not by birth but by ability, education and hard work”. Therefore, it regurgitates all the usual rhetoric.

However, who is being branded as the evil industrial giant stepping on the underprivileged and downtrodden? The lowest BEE rating of the major cell phone companies comes in at Level 3, which amounts to a 110% Procurement Recognition Level. The largest of those companies have BEE ratings of level 2, amounting to a Procurement Recognition Level of 125%. This is hardly a reflection of an Apartheid era draconian business model. In fact, it is a reflection of big business achieving the goals of a free and prosperous economic society to the benefit of everyone.

Furthermore, the growth patterns of these companies are clearly being steered in the direction of better BEE ratings and economic empowerment. A good example is MTN’s Zakhele Futhi R9.9bn black economic empowerment transaction. So, when the ICT White Paper wants to make the above-said company’s services more “inclusive”, and to “the prosperity of all”, what are they proposing? Simply put, the nationalisation of the company’s assets through a forced mandatory role out of an open access network.

Is this statement accurate or just sensationalistic in nature?

If the proposals in the White Paper are acted upon, this is exactly what will happen. The specific proposal referred to on page 68 of the paper, states “The regulator will be required to publish a list of deemed open access networks”.

This will entail the following: An access provider will be “deemed” an open access network if it displays any of the following characteristics:

  • It has significant market power in the relevant infrastructure market, or
  • It controls an essential facility; or
  • It has a network that constitutes more than 25% of the total infrastructure in that market; or
  • It has a scarce resource, such as frequency spectrum, assigned to it for its exclusive use.

This mandatory implementation of an open access network will enable the government to control and dictate inter alia pricing, active infrastructure sharing, specific network and population coverage for providers deemed to be an open access network.

More importantly, all providers deemed to be an open access network must comply with “all of the general open access principles, and to the extent that an operator is vertically integrated, the principles applicable to vertically integrated entities, will apply as well” as dictated by the regulator (page 70 of the white paper).

The White Paper is clear that participation will be unilaterally imposed on those SPs that meet the required characteristics regardless of the will to participate or not. The regulator will also be obliged to publish a list of deemed open access networks as soon as possible after the finalisation of the White Paper.

If it works, it works. Right? The fact is, though, mandatory participation in an open access network simply does not meet the goals it sets out to achieve.

Per international studies (Wolfgang Briglauer: The Impact of Regulation and Competition on the Adoption of Fibre-Based Broadband Services: Recent Evidence from the European Union Member State 2013- to name but one of many studies) it is common cause that forced mandatory participation in an open access network results in stunted economic growth and stagnates technological development. The scope and length of this piece does not allow me to further expand on case studies, however, it is out there for all to read and learn from page 68 of the paper.

It is counter-intuitive to potentially stunt the growth of an industry that has arguably contributed the most to sustained economic development and transformation. According to the ICT Satellite report published in 2015, ICT contribution to the gross domestic product (GDP) amounted to 2,9% in 2012.

It is important to note that cell phone SP’s economic contribution is not confined to the ICT sector. Industrial and real estate development, for instance, would fall outside the scope of the GDP contribution analysis for cell phone SPs.

In summary, mandatory participation in an Open Access Network does not constitute “radical economic transformation” in the positive. In the negative, it certainly does constitute “radical economic transformation” because it will harm the socio-economic development of South Africa and undermine the very goals set by the NDP.

Credit: CNBC Africa

Published on 14 March 2017 | 7:57 am at Source