'Skewed market structure main cause of ineffective competition'
JOHANNESBURG - The Competition Commission has alleged that there was overwhelming evidence that South Africa suffered from ineffective competition due to the skewed market structure which perpetuates dominance of Vodacom and MTN.
Commission chief economist James Hodge told the second day of the Independent Communications Authority of South Africa (Icasa) public hearing on the Mobile Broadband Services Inquiry that the market had not changed.
Hodge said the move to 5G risked a further cycle of technological leadership entrenching dominance.
“What we have seen in the past is that every shift to a new generation of technologies reinforces the leadership of Vodacom and MTN in the market because they are the ones with the pervasive coverage and the profitability and capital to make the technological leap early which gives them a distinct advantage in the market,” Hodge said.
“The roaming agreements and other agreements do not bring in those new technologies and this sets the challenger networks behind and we think that the current move to 5G means that wholesale regulations are more urgent now than ever, because what happens in the next five years will shape the sector for the next 15 to 20 years.”
The commission completed its Data Services Market Inquiry last year, which recommended that retail prices were excessive, because of ineffective competition, not just spectrum constraint, and resulted in Vodacom and MTN slashing their prices of monthly data packages from April.
However, economist Patrick Smith argued that MTN had invested billions in infrastructure over its 26 years of existence.
Smith said that the group had created competition in the telecoms sector.
He said the shared network and roaming agreements with operators such as Cell C was an example of pro- competitive and not spectrum trading.
“MTN does not think that spectrum is something that you can be dominant in. I think what is important for competition is that there is sufficient spectrum to incentivise at least two operators to roll out and to pay these tens of billions of rand to roll out two national networks so that you create two wholesale infrastructures that can keep one other honest and keep advancing technology and improving quality and coverage and on those networks others can roam, and do spectrum deals,” said Smith.
MTN South Africa’s general manager for regulatory affairs, Moses Mashisane, said Vodacom dominated the post-paid market and that of MTN South Africa.
“When you look at Telkom it is roughly the same size as MTN if you talk of revenue. We are always compared to Vodacom, we are not even half the size of Vodacom but in all the regulations that we have seen are all put in the same basket as if we are Vodacom. Vodacom is clearly a leader in this market.
“Telkom is not a small operator and is obviously benefiting from its fixed business. The thing about Telkom coming to you and telling you they are small, they do not tell you about their fixed side, which is unfair,” Mashisane said.
On Monday, partly state-owned Telkom told the public hearing that MTN and Vodacom allegedly had preferential spectrum assignment, had access to distribution channels and there was a lack of pro-competitive regulations.