SA'S TELKOM THREATENS EASSY FUNDING IF CHALLENGED ON SAT3 MONOPOLY

Telecoms

Telkom would think twice about investing in another project to boost Africa’s scarce bandwidth if it was forced to reduce the fees it charges rival operators to access international bandwidth, says CEO Sizwe Nxasana.

Capping the fees that Telkom can charge internet service providers and other operators for access to its undersea bandwidth facilities could prove detrimental to Africa’s telecommunications services, Nxasana said on Friday.

Telkom is the major partner in an undersea cable linking west Africa to the rest of the world for voice and data services, but critics say its fees have kept communications costs artificially high.

Last week the communications department said it would ask the Independent Communications Authority of SA (Icasa) to determine if the cable is an "essential service" for SA — in which case Icasa would govern the prices.

That financial blow for Telkom would benefit consumers and business users, as the other players would pass on their substantial cost savings. Internet service providers will draw on international cost comparisons to argue that Telkom’s high fees prevent them from delivering voice and data services at affordable rates.

Nxasana said Icasa had not yet begun to assess if the cable was a national asset.

But if Telkom is forced to slash its fees, it may withdraw its plan to fund a similar cable around east Africa, destroying the chance of Africa gaining the bandwidth it desperately needs.

"I’m not sure whether this discussion is good for the country. We are now looking at investing in the eastern cable, but if it’s going to be described as an essential service and the access tariffs we have to levy are not enough to recoup our investments we will not invest," Nxasana said.

If Icasa does rule the cable is an essential service, the bandwidth leasing fees Icasa sets will determine whether or not Telkom supports the eastern cable.

"If we could make an acceptable margin we would invest," said Nxasana. He claimed this was just commercial sense, and not a case of holding the country to ransom.

The privatisation of Telkom brought in private shareholders, so it is no longer spending state money if it invests in the eastern cable. What muddies the waters is that Telkom was still state-owned and therefore using public money when it invested in the existing cable. Telkom holds a 13% stake in the western cable stretching 27450km, and its contribution of USD85m to the total of USD650m makes it the largest of 36 shareholders.

The East African Submarine Cable System, was now under discussion between operators, governments and equipment suppliers to establish the costs and a timetable, but may not be viable at all without Telkom’s backing.

The cable would connect landlocked countries in eastern and central Africa, which currently use more expensive and less reliable satellite services.

Nxasana said it would be "unfortunate if Telkom was disincentivised from investing", as many voice and data companies agitating for lower prices could not afford to make the huge investments required in basic infrastructure.

Icasa’s decision should be weighed against disasters in other countries where no one was willing to invest and the telecommunications infrastructure collapsed, he said. Business Day