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Political Economy of Internet and Mobile Phones:

South Africa

Research Coordinator: Dr. Sarah Chiumbu

Country Researcher: Titi Akinsanmi

Political Economy of Internet and Mobile Phones: South Africa

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FOREWORD

In 2010 the Department of Media Studies at the University of the Witwatersrand, with

support from the Open Society Initiative of Southern Africa (OSISA) embarked on a two-

year long project titled, ICT Policy and New Media Cultures in Southern Africa. The

research project involved a two-tiered initiative aimed at exploring the political

economy of new media industries in five Southern African countries; South Africa,

Mozambique, Malawi, Zambia and Zimbabwe. The first tier of the project entailed

detailed ICT policy reports on each of the countries, while the second tier involved

ethnographic studies on the use of ICTs by ordinary citizens, civil society and social

movements.

With a keen interest on the internet and mobile phones in particular, the research

sought to examine the extent to which forms of ownership and financing of these media

enhance or militate against universal access of citizens to these media. The focus on

universal access remained crucial to the study, given that it is seen as corollary to the

empowerment of citizens and the unleashing of their democratic and developmental

potential in social, political, and economic processes.

In a continent that is generally lagging behind in the digital age, the internet and mobile

phones are being seen as key to leapfrogging into the future. With the social uprisings of

the Middle East and North Africa, questions about the role of the internet and mobile

phones, particularly in relation to citizen empowerment, are becoming more and more

important. As such, mapping the development of these technologies in terms of

emerging ownership patterns and regulatory systems and norms becomes critical, as

these have direct implications for citizen access.

The following report is part of a series of five country reports compiled in fulfilment of

the first tier of the project. The reports specifically address questions of ownership,

financing and regulation of the specified Internet and mobile phone industries and how

this affects universal access to new media services by citizens in terms of affordability,

accessibility, and availability. Weak regulatory bodies across region are perhaps the

strongest link across all five reports. The result is ensuing problems of lack of

competition, hostile markets environments for new comers and the incumbent factor of

exorbitant tariffs rates. Despite the more common assumption of the digital divide

segregating Africa from joining the digital revolution issues of accessibility and

affordability are actually at the forefront of this challenge. The five country reports

explore this phenomenon with an overwhelmingly strong trend vindicating fragile

regulatory structures as the chief culprit. Similar trends include restrictive national ICT

policies which present unwelcome barriers to broader initiatives of universal access.


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TABLE OF CONTENTS

FOREWORD .............................................................................................................................................. i

TABLE OF CONTENTS ............................................................................................................................... ii

LIST OF FIGURES ..................................................................................................................................... iv

LIST OF TABLES ....................................................................................................................................... iv

EXECUTIVE SUMMARY ............................................................................................................................ 1

1. COUNTRY FACTS .............................................................................................................................. 2

1.1. Political Structure .................................................................................................................. 3

1.2. Economic Structure ............................................................................................................... 4

1.3. Socio and Economic Setting .................................................................................................. 6

1.3.1. Human Development Index ............................................................................................ 6

1.3.2. Gender Inequality Index .................................................................................................. 7

1.3.3. Multidimensional Poverty Index ..................................................................................... 8

1.4. Conclusion .............................................................................................................................. 8

2. CONSTITUTION ................................................................................................................................ 9

2.1. Freedom of Expression ......................................................................................................... 9

3. MEDIA AND COMMUNICATIONS LANDSCAPE .............................................................................. 10

3.1. Print Media ........................................................................................................................... 10

3.2. Electronic/Broadcasting Media ............................................................................................. 11

3.3. Telecommunications Companies .......................................................................................... 12

3.4. Policy and Regulation of the Media ...................................................................................... 14

3.4.1. Policy ............................................................................................................................. 14

3.4.2. Regulation and Licensing .............................................................................................. 16

4. INFRASTRUCTURE ......................................................................................................................... 19

4.1. Telecom infrastructure ......................................................................................................... 20

4.2. Electricity ............................................................................................................................... 21

4.3. Broadband ............................................................................................................................. 22

5. STATUS OF INTERNET AND MOBILE PHONES ............................................................................... 23

5.1. Status - Internet Penetration ................................................................................................ 23

5.1.1. Access ............................................................................................................................ 23

5.1.2. Number of Internet Service Providers .......................................................................... 24

5.1.3. Number of Computers .................................................................................................. 27


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5.2. Status - Mobile Phones Penetration ..................................................................................... 28

5.2.1. Access ............................................................................................................................ 28

5.2.2. Number of Mobile Phone Companies ........................................................................... 29

6. OWNERSHIP, PRICING STRUCTURE AND COST ............................................................................. 33

6.1. Liberalisation of Markets: Duopolies, Affordability .............................................................. 33

6.2. Convergence: Technology Platforms and Service ................................................................. 34

6.3. Access .................................................................................................................................... 36

6.4. Ownership ............................................................................................................................. 37

6.5. Interconnection Rates ........................................................................................................... 38

6.6. Political Links ......................................................................................................................... 39

7. REGULATION ................................................................................................................................. 39

7.1. Regulation and Regime for Internet and Mobile Phones ..................................................... 40

7.2. Competition Laws ................................................................................................................. 40

8. CONCLUSIONS AND RECOMMENDATIONS ................................................................................... 41

8.1. Conclusions ........................................................................................................................... 41

8.2. Recommendations ................................................................................................................ 42

9. ADVOCACY STRATEGIES ................................................................................................................ 43

REFERENCES .......................................................................................................................................... 44

LIST OF ACRONYMS ............................................................................................................................... 47


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LIST OF FIGURES

Figure 1: Map of South Africa ................................................................................................................ 2

Figure 2: South Africa’s political landscape based on constitutional provision ..................................... 3

Figure 3: SA Human Development Index: Health, Education and Income 2010 ................................... 6

Figure 4: Trends in South Africa’s HDI component indices 1990-2010 ................................................ 7

Figure 5: South Africa’s Multidimensional deprivations compared to income poverty ......................... 8

Figure 6: Map showing existing and planned submarine fibre cables for Africa until 2010 ................ 22

Figure 7: Mobile connections vs users in South Africa between 1994 and 2008 ................................. 29

Figure 8: Mobile market shares - 2011 ................................................................................................. 38

LIST OF TABLES

Table 1: South Africa Data Profile ......................................................................................................... 5

Table 2: Internet usage and population statistics .................................................................................. 23

Table 3: Mobile connection speeds and data consumption (South Africa)........................................... 24

Table 4: Internet - user population in South Africa (2009) ................................................................... 28

Table 5: Mobile and wireless data costs – prepaid and contract (MTN, Vodacom,

Cell C, Virgin Mobile, Neotel, 8-ta) ........... 35


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EXECUTIVE SUMMARY

The telecommunication reform process in South Africa started in 1996 and since then

the country has gone through two key reform processes. The first one saw the partial

privatisation of the incumbent, Telkom, and the entry of a third mobile operator, Cell C,

which joined the existing MTN and Vodacom. In the second phase another national

fixed-line operator, NeoTel, entered the market and the market was further liberalised

through the enactment of the Electronic Communications Act in 2005, leading to a

converged environment. The ‘managed liberalisation’ adopted by South Africa has seen

the country adopting privatisation over liberalisation and competition leading to the

dominant position of Telkom.

Although South Africa has five mobile phone operators and several ISPs, a significant

proportion of the population, due to historical factors and monopolistic policies, do not

have equitable access to ICTs. Access is severely hampered primarily as a result of

exorbitant tariff rates that plague the ICT sector in the region. Exorbitant mobile tariffs

translate into services for a privileged few that exclude the vast majority of middle to

low income South Africans. The addition of three mobile phone operators into the

market has failed to induce much needed competition into the sector as Vodacom and

MTN’s duopoly continues to be the dominant force. Extremely high interconnection

rates are indicators of weak regulation in the industry where mobile giants are seen to

enjoy leverage over small competitors with minimal interference from regulators.

Ownership structures have shown to have a direct effect on access and affordability

within the South African ICT context. Despite the mobile market exhibiting an

oligopolistic nature, the duopoly mentioned above have an entrenched foothold that

reduces the potency of competition while dictating the terms and power relations of the

sector. Anti-competitive pricing strategies by Vodacom and MTN maintain high tariff

rates in the region that compromise universal access. Both giants boast prominent

personalities within their respective board of directors with strong links to government

and the ruling ANC. A strengthening of regulatory framework holds much potential for

ICT universal access in South Africa. A tighter grip on the profiteering incentives of

internet and mobile phone operators would ultimately translate into low end-user costs

and greater access and affordability for ordinary South Africans.


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1. COUNTRY FACTS1

This section provides a brief profile of the country including information on the

population, languages, religions, literacy, GDP, income levels, life expectancy amongst

others. It gives a contextual overview of social and livelihood facts including tables and

figures on the economic/social data in the form of its Human Development Index (HDI)

as well as its political and economic structures as it relates to the research focus.

South Africa (SA) occupies the southernmost part of the African continent, stretching

latitudinally from 22° to 35° S and longitudinally from 17° to 33° E over a geographical

area of 1 219 090 km2. It has a population of 49 320 150 million (2009), an annual

population growth rate of 1.2% (2009) with black 79,4% being black, 9,2% white, 8,7%

coloured and Asian, particularly Indian, as 2,7% of the population. Its predominant

religions are Christianity, Traditional African Religion, Hinduism, Islam and Judaism.

There are 11 official languages including English, isiZulu, isiXhosa, isiNdebele,

Afrikaans, siSwati, Sesotho sa Leboa, Sesotho, Setswana, Tshivenda, Xitsonga. The

country has nine provinces with three capitals: Pretoria in the Gauteng region serves as

the administrative seat of government; Cape Town in the Western Cape province is the

legislative seat; and Bloemfontein in the Free State province hosts the judicial seat of

government.

Figure 1: Map of South Africa

1 Based on the 2010 Mid-Year Population Estimate Report at http://www.statssa.gov.za


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Education in South Africa is compulsory for all children aged 7–15 years. The SA Schools

Act (Act 84 of 1996) aims to achieve greater educational opportunities for black

children by mandating a single syllabus and more equitable funding for schools post

apartheid. SA’s infant mortality rate as at mid-2010 was 47 per 1 000 live births with an

overall life expectancy rate of 55,2 years for women and 53,3 years for men.

1.1. Political Structure

South Africa is a multiparty2 parliamentary three-tier (local, provincial, national)

democracy in which constitutional power is shared between the President and the

Parliament. The President is the Head of State, and is elected to a five-year term by the

National Assembly from among its members. The Parliament consists of two houses, the

National Assembly with 350–400 members elected for five-year terms and the National

Council of Provinces (NCOP), which has 90 members, 10 from each of the nine

provinces and 10 non-voting delegates representing local government. The Parliament

is responsible for drafting the laws of the republic.

Figure 2: South Africa’s political landscape based on constitutional provision

Source:

http://www.bbc.co.uk/scotland/education/ms/southafrica/political/constitution/structure.shtml?flashplugin=true&flashdetect=true&(none)

2 There are 13 political parties in south Africa namely: African National Congress (ANC), Democratic Alliance

(DA), Congress of the People (COPE), Inkatha Freedom Party (IFP), Independent Democrats, United Democratic Movement (UDM), Freedom Front Plus, African Christian Democratic Party, United Christian Democratic Party, Pan Africanist Congress (PAC), Minority Front, Azanian People's Organisation, African People's Convention. The South African Communist party exists but is not officially represented in Parliament.


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The National Assembly is elected by a system of proportional representation and has

specific control over bills relating to monetary matters. The NCOP replaced the former

Senate as the second chamber of Parliament and was created to give a greater voice to

provincial interests. It approves legislation that involves shared national and provincial

competencies. The third arm of the central government is an independent judiciary. The

Constitutional Court is the highest court for interpreting and deciding constitutional

issues, while the Supreme Court of Appeal is the highest court for non-constitutional

matters. Citizens and permanent residents who are 18 years and older are allowed to

vote once registered.

1.2. Economic Structure3

The South African economy is productive and industrialised exhibiting characteristics

associated with developing countries, including a division of labour between formal and

informal sectors, and an uneven distribution of wealth and income. It has a two-tiered

economy. The first economy is formal in nature and rivals that of other developed

countries. The second economy, with only the most basic infrastructure, is made up of

small-scale informal entrepreneurs. The formal economic sector is based on mining and

manufacturing services, transport, energy, tourism, agriculture and a growing

technology and telecommunications industry. South Africa is in the enviable position of

being the only country in the world that manufactures fuel from coal as well as being

one of the largest producers of platinum, manganese, gold and chrome in the world.

After its transition to a democratic non-racial government, a number of economic

policies where put in place to address historical socio-economic imbalances while

stimulating sustained economic growth. Some of these include an initial blueprint called

the Reconstruction and Development Programme (RDP), which was designed to create

programmes to improve the standard of living for the majority of the population. The

RDP was then phased out and replaced with the Black Economic Empowerment Policy

(BEE and BEEE).

3 This section draws heavily on information from

http://www.southafrica.info/business/economy/econoverview.htm and http://www.oecd.org/dataoecd/48/38/1826412.pdf last accessed on 27 April 2011


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The South African currency is the rand (ZAR) with a hundred (100) cents equalling one

rand. The annual GDP growth between 2004 and 2007 averaged 5,0%, but fell to a rate

of 3,7% in 2008 because of higher interest rates, power shortages and weakening

commodities prices. GDP contracted by 1,8% in 2009 as South Africa experienced its

first recession in 18 years with a GDP per capita of US$5 787.00 in 2009 while inflation

averaged 11,3% in 2008 and 7,2% in 2009. In 2009 it had a total export rate of US$71,9

billion (markets include China, US, Japan, Germany, UK and sub-Saharan Africa) and an

import rate of US$75.7 billion (including machinery, transport equipment, chemicals,

petroleum products, textiles, and scientific instruments).

Table 1: South Africa Data Profile

Indicator 2005 2006 2007 2011

Population, total (millions) 46,89 47,39 47,59 50.59

Population growth (annual %) 1,.2 1,1 0,4 1,2

GDP (current US$) (billions) 242,06 254,99 277,58 408.01

GDP growth (annual %) 5,1 5,0 4,8 3.1

Inflation, GDP deflator (annual %) 4,8 6,8 8,1 5

Agriculture, value added (% of GDP) 3 3 3 2.5

Industry, value added (% of GDP) 31 31 31 31.6

Time required to start a business (days) 35 35 31 19

Market capitalisation of listed companies

(% of GDP) 233,6 273,9 291,1 209.61

Foreign direct investment, net inflows

(BoP, current US$) (millions) 6,522 183 5,736 5,717

Workers' remittances and compensation of

employees, received (US$) (millions) 424 424 424 1,371

Source: World Development Indicators database


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1.3. Socio and Economic Setting

1.3.1. Human Development Index

The United Nations Development Programme (UNDP) via its Human Development

Report (HDR) has published the Human Development Index (HDI) since 1990. The HDI

was introduced as an alternative to conventional measures of national development,

such as level of income and the rate of economic growth. It is a summary measure for

assessing long-term progress in three basic dimensions of human development: a long

and healthy life (life expectancy), access to knowledge (education) and a decent

standard of living (income).

South Africa’s HDI as at October 2010 stood at 0,597, which gives the country a rank of

110 out of 169 countries and areas with comparable data. This HDI of 0,597 is above the

regional average of 0,389 for countries in sub-Saharan Africa. It is also above the

average of 0,592 for medium human development countries.

Figure 3: SA Human Development Index: Health, Education and Income 2010

The figure below reviews South Africa’s progress in each of the HDI indicators over 20

years.


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Figure 4: Trends in South Africa’s HDI component indices 1990-2010

1.3.2. Gender Inequality Index

The UNDP HDR Gender Inequality Index (GII) reflects women’s disadvantages in three

dimensions – reproductive health (maternal mortality and adolescent fertility rates),

empowerment (share of parliamentary seats held by each gender and attainment of

secondary and higher education by each gender) and economic activity (labour market

participation rate for each gender). The GII replaces the previous Gender-related

Development Index and Gender Empowerment Index by showing the loss in human

development due to inequality between female and male achievements in the three GII

dimensions.

In South Africa in 2010, women held 34% of South African parliamentary seats, and

66% of adult women have a secondary or higher level of education compared to 68% of

their male counterparts. For every 100 000 live births, 400 women died from

pregnancy-related causes; and the adolescent fertility rate is 59 births per 1000 live

births. Female participation in the labour market was 51% compared to 67% for men.

The result is a GII value for South Africa of 0,635, ranking it 82 out of 138 countries,

based on 2008 data.


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1.3.3. Multidimensional Poverty Index

Poverty has frequently been discussed only in terms of income poverty. The

Multidimensional Poverty Index (MPI) identifies multiple deprivations in the same

households in education, health and standard of living. The Figure below compares

income poverty, measured by the percentage of the population living below PPP

US$1,25 per day, and multidimensional deprivations in South Africa. It also shows the

percentage of South Africa’s population deprived in at least one indicator in each of the

three dimensions: standard of living, education and health.

Figure 5: South Africa’s Multidimensional deprivations compared to income poverty

In South Africa 3% of the population suffer multiple deprivations while an additional

4% per cent are vulnerable to multiple deprivations. The breadth of deprivation

(intensity) in South Africa, which is the average percentage of deprivation experienced

by people in multidimensional poverty, is 47%. This shows that income poverty only

tells part of the story. The multidimensional poverty headcount is 23 percentage points

lower than income poverty. This implies that those who are monetarily poor may still

have access to non-income resources.

1.4. Conclusion

South Africa has moved forward from its old economic system, which was based on

import substitution, high tariffs and subsidies, anticompetitive behaviour and extensive


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government intervention in the economy. The government has moved to reduce its

hitherto highly active role in the economy by promoting greater private-sector

investment and competition with the introduction of the Competition Law on

September 1, 1999. In the last ten years it has significantly reduced tariffs and export

subsidies, loosened exchange controls, cut the secondary tax on corporate dividends

and improved enforcement of intellectual property laws.

The growth of the media, and the telecommunications landscape particularly, began

amongst others as a result of the government’s commitment to open markets,

privatisation, and a favourable investment climate with its release of the neo-liberal

economic strategy called Growth, Employment and Redistribution (GEAR) from 1996 -

2000. The strategy had a mixed outcome by bringing greater financial discipline but not

delivering in key areas such as formal employment and continuing unequal distribution

of wealth along racial lines.

2. CONSTITUTION

The Constitution of the Republic of South Africa, 1996, was approved by the

Constitutional Court (CC) on 4 December 1996 and took effect on 4 February 1997.

Acclaimed internationally as progressive, the Constitution is the supreme law of the

land and no other laws or action of government or the private sector can supersede its

provisions.

2.1. Freedom of Expression

The Constitution's Bill of Rights (chapter 2:7-39) provides for and guarantees

fundamental political and social rights of South Africa's citizens, the freedom of the

press and other media. Specifically of relevance to this reach on the political economy of

the internet and mobile phones, the Constitution speaks to everyone having a right to

privacy:

‘… which includes the right not to have: their person or home searched; their

property searched; their possessions seized; or the privacy of their

communications infringed.’ (Constitution Chapter 2: 14)

It also gives the right to freedom of expression including:


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‘… freedom of the press and other media; freedom to receive or impart

information or ideas; freedom of artistic creativity; and academic freedom and

freedom of scientific research.’ (Constitution Chapter 2:16)

Acknowledging its historical imbalances, freedom of expression is not extended to

propaganda for war, incitement of imminent violence or advocacy of hatred based on

race, ethnicity, gender or religion and that which constitutes incitement to cause harm.

Lastly is the provision within the Constitution for access to information by everyone

including information held by the state and any information that is held by another

person and that is required for the exercise or protection of any rights (Chapter 2: 32).

It also provides for the establishment of the Independent Broadcasting Authority to

regulate broadcasting within the country:

‘National legislation must establish an independent authority to regulate

broadcasting in the public interest, and to ensure fairness and a diversity of

views broadly representing South African society.’ (Constitution Chapter 9:192)

3. MEDIA AND COMMUNICATIONS LANDSCAPE

This chapter covers the media and communication landscape in South Africa providing

information on relevant policies and regulation, an overview of the print, electronic and

broadcasting media. It also gives a summary of the major telecommunications players

operating in the country.

The South African communications sector (together with transport and storage)

accounts for almost 10% of the country’s gross domestic product. It boasts an

outstanding broadcast infrastructure and a diversity of print and broadcast media.

3.1. Print Media

There are four major print media conglomerates/publishing houses in South Africa.

These are Media244 (part of Naspers, the largest media group in Africa), the Irish-based

Independent News & Media (Pty) Limited5 group, Caxton Publishers & Printers Limited6

4 www.media24.com

5 http://www.inmplc.com/

6 http://www.caxton.co.za/


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and Avusa Limited7 (previously Johnnic Communications). As at March 2009, South

Africa had 21 daily newspapers, 27 major weeklies, 660 consumer magazines, 735

Business-to-Business publications, 470 community newspapers and magazines, 92

television stations, 137 radio stations and over 65 DSTV audio channels. The national

news agency - the South African Press Association8 , established in 1938 - is a

cooperative, non-governmental agency that provides global news to the South African

media market.

3.2. Electronic/Broadcasting Media

The South African Broadcasting Corporation (SABC) is the public broadcaster and was

established in 1936 through an act of parliament to replace the African Broadcasting

Corporation formed in 1927. It was initially funded entirely by licence fees; in 1978 the

UK began to collect revenues from advertising. Today, part of the funding is still

generated by an annual licence fee of R228. Though its independence is guaranteed by

legislation, over the last decade there have been many allegations of continuing

interference and manipulation. Over the last five years, the SABC has been corporatised

and restructured in an attempt to help it better fulfil its mandate.

The SABC’s television network comprises four television channels – three of them free-

to-air (SABC 1, 2, 3) and the fourth pay-TV (SABC Africa). Combined, the free-to-air

channels attract more than 17,5 million adult viewers daily, reaching 89% of the total

adult TV-viewing population. In 1986, the SABC’s monopoly on TV was challenged by

the launch of a subscription-based service known as M-Net, backed by a consortium of

newspaper publishers. However, it could not broadcast its own news and current affairs

programmes, which were still the preserve of the SABC. The SABC’s dominance was

further eroded by the launch of the first 'free-to-air' private TV channel, called e.tv.

Satellite television also expanded, as M-Net's sister company, Multichoice, launched its

digital satellite TV service (DSTV) in 1995. In July 2008, Multichoice launched high-

definition television, the first in Africa. Multichoice provides digital media

entertainment, content and services to multiple devices, which include pay TV

7 http://www.avusa.co.za/

8 www.sapa.co.za


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subscriber services to more than 1,5 million customers. Most of the SABC’s TV channels

are still provided as part of this service9.

The SABC’s national radio network comprises 18 radio stations. Fifteen of the SABC’s

radio stations are dedicated specifically to public-service broadcasting and include 11

full spectrum stations, one in each of the official languages of South Africa, a cultural

service for the Indian community broadcasting in English, a regional community station

broadcasting in isiXhosa and English and a community station broadcasting in the Xu

and Khwe languages of the Khoisan people of the Northern Cape.

A number of community radio stations also exist. They have a huge potential for the

support of, among other things, cultural and educational information exchanges. These

radio stations use all indigenous languages, ensuring that people receive information in

languages they understand. The independent Media Development and Diversity

Agency10 (MDDA) jointly funded by government, the media and other donors works to

foster diversity, particularly in community and small commercial media, and to redress

imbalances in the industry. It awards grants to community radio, TV, newspapers,

magazines and small commercial newspapers, throughout the country.

3.3. Telecommunications Companies

Mobile Licensing is a relatively new development in many telecommunications markets

across Africa. Historically, state-owned incumbent operators provided

telecommunication services on a monopoly basis in most markets. Telecommunications

operators were treated as part of public administration along with postal services, and

licences were not considered necessary. In many cases licences for incumbent

telecommunications operators were prepared as part of the privatisation process11. In

environments where the regulatory sector is well developed, the Ministry has to

9 www.sabc.co.za and http://en.wikipedia.org/wiki/South_African_Broadcasting_Corporation

10

http://www.mdda.org.za/ 11

Addy-Nayo C (Unknown) 3G Mobile Policy: The case of Ghana


13

approve and issue licenses recommended by the regulator, which in South Africa is

ICASA12.

In the last seven years, South Africa has witnessed tremendous growth in its

telecommunications sector with an outstanding infrastructure particularly in the mobile

phone industry. Vodacom and MTN were granted licences to operate in 1993, Cell C

followed suit in 2001, and Virgin Mobile and 8-ta came much later. South Africa boasts a

100% mobile penetration rate with a network that is 99% digital and includes the latest

in fixed line, wireless and satellite communications, making it the most developed

telecommunications network in Africa.

In 2001, the Telecommunications Amendment Act was passed and it triggered the

enablement of the DoC to take the first steps towards liberalising the South African

telecommunications market, increasing competition and, as a by-product, stimulating

the sector to bring down the costs of communications and remove constraints on

growth. Next was the passing of the Electronic Communications Act (ECA) in 2005. The

objective was to remove policies that hinder the development of cross-sector

applications, services and businesses and to enable the sector to reflect the integration

of telecommunications with Information Technology (IT), broadcasting and

broadcasting signal distribution. It also speaks to empowering citizens by detailing

avenues that would improve their access to information and knowledge13. The passing

of the ECA marked a new regulatory framework for liberalising the telecommunications

market in South Africa. Since then South Africa has made some strides towards further

liberalising its telecommunications market.

12

Presentation by Mindel De La Torre, ITU Workshop on Telecommunications Reform, Gaborone, Botswana, May 1999 13

The department has identified the following priority areas. First is the Broadcasting Digital Migration Strategy, which had the first terrestrial digital signal switched on 1 November 2008 and the analogue one will be switched off on the same date in 2011, giving the country a dual illumination period of three years. The strategy was approved in July 2008. This was an historic milestone in the country as South Africa joined pioneer countries in the ICT sector. Second is the Universal Service and Access Policy and Strategy (USAASA). USAASA was established in terms of Section 58 of the Telecommunications Act, 1996. The main role of the agency is to promote universal service and access to ICTs and services for all South Africans. It also facilitates and offers guidance in evaluating, monitoring and implementing schemes, which propose to improve universal access and service. In addition, it is involved in setting up telecentres, which provide ICT services, especially in rural areas, on a cost-recovery basis.


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It should be noted though that the sector has not grown without major hiccups such as

the debacle around liberalisation, the compulsion of Value Added Networks (VANs) to

utilise the network services of main competitors and the ensuing case taken to the

Supreme Court by Altech Autopage14. As of June 2012, though, South Africa has five

major mobile phone service providers, namely Vodacom, MTN, Cell C, Virgin Mobile and

8.ta, the first three also having a significant footprint across the African region.

Established entities such as Telkom and Multichoice secured market share under prior

monopoly regimes, which make it difficult for new entrants to offer competitive

telecommunications services (e.g. pay-TV and internet). The latter part of this paper

speaks more to the status of the internet and mobile phone industry as well as to the

specifics of the players in the sectors.

3.4. Policy and Regulation of the Media

3.4.1. Policy

The Department of Communications (DoC) is the arm of government directly

responsible within South Africa for all things to do with communication: print,

electronic and broadcasting. Charged with formulating and overseeing policy

implementation for the communications sector, the DoC’s mandate is to create a

favourable Information and Communications Technology (ICT) environment, ensuring

that South Africa has the capacity to advance its socio-economic development goals and

support the renewal of Africa and the building of a better world. The Presidential

National Commission on Information Society and Development and the Presidential

International Advisory Council on the Information Society and Development advise the

government on ICT policy. With this dedicated focus on the part of the government

institutions and committees in mind a number of acts and strategies have been

formulated and adopted over the last few years.

The first of these was the Telecommunications Policy White paper of 199615, which

speaks to universal service, market structure and the establishment of an independent

14

See McLeod, D (2008) Licences on the Line: Minister’s Policy directive sows confusion in telecom sector. Financial Mail 4 July 2008. BDFM: Rosebank 15

Telecommunications Policy White Paper, 1996, Department of Communications. Republic of South Africa: Pretoria


15

regulator. It also gave four years of exclusivity for the incumbent telecoms provider,

Telkom. It was charged with providing fixed line services as a monopoly in return for it

rolling out telecoms infrastructure across the country to previously disadvantaged

sections. The issue of convergence though was not adequately addressed in the White

Paper of 1996 or in the Broadcasting Policy of 1998 though it was recognised as the

reality of modern telecoms. This lead to the introduction of the Electronic Commerce

Green Paper of 2000, then the Draft Convergence Bill of 2003, which was passed as a

Bill by Parliament in February 2005 as the Electronic Communications Act of 2006.

The Electronic Communications Act16 (Act 36 of 2006) sought to remove policies that

hinder the development of cross-sector applications, services and businesses. The Act

enables the sector to reflect the integration of telecommunications with Information

Technology (IT), broadcasting and broadcasting signal distribution. It also empowers

citizens with better access to knowledge and information. The Telecommunications

Amendment Act17 (Act 64 of 2001) has enabled the liberalisation of the South African

telecommunications market, increased competition and, as a by-product, stimulated the

sector to significantly reduce the cost of communications and remove some of the

existing constraints on growth. The National Information Society and Development

Plan18 and the National E-Strategy adopted by the DoC in 2007 are some of the

blueprints that guide the country’s engagement in building an advanced information

society.

By June 2009, the Department of Communications began work on the development of

an Integrated National ICT Policy Framework. The policy framework seeks to promote

the convergence of technologies and stimulate the growth of the economy in line with

the objectives of the National Industrial Policy19. It encourages e-commerce activities

and a continuing expansion of ICT infrastructure, linking rural and urban communities

as well as uplifting the poor.

16

http://www.info.gov.za/view/DownloadFileAction?id=67890 last accessed 27 April 2011 17

http://www.info.gov.za/view/DownloadFileAction?id=68166 last accessed 27 April 2011 18

http://www.pnc.gov.za/index.php?option=com_docman&task=doc_download&gid=4&Itemid=100071 last accessed 27 April 2011 19

http://www.thedti.gov.za/nipf/nipf.htm last accessed 27th April 2011 at 12:12pm


16

The South African National Broadband Policy was finalised in June, 2010. The policy

provides a coordinated national approach to the provision of affordable, reliable and

secure broadband infrastructure and services for all of South Africa by 2019. Operation

of the policy is to be lead by an intergovernmental broadband implementation

committee. Their goal is to draw up and coordinate the implementation plan. It is noted,

though, that at the time of this research this committee is not multi-stakeholder in

nature. The challenge it faces is how it will approach infrastructure development in

rural areas where, to date, the private sector has shown no real interest in investing in

capabilities for internet connections and creating high-speed access to data (CPA, 2010).

These pieces of legislation, policies and laws are all complimented by relevant sections

of generic legislation. These include the competition legislations and other ministries

involved in pronouncing policy directives such as the Ministry of Trade and Industry,

the Justice and Constitutional courts and Public Enterprises. The South African

Consumer Protection Act (CPA) came into effect on 1 April 2011 and this saw the

establishment of the National Consumer Commission (NCC) as well. It is important to

note that the CPA, recognising the potential for overlap with existing regulatory policies,

made provisions for liaising to coordinate and harmonise the exercise of jurisdiction on

matters of common interest:

‘… and for that reason to negotiate agreements with such authorities in order to

coordinate and harmonise the exercise of jurisdiction over consumer matters in

the relevant sectors (Section 97 of the CPA)’

These policies, anchored in the South African Constitution, are administered/overseen

by a government established body as well as industry bodies, which provide a form of

self-regulation amongst sectoral players.

3.4.2. Regulation and Licensing

Regulation occurs in a number of formats from legal restrictions promulgated by a

government authority to self-regulation, social regulation, co-regulation and/or market

regulation (internationally or locally)20. In South Africa regulation of the

20

Thornton, L. (2006) Telecommunications – an overview. In Thornton, L. Carrim, Y. Mtshaulana P. & Reburn, P. Eds. 2006 Telecommunications law in South Africa, pp16 – 48. Ste publishers: Parktown


17

telecommunications sector (internet and mobile) is accountable to both domestic and

international conventions.

Based on a constitutional mandate (Constitution Chapter 9:192), the broadcasting

regulator - the Independent Broadcasting Authority (IBA) - was set up in 1993 as part of

the outputs of Independent Broadcasting Authority Act. Prior to its amendment in 2001,

section 5 of the Telecommunications Act had made provision for the establishment of

the South African Telecommunications Regulatory Authority (SATRA). The White Paper

on Telecommunications Policy sets out the objectives of SATRA. On 1 July 2000, SATRA

was dissolved.

The ICASA act of 2000 provides for the establishment of ICASA as the independent

authority to regulate broadcasting and the telecommunications sector. It also provides

for the dissolution of SATRA and the IBA, and the transfer of their functions to ICASA.

This was seen at the time as an acknowledgement of the realities of convergence

between broadcasting and telecommunications and the need for coherent regulation of

both sectors. Thus ICASA derives its mandate from four statutes. These are the ICASA

Act of 2005; the Independent Broadcasting Act; the Broadcasting Act, the

Telecommunications Authority Act and the ICASA Amendment Act; and the Electronic

Communications Act, which substantially amended the IBA Act of 1993 and the

Broadcasting Act of 1999.

The Minister of Communications, the DoC, the Independent Communications Authority

of South Africa (ICASA) and the Competition Commission (instituted based on the

Competition Act of 1998 dealing with competition and related issues) regulate the

telecommunications industry in South Africa. ICASA deals with the day-to-day

regulation of the telecommunications industry. Its functions are largely not at the

policy-making level but more at the operational and implementation levels with the

power to make regulations and participate in the licensing process as a licensing

authority. Enabling legislation also empowers ICASA to monitor licensee compliance

with license terms and conditions, develop regulations for the three sectors, plan and

manage the radio frequency spectrum as well as protect consumers of these services

from unfair business practices, poor quality services and harmful or inferior products.


18

ICASA is also charged with the power to adjudicate disputes arising between service

providers, or between service providers and consumers.

As part of its responsibility as a watchdog for the telecommunications industry, ICASA

has to ensure level playing fields where rules apply equally to all industry players by

having open and transparent processes. Some of the strategies adopted include

consultative processes in developing rules, regulations and policies and ensuring

fairness through its adjudication functions. A major responsibility for ICASA is its

protection and championing of consumers’ rights. It is tasked with educating consumers

on ICASA’s role and function in handling complaints while informing them of their

rights and the procedures for ensuring a fair hearing and settlement in cases where

poor service is rendered. It also works on behalf of the consumer community to

promote the attainment of universal service and access. It does this by putting

requirements in operators’ licences to roll out services in under-serviced areas and

ensuring that licensees contribute to the Universal Service Fund. ICASA does not

however administer the Universal Service Fund; it merely receives monies on behalf of

the Universal Service Agency (USA).

The South African telecommunications industry is a rule-based economic arena

accountable to legal instruments of not just the country but also to international

conventions that it is signatory to21. Thus in regulating the industry ICASA aligns its

actions, policies and regulations with the framework set by international and regional

bodies to which it is affiliated. These include the Telecommunication Regulatory

Association of Southern Africa (TRASA), the International Telecommunications Union

(ITU), the International Institute of Communications (IIC) and Reseau Des Instances

Africaines De Regulation De la Communication (RIARC).

TRASA was formed by the members of the Southern African Development Community

(SADC) and came into being on 15 September 1997. It was established out of two

articles in the SADC Protocol on Transport, Communications & Meteorology, namely

section 10.7 and 13.13. Its goal is to increase communication and coordination between

regulatory authorities with uniformity of telecommunications regulation in the SADC

region. Its goal is also to encourage investment in the telecommunications sector in the

21

Dagada, R., Mukwevho H.S and Schofield A. (Unknown) Telecommunication Revolution in a Developmental State: South Africa becomes ICT Phenomenon Unpublished


19

region by supporting the creation of a common enabling environment for all

stakeholders. It aims to promote the establishment and operation of efficient, adequate

and cost-effective telecommunications networks and services in the SADC region, which

meet the diverse needs of customers while being economically sustainable.

As the regulator of the communications and postal sectors, the authority’s leadership

extends a hand of engagement, co-operation and collaboration to all stakeholders in the

industry. Stakeholders refer to licensees and operators, non-governmental groups and

municipalities, institutions of learning, the media and the South African public in

general. As part of its mandate for improving delivery, it has a number of flagship

projects planned including the development of Local Loop Unbundling regulations,

licensing spectrum in the 2.6 GHz and 3.5 GHz bands and monitoring the impact of call

termination regulations on the retail voice market with regard to the affordability of

services for consumers.

4. INFRASTRUCTURE

This section gives an overview of the infrastructure landscape for South Africa in

relation to the wider African and SADC region. It identifies the existing infrastructure

connections from fibre cables to shared satellite platforms.

Regional Context

The Southern African Development Community (SADC) has as its main goal the

integration of the politics and economies of its 14 Southern African member states. With

this goal in mind it adopted the Protocol on Transport, Communications and

Meteorology in 1998. This protocol requires member states, including South Africa, to

harmonise their telecommunications regulatory environments, and to create similar

standards, network provisions, performance standards, regulatory structures and

universal service policies.

In the same vein the African Union of which South Africa is a member, works to create

partnerships between nation members to strengthen and grow the ICT industry across

the continent. It does this by promoting and establishing funding and finance

mechanisms, by establishing institutions such as NEPAD and developing appropriate

policy and regulatory frameworks and human resources development.


20

South Africa is also a member of the World Trade Organisation, membership of which

requires adherence to specific principles including free trade through tariff reduction,

non-discrimination against foreign players, market liberalisation, increased competition

and policy transparency. Within the telecommunications framework agreement in the

WTO, South Africa is bound to ensure access to and the use of public

telecommunications transport networks or services offered within or across the

borders of South Africa by WTO members. It also has to ensure that relevant

information on conditions affecting access to and use of public telecommunications is

publicly available while also providing information on specifications of technical

interfaces with such networks and services. Lastly, it must ensure access on reasonable

and non-discriminatory terms and conditions of use22.

4.1. Telecom infrastructure

The telecommunications industry is one of the fastest growing sectors of the South

African economy, and in 2008 it was rated the fourth-fastest growing

telecommunication market in the world (SouthAfrica.info 2008). South Africa’s local

telecommunications infrastructure provides modern and efficient services to urban

areas, but at comparatively high costs and with limited coverage in rural areas. In 2011

there was an estimated 40 million cellphone users in South Africa. Motloung (2008)

indicates that there is a 55% penetration rate of mobile phones in villages with fewer

than 500 people while landline phones and PCs seat at a very low 6% and 2%

respectively23.

Over the last ten years, SA has gradually lost its predominant leadership position in the

Telecoms and the broader ICT sector. It has moved from having 50% of all internet

hosts and internet subscribers to being in fifth position in 2009. This has been as a

result of better regulation policy and an ever-increasing investment in ICTs across the

African region (ICASA, 2011). As noted in the previous chapter on policy and regulation,

the continuing challenge is how government can further enable the private sector, via

its policies and regulation that will support profitability, to invest extensively in rural

22

http://www1.american.edu/initeb/cl5693a/southafricasources.htm 23

Motloung, M (2008). Please try again later: bridging the digital divide is proving more difficult than the state imagined. Financial Mail, 28 March 2008. BDFM: Rosebank


21

areas. This directly impacts the economic development of the hinterland, which hitherto

has largely been left behind in the Telecoms boom.

With the introduction of policy to deregulate and liberalise the sector there has been

some improvements and advancement in the sector with lower prices to consumers and

the opening of the market to more players (small to medium sized). ICT infrastructure is

being rolled out in local and provincial governments to augment private capital

initiatives. This will be discussed in some detail in the section on the status of the

internet. Telecoms infrastructure though would be useless if there was inadequate or

even more expensive electrical power supply to support its rollout and use.

Over the last ten years, SA has gradually lost its predominant leadership position in the

Telecoms and the broader ICT sector. It has moved from having 50% of all internet

hosts and internet subscribers to being in fifth position in 2009. This has been as a

result of better regulation policy and an ever-increasing investment in ICTs across the

African region (ICASA, 2011). As noted in the previous chapter on policy and regulation,

the continuing challenge is how government can further enable the private sector, via

its policies and regulation that will support profitability, to invest extensively in rural

areas. This directly impacts the economic development of the hinterland, which hitherto

has largely been left behind in the Telecoms boom.

4.2. Electricity

Eskom is the national power-generating authority for South Africa. It generates

approximately 95% of the electricity used in South Africa and approximately 45% of the

electricity used in Africa. It generates, transmits and distributes electricity to industrial,

mining, commercial, agricultural and residential customers and redistributors.

Additional power stations and major power lines are also being built to meet rising

electricity demand in South Africa24. It is noted that Eskom also buys electricity from

and sells electricity to the countries of the SADC.

24

www.eskom.co.za


22

4.3. Broadband

Telkom was the first provider of ADSL service in South Africa, in 2002. Since then, ADSL

prices have significantly reduced largely as a result of competition from other providers

and from mobile network operators, and also as a result of a range of fibre-optic cables

such as the proposed East African Submarine System (EASSy) SEACOM cable25.

It should be noted that the US-led SEACOM project is the first of a series of undersea

cable projects to become operational and from which South Africa will derive great

benefit. SEACOM's landing stations are planned to operate on a market-based, ‘open-

access’ system26.

Figure 6: Map showing existing and planned submarine fibre cables for Africa until 2010

25

SEACOM provides the first access to broadband connectivity for countries on Africa’s eastern and southern seaboard, which were previously 100% reliant on Telkom's (the incumbent monopoly in South Africa) expensive satellite-based technology see http://www.seacom.mu/ 26

Esselaar S. Gillwald, A. Sutherland, E. 2007. The regulation of undersea cables and landing stations. LINK Centre: Johannesburg


23

The DoC’s initial stance that ownership of all broadband undersea cables that land in

South Africa be owned by a majority of South African companies almost scuppered

plans to encourage foreign investors prior to its withdrawal by the DoC27. The

establishment of the Broadband Infraco by the Department of Public Enterprise in 2007

was an attempt to address the need for broader and cheaper access for consumers

(public and private) as provided by broadband Internet Service Providers. Its mandate

was to supply the capacity and bring down the cost of broadband by providing and

owning the long-distance haul and employing the Full Service Network (FSN) deployed

by Eskom and Transnet.

5. STATUS OF INTERNET AND MOBILE PHONES

5.1. Status - Internet Penetration

This section gives a descriptive overview of the status of the internet industry in South

Africa. By focusing on the SA ecosystem with information about sectoral players (major

and minor), it shows available data on access and penetration rates.

5.1.1. Access

It will be of research interest, in another couple of years, to examine how the

operationalisation of Infraco, SEACOM and other broadband offerings (such as the

NEPAD broadband project28) will change the current ratio of internet users when

compared to the country’s population as shown below from 2000 to 2009.

Table 2: Internet usage and population statistics

YEAR Users Population % Pen. Usage source

2000 2 400 000 43 690 000 5.5 % ITU

2001 2 750 000 44 409 700 6.2 % IWS

2002 3 100 000 45 129 400 6.8 % ITU

2003 3 283 000 45 919 200 7.1 % World Wide Worx

2004 3 523 000 47 556 900 7.4 % World Wide Worx

2005 3 600 000 48 861 805 7.4 % World Wide Worx

2008 4 590 000 43 786 115 10.5 % World Wide Worx

2009 5 300 000 49 052 489 10.8 % World Wide Worx Source: http://www.info.gov.za/aboutsa/communications.htm#access last accessed 27 April 2011

27

Kasonde, T. (2007) Controversy continues over undersea cables. Available online: http://www.bizcommunity.com/Article/416/16/19429.html last accessed 14 June 2011 28

This is a continental initiative that aims to connect African countries to one another and to the rest of the world through a fibre-optic cable network that will result in the provision of affordable broadband capacity.

http://www.theworx.biz/

http://www.theworx.biz/

http://www.worldwideworx.com/

http://www.worldwideworx.com/


24

The internet ecosystem has also been influenced by the convergence occurring in the

technological sector with more people accessing the internet via their mobile phones

and other handheld devices. Below is a table showing the mobile connection speeds and

data consumption for South Africa between the fourth quarter of 2009 and the third

quarter of 2010. The next section speaks to the status of the mobile phone industry.

Table 3: Mobile connection speeds and data consumption (South Africa)

Year Average kbps Peak kbps Average monthly usage

Q4 2009 485 – –

Q1 2010 465 835 142

Q2 2010 522 959 216 Q3 2010 495 928 177

Akamai Report: Mobile Connection Speeds & Data Consumption Source: http://mybroadband.co.za Source: www.internetworldstats.com

5.1.2. Number of Internet Service Providers

The telecommunications industry in South Africa went through a lot of changes post-

apartheid in 1994. A major part of this was the opening up of spectrum and

liberalisation of licensing and the market to more VANs. This applied to data

communications and Internet Service Providers of which there are over 300 in the

country. Due to the managed liberalisation path chosen by the DoC putting VANs in a

position of procuring services from market competitors, the effective growth of these

VANs has been affected by the market domination of Telkom and other large players

with policy protecting them from full-fledged competition for a number of years

(Dagada, unknown).

Telkom: Founded 19 years ago, Telkom was listed on the Johannesburg Stock Exchange

in March of 2003. It is owned 39,8% by Government, 8,9% by Black Ginger 33

(Pty) Ltd, 4% by Public Investment Corporation, 3% by Telkom Treasury Stock,

and the remaining 44,3 % is considered ‘Free Float’ (Telkom Investor Relations

2011). In February 2007, it bought Africa Online, the largest Pan-African Internet

Service Provider in sub-Saharan Africa. By May of the same year, it had acquired

a 75% stake in Nigeria’s second-largest private telecommunications operator,

namely Multilinks. It eventually became the sole owner in January 2009.


25

On 21 April 2009, Telkom acquired a 100% interest in MWEB Africa Limited.

MWEB Africa is a group of companies offering internet services and its own

VSAT access services in sub-Saharan Africa (excluding South Africa). Telkom

formally launched its data centre operation, branded Cybernest, in Bellville, Cape

Town, on November 19 2009.

Internet Solutions: Internet Solutions (IS) was launched in 1993, and has become a

leading African Internet Protocol-based (IP) Communications Service Provider. It

was the first commercial Internet Service Provider (ISP) in South Africa (Internet

Solutions, 2011). It is a wholly owned division of Dimension Data providing

converged communications services (hosting, access, security solutions, virtual

private network, mobile solutions, voice over Internet solutions, broadband and

applications services) to over 80% of South Africa’s top companies.

Mweb: Owned by the Naspers group, Mweb was established in 1997. As at 2011, it

provides internet service to about 320 000 South African users, which includes

home users, business customers and corporate clients (Mweb website). It owns

the largest VSAT (Very Small Aperture Terminal) corporate internet base in sub-

Saharan Africa. Mweb is a participant in the Business-to-Business (B2B) and

Business-to-Consumer (B2C) eCommerce markets. Its business division provides

integrated commerce solutions to retailers.

Sentech29: Sentech is a broadband network business accommodating narrowband

functionality on a common platform, supplying communication solutions and

services to wholesale and retail customers in chosen markets in South Africa and

the rest of the continent. It began operation in 1992 as a technical and broadcast

arm of the SABC, distributing signal for transmissions related to it.

It owns and operates about 210 terrestrial broadcasting transmitter sites where

short-wave, medium wave, FM, television and MMDS (Multichannel Multipoint

Distribution Service) transmitters (over 1200) are housed to provide services to

various broadcasters. It is also in possession of satellite transmission systems,

29

www.sentech.co.za


26

which it operates to provide connection for terrestrial transmitter networks and

direct satellite broadcasting services30.

After the triple enquiry report done by the IBA in 1995, it was recommended

that Sentech become a public company functioning as a commercial entity

obtaining funding from the South Africa Parliament. Sentech continues to be

beset by a range of problems from financial to operational, yet it is tasked with

South Africa’s digital migration.

iBurst: iBurst Mobile Broadband Internet Technology began operations in 2005, and is

100% owned by Wireless Business Holdings (Pty) Ltd, which in turn was

founded in 1999. It constructed a network backbone behind the National Lottery

in South Africa, and in these early days offered nationwide wireless data services

(running on its WiMax spectrum) covering about 95% of the SA population. This

infrastructure is now being used to provide commercial wireless broadband data

network using the same iBurst technology. WBS Shareholders include the South

African National Civics Organisation (SANCO), the National Union of Metal

Workers of South Africa (NUMSA) and Vodacom (bought a 10% stake in WBS in

2006).

ISPA: The Internet Service Providers Association (ISPA) is a voluntary South African

internet industry body. Established on 6 June 1996, the association currently

represents in excess of 150 Internet Service Providers with a diverse range of

services and target markets. The Minister of Communications formally

recognised ISPA as an Industry Representative Body in terms of section 71 of the

Electronic Communications and Transactions Act, 2002 on 20 May 2009.

ISPA has and continues to influence and shape telecommunications policy in

South Africa since its formation in 1996. The association has provided

submissions and feedback to such key pieces of legislation as the

Telecommunications Amendment Act, the Electronic Communications and

Transactions Act, the Electronic Communications Act, the ICASA Amendment Act,

the Regulation of Interception of Communications and Provision of

Communicated-related Information Act as well as various other associated

30

www.sentech.co.za last accessed 14th June 2011


27

regulations. ISPA encourages members to participate in discussions relating to

policy issues and has very active working groups, including the regulatory

submissions working group and a working group that deals with fair competition

issues.

The Internet Service Providers’ Association (ISPA) currently operates two

Internet Exchange points, namely the Johannesburg Internet Exchange (JINX)

and Cape Town Internet Exchange (CINX). Internet Exchanges (INXs) provide a

mechanism for ISPA’s members to interconnect their networks and exchange

traffic. The exchanges encourage the local routing of internet traffic not destined

for international locations. These exchange points are a vital part of SA's internet

infrastructure as they connect most of the local IP networks, and lead to more

efficient traffic exchange. It should be noted that both Cell C and MTN do voice

interconnection at the INXs run by ISPA.

Entirely funded by annual membership fees and contributions from its members,

ISPA is represented by a management committee elected by ISPA members at an

annual general meeting. A website is maintained at http://www.ispa.org.za

where a list of the members can be found.

5.1.3. Number of Computers

The total population of internet users in South Africa, according to a study by World

Wide Worx, indicates that having passed the 5,3 million mark for internet users in South

Africa implies that internet usage penetration has exceeded 10% (WorldWideWorx

2010). A 2010 report by Akamai, however, rates South Africa as one of the 86 countries

with average internet speed (below 1Mbps) (Muller 2011). The table below shows

updated figures representing the total number of internet users in South Africa in 2009.

These figures do not include individuals whose main method of accessing the internet is

through internet cafes or other public facilities. It should also be noted that the number

of broadband (b/b) users is much larger than the users who access the internet via dial-

up in 2009.


28

Table 4: Internet - user population in South Africa (2009)

Total wireless broadband subscribers 1 494 000

Unique wireless broadband users 930 000

ADSL broadband users 630 000

Total broadband users 1 560 000

Dial-up internet users 250 000

Corporate users (mainly leased lines) 2 060 000

SME users (additional, mainly ADSL) 506 000

Academic users 540 000

Total internet user population 5 3 million

Source: Goldstuck, 2010: 75 – 137 (Abraham and Goldstuck)

5.2. Status - Mobile Phones Penetration

5.2.1. Access

The figure below illustrates the ratio of connected lines to phone users between 1994

and 2008, as presented in the 2009 annual mobility study by World Wide Worx. The

study revealed that in spite of the (about) 100% mobile phone penetration, the cellular

market still continues to grow tremendously. The low cost of new SIM cards (around

50c/starter pack) has made it easier for individuals to own more than one phone line,

hence there has been a significant increase in cellular connections, but not necessarily

an increase in cell phone users. The ratio of SIM card per cell phone user has grown

from an average of 1:1 in 1997 to 1:1,2 in 2003 and 1:1,47 by the end of 2008

(WorldWideWorx 2009).


29

Figure 7: Mobile connections vs users in South Africa between 1994 and 2008

5.2.2. Number of Mobile Phone Companies

The South African mobile communications market is a highly competitive and rapidly

changing environment. Included in the range of new competitors are four broadband

suppliers and the imminent entry of two fixed line operators who are all actively

involved in giving back and growing the local communities via social responsibility

initiatives. Currently there are two fixed line operators: Telkom, the incumbent

monopoly, and Neotel, which was licensed in 2003.

Mobile Telecommunications Network (MTN): Launched in 1994, the MTN Group is a

multinational telecommunications group operating in 21 countries in Africa and

the Middle East. The MTN Group operates three business divisions: MTN-SA

(South Africa), MTN International and Strategic Investments. They are currently

listed on the Johannesburg Stock Exchange under the Industrial

Telecommunications Sector (which falls under the Industrial Non-Cyclical

Services). The MTN Group Limited (MTN Group) is a leading provider of

communication services, offering cellular network access and business solutions.


30

MTN is a leading provider of cellular network services in Africa. MTN obtained a

licence to operate in South Africa in 1993, and launched commercially in June

1994. In March 2012 MTN recorded 170 million subscribers across the group

(the entire global corporations), and by 2011 MTN South Africa had claimed a

market share of 35% with a subscriber base of 19,8 million. A number of

customer-focused products have been introduced such as mCharge, a virtual

recharge mechanism, and the introduction of R5 as MTN’s lowest airtime

denomination, which is targeted at dormant and low-usage customers. Two new

pricing plans, PAYG call per second peak and peak maximiser reposition, were

also introduced. They are designed around peak use and targeted at high usage

prepaid customers. Looking forward, MTN South Africa plans a range of network

roll out to improve quality of service, capacity and self-provisioning. In

particular, Data and 3G are expected to show stronger growth due to more

competitive pricing and increased coverage.

MTN South Africa operations are completely held by the MTN Group. Ownership,

as reported in 2005, was 85,11% public held, and 14,89% non-public held

(directors of MTN group, MTN group employees, Newshelf 664 Ltd, and MTN

Holdings Share Trust) (African Telecoms News, 2005). In 2010, MTN began a

Broad-Based Black Economic Empowerment (BBBEE) transaction, which

involved divesting 4% equity ownership to black South African investors (MTN

Group, 2010), in a bid to broaden MTN South Africa’s BEE ownership. Cyril

Ramaphosa is the director and chairman of MTN South Africa, with interests in

various other sectors of the MTN group. Ramaphosa is a former Member of

Parliament and previous Secretary General of the ANC, South Africa’s ruling

party, and former Secretary General of the National Union of Mineworkers. Apart

from this, Ramaphosa once chaired the Constitutional Assembly and the Black

Economic Empowerment Commission. Ramaphosa thus enjoys strong links to

the government and the ruling ANC.

Vodacom: The Vodacom Group provides voice, data, messaging, broadband and

converged services to over 40 million customers. Its business segments consist

of Vodacom South Africa, Vodacom Lesotho, Vodacom Mozambique, Vodacom

Tanzania and Vodacom DRC. The group offers a range of converged services


31

through Vodacom Business and Gateway, a provider of communications services

to multinationals and network operators. Since its commercial launch in June

1994, Vodacom has consistently had the larger market share in terms of

customer figures, network roll out and product innovation amongst South

Africa’s cellular network operators. It is noted also that Vodacom was the first

operator to offer a cellular fax and data service, prepaid cellular, TV content (a

soap opera) and 3G HSDPA network in South Africa. In 2009, Vodafone Group

acquired a majority stake in Vodacom, which has enabled the South African arm

to partner with Neotel and MTN in implementing a new fibre-optic network.

Vodacom was granted a licence to operate in South Africa alongside MTN in 1993

and it began operations in 1994. Vodacom South Africa is considered the market

leader within the country with a claimed market share of 53% and a subscriber

base of about 26 million. Vodafone is the majority owner of Vodacom (Vodacom,

2010). Vodafone and Telkom were previously 50% joint shareholders of

Vodacom; Telkom however divested from the company and launched its own

mobile service in August 2010 (8-ta) (Telkom 2010). Fifteen per cent of Telkom’s

shares in Vodacom were acquired by Vodafone, and the remaining 35% were

unbundled to members of the public who were existing shareholders

(Engineering News 2009). Mthandazo Peter Moyo is the director and chairman

of Vodacom’s board. Moyo’s business interests extend into Amabubesi Group

where he holds various directorships. Moyo was appointed chairman of the

Vodacom Group in May 2009. Prior to his appointment at Vodacom, Moyo served

on the board of Telkom where he assisted in the company listing on the JSE.

Another member of the board is Jabulani Moleketi, who is a chairman at the

Development Bank of South Africa. Moleketi is also the former Deputy Minister

of Finance and former MEC of Financial and Economic Affairs in the Gauteng

Provincial Government.

Cell C: Cell C was launched in 2001 – a record eight years after the first cellular phone

providers were licensed to provide mobile phone services in South Africa. Mobile

phone users welcomed the new service provider with the hopes of experiencing

better tariffs as a result of the increase in competition within the market, and the

end of the duopoly by MTN and Vodacom (African Telecoms News 2005). Cell C


32

is 100% owned by 3C Telecommunications, which is 60% owned by Oger

Telecom South Africa, a division of Saudi Oger; 25% owned in an unencumbered

holding by CellSAf, (a Broad-Based Black Economic Empowerment entity

representing over 30 black empowerment companies and trusts); and 15% by

Lanun Securities SA (Lanun is a wholly owned subsidiary of Saudi Oger Ltd).

Alan Knott-Craig was appointed as Chief Executive Officer of Cell C in April 2012.

Knott-Craig has a long history in the telecommunications industry and joined

Cell C after a four-year retirement from the sector. He served as the Chief

Executive Officer of Vodacom prior to which he was the General Manager of

Mobile Communications at Telkom.

Cell C's network currently covers more than 30% of South Africa's geographic

area and 87% of the population. Roaming agreements exist with over 559

telecommunications operators in 188 countries. Data roaming services are

available on 312 roaming partner networks in 123 countries. 3G roaming

agreements exist with 113 networks in 79 countries. Cell C's customer market

share is currently 14.5% with a customer base of 6.9 million, and a market share

14.5% (Cell C, 2010).

Cell C is noted for bringing competitive market reshaping options to customers

from its operation on a dual band network and offering cost-effective call options

such as per second billing. They are also currently building the first HSPA+ 900

network in South Africa. It is noteworthy that Cell C has created more than 8 500

entrepreneurial and job opportunities with their Community Service Telephones

(CSTs) thus contributing to South Africa’s universal access goals of affordable

mobile services.

Virgin Mobile: In 2006, Virgin Mobile, a Mobile Virtual Network Operator (MVNO31),

began operation in South Africa. Virgin Mobile is one of UK’s largest operators,

and it entered the South African market by means of a joint venture partnership

with Cell C. Operating as a Virtual Network Operator (VNO), Virgin Mobile South

Africa owns no infrastructure of its own. Rather, it operates through the Cell C 31

An MVNO is a telecoms operator that provides mobile telephony services but does not have its own licensed frequency allocation of radio spectrum nor does it necessarily have all of the network infrastructure required to offer mobile communications service


33

network32. In April 2011, Cell C sold its 50% shareholding in Virgin Mobile. The

deal saw Virgin Mobile assume a 55% stake in the company with the remaining

shareholding of 45% being sold to Bahamas-based Calico Investments. Steve

Bailey serves as the Chief Executive Officer of Virgin Mobile. Bailey previously

served as the Financial Director of Cell C.

8-ta: This is the mobile network service provided by Telkom. The service was launched

late in 2010 and, as such, reports pertaining to market share and subscriber base

are not readily available. Telkom was previously the monopoly supplier of fixed

line telephony services in South Africa up until 2002 when the monopoly license

expired; Neotel was awarded a license to operate in 2005. 8-ta will run off MTN’s

network infrastructure until Telkom rolls out its own base stations. 8-ta is

governed by Telkom’s board of directors. Polelo Lazarus Zim was appointed

Chairman of the Telkom board in 2011. In conjunction with his position at

Telkom Zim also currently sits on the boards of North Platinum Ltd, Sanlam Ltd

and the Chamber of Mines South Africa. Zim has extensive experience in the

media sectors and previously served as Chief Executive Officer of M-Net.

6. OWNERSHIP, PRICING STRUCTURE AND COST

6.1. Liberalisation of Markets: Duopolies, Affordability

An economic drive for liberalisation swept through Africa in the very late 1990s

through to the mid-2000s. This, combined with the growing technological drive towards

convergence33 across the globe, enabled innovation and competition in the mobile and

internet industry not just within South Africa. This therefore created a new generation

of market players in relatively different market environments to which past telecom

monopolies had existed and operated within.

As a direct result, the economy of South Africa and other African countries changed –

most created new monopolies and duopolies in the sector while others truly brought

about a multi-player economy. South Africa oscillates somewhere in the sphere of a

32

Computer Business Review (CBR), 2006 33

Gillwald A (Unknown) National Convergence Policy in a Globalized World: Preparing South Africa for Next Generation Networks, Services and Regulation. Available: http://link.wits.ac.za.


34

duopoly driven by the early and larger players in the mobile and internet industry such

as Telkom, Internet Solutions, Vodacom and MTN. It should be noted, though, that

through the work of sectoral organisations such as ISPA and SATSPA smaller players are

given a platform to address inequality issues.

These emerging market players are being strengthened by the adoption of relatively

progressive policies by the South African government. This is the case of the broadband

policy of 2010 and the Consumer Act of 2011. There are independent regulatory bodies,

but in actual practice the political influences continue to shape and control much of its

work. More work is required in translating the policies and attendant strategies into

operational strategies that can be implemented without political and private-sector

interference.

This increased competition should in theory bring pricing down, making it more

affordable for the consumer as well as new entrants to the service-provision chain. The

defining economic features of network industries such as telecommunications are

significant economies of scale in production, network externalities, the need for

compatibility and standards, and complementarities in demand and switching costs for

consumers. These economic features have an impact on the nature of competition in the

industry. In particular, they provide the means for a single firm to establish and

maintain a dominant position in the market. This may be to the detriment of consumers

if that dominant position is abused through above or below-cost pricing. But this is only

possible where no unfair practices or price fixing is occurring, as in the case of the

unfair internet provision pricing/costing models, which was addressed by the

Competition Commission, resulting in fines of billions of rand for Telkom Business.

6.2. Convergence: Technology Platforms and Service

The International Telecommunications Union (ITU) has provided an almost all-

encompassing definition that describes convergence as ‘the technological, market, legal

or regulatory capability to integrate across previously separated technologies, markets

or politically defined industry structures. Convergence also involves an important


35

international component, as many services and information sources that were

traditionally controlled on a domestic level are being provided on a global basis’34.

South Africa’s take-up of convergence will, like that of other developing countries,

depend on and differ according to the needs of the local economy; the level of

investment locally and internationally; existing governance models and social policy.

The convergence of technologies and services, as well as that of entities that provide

such services, will continue to create various challenges to current legislation, policy

and regulatory frameworks. This is the case in South Africa where mobile service

providers have become some of the foremost providers of internet access as part of and

external to mobile service provision. These challenges, for example, would include

having the right framework and platform for mediation on pricing when internet

service is provided by mobile networks which have a wider infrastructure network

across the country than smaller players such as XDSL broadband35, who have to utilise

their competitors’ infrastructure to provide adequate service to their customers. These

are issues that ISPAs Fair Competition working group has to address on an ongoing

basis.

The table below gives an overview of the data packages as provided by the mobile

service providers in South Africa. These are not rates that can necessarily be matched

by smaller Internet Service Providers who are, more often than not, resellers of these

existing packages.

Table 5: Mobile and wireless data costs – prepaid and contract (MTN, Vodacom, Cell C, Virgin Mobile,

Neotel, 8-ta)

Bundle Cost MB

Included

Out bundl

e R/MB

R/MB 5MB

10MB

20MB

50MB

100MB

200MB

500MB

1024MB

2048MB

3072MB

5120MB

10240MB

20480MB

NeoConnect Lite PrePaid ¹

R0 .00

0 R0.20 R0.20 1 2 4 10 20 40 100 204 .8

409 .6

614 .4

1024 2048 4096

Virgin Mobile R0 .00

0 R0.60 R0.60 3 6 12 30 60 120 300 614 .4

1228 .8

1843 .2

3072 6144 12288

MTN 75MB R49 .00

75 R0.65 R0.65 49 49 49 49 65 .25

130 .25

325 .25

665 .85

1331 .45

1997 .05

3328 .25

6656 .25

13312.25

Cell C Prepaid 100MB

R50 .00

100 R2.00 R0.50 50 50 50 50 50 250 850 1898 3946 5994 10090 20330 40810

MTN 10MB R10 .00

10 R1.00 R1.00 10 10 20 50 100 200 500 1024 2048 3072 5120 10240 20480

8.ta 100MB Pre R50 100 R1.00 R0.50 50 50 50 50 50 150 450 974 1998 3022 5070 10190 20430

34

International Telecommunications Union (1999)Trends in Telecommunication Reform: Convergence and Regulation pg 2 35

http://www.xdsl.co.za


36

paid .00

Cell C Contract 100MB

R50 .00

100 R0.50 R0.50 50 50 50 50 50 100 250 512 1024 1536 2560 5120 10240

Vodacom Standard Prepaid MyMeg 8

R9 .25

8 R2.00 R1.16 9.25 13 .25

33 .25

93 .25

193 .25

393 .25

993 .25

2041 .25

4089 .25

6137 .25

10233 .25

20473 .25

40953.25

Vodacom Standard Contract MyMeg 8

R9 .25

8 R2.00 R1.16 9.25 13 .25

33 .25

93 .25

193 .25

393 .25

993 .25

2041 .25

4089 .25

6137 .25

10233 .25

20473 .25

40953.25

Cell C Prepaid 250MB

R100 .00

250 R2.00 R0.40 100 100 100 100 100 100 600 1648 3696 5744 9840 20080 40560

8.ta 250MB Prepaid

R100 .00

250 R1.00 R0.40 100 100 100 100 100 100 350 874 1898 2922 4970 10090 20330

Cell C Contract 250MB

R100 .00

250 R0.40 R0.40 100 100 100 100 100 100 200 409 .6

819 .2

1228 .8

2048 4096 8192

NeoConnect Lite 99 ¹

R99 .00

0 R0.08 R0.08 99.4 99 .8

100 .6

103 107 115 139 180 .92

262 .84

344 .76

508 .6

918 .2

1737.4

Cell C Contract 24GB with modem

R149 .00

2048 R0.39 R0.07 149 149 149 149 149 149 149 149 149 548 .36

1347 .08

3343 .88

7337.48

Neotel NeoGo ² R239

.00 1536 R0.08 R0.16 239 239 239 239 239 239 239 239 279

.96 361 .88

525 .72

935 .32

1754.52

Cell C Contract 60GB with modem

R299 .00

5120 R0.39 R0.06 299 299 299 299 299 299 299 299 299 299 299 2295 .80

6289.40

NeoConnect Lite 469 + modem

R469 .00

20480 R0.08 R0.02 469 469 469 469 469 469 469 469 469 469 469 469 469

MTN Data only Uncapped Lite (+modem)

R749 .00

3072 R0.00 R0.24 749 749 749 749 749 749 749 749 749 749 749 749 749

Source: http://grandtrunk.za.org

6.3. Access

At the surface level South Africa’s mobile penetration rate of 100% bodes an optimistic

perspective on the country’s ICT sector and the cause of universal access. However,

beneath the seemingly progressive nature of this sector lies the problematic nature of

affordability. South Africa’s mobile phone tariffs are still one of the highest in the region

and therefore prove too costly for citizens in the middle to low income bracket. While

mobile networks operating in the country claim to work in competitive markets, the

current mobile tariffs indicate rife overpricing when compared to both regional and

international rates.

Thus, within South Africa’s peculiar mobile phone market, penetration rates seem to

indicate savvy mobile users rather than notions of access and affordability. Penetration

rates are calculated according to SIM sales by operators. The direct correlation between

SIM sales and users is problematic with the particular context especially since there is

an estimated 1,13 active SIM cards per user. High tariffs have resulted in a phenomenon

of multiple SIM cards per user where mobile subscribers aim to manipulate tariffs

through strategic usage tactics. Dual SIM ownership is largely recognised as a direct


37

consequence of exorbitant costs and the South African mobile market is therefore no

different. It is within this light that South Africa’s mobile penetration rates appear

exaggerated and not truly a reflection of active users. Multiple SIM ownerships account

for a considerable over count of users coupled with strategic use of cost-effective

mechanisms such as ‘Please Call Me’s’36.

Affordability remains the greatest obstacle to true access of mobile phones in South

Africa. High penetration rates do not necessarily account for greater numbers in access

but rather savvy consumer tactics that sabotage costs. The result is less talk-time

minutes and more pro-active methods of exploiting SIM usage.

6.4. Ownership

South Africa’s mobile phone industry has come a long way since its early years that

were dominated by the duopoly of Vodacom and MTN. The addition of new operations

Cell C, Virgin Mobile and 8ta have been a welcome addition to the sector with the hope

of competition boding well for issues of affordability and access. However, despite the

added competition, South Africa’s mobile phone industry is still marred by exorbitant

tariff rates that compromise access. Ownership structures have a direct effect on issues

of affordability and access. South Africa’s mobile phone industry’s costly tariff rates are

similarly a result of the ownership patterns in the industry. Although Cell C has made a

noticeable dent in the market shares of the industry, the shift has unfortunately not

been strong enough to compete with giants Vodacom and MTN. Newcomers Virgin

Mobile and 8ta have likewise been sluggish in growth, offering minimal competition.

36

South Africa ICT Sector Performance Review 2009/2010


38

Figure 8: Mobile market shares - 2011

With a combined market share of 77%, Vodacom and MTN are the strongest contenders

in the mobile market. While in essence the market is characterised by an oligopoly, the

force of duopoly between Vodacom and MTN is most dominant. The collective market

power of the two completely undermines the potential of competition since the

remaining actors barely feature.

6.5. Interconnection Rates

Interconnection rates have long been identified as leading agents in South Africa’s

expensive mobile phone tariffs. The rates are determined through negotiations between

operators where parties with the most subscribers hold the greatest leverage. Within

the South African context, Vodacom and MTN hold the largest subscriber base and

therefore enjoy final say on the rates. Price collusion between the two has often been

alleged on the basis of similar pricing strategies that rarely indicate strong

competition37. Complaints of price collusion were first lodged in 2004. However, in

2011 both Vodacom and MTN were cleared of charges following years of investigation

that did not yield substantial evidence of price fixing38. Despite this, allegations of price

collusion continue to surface on account of the interdependent nature of the two mobile

companies that cooperate on agreements of voice and data traffic and roaming. These

37

Econex The Economics of Mobile Interconnection Rates in South Africa 2009 38

Source http://www.balancingact-africa.com/news/en/issue-no-547/telecoms/south-africa-mtn-vod/en

http://www.google.co.uk/imgres?q=south+african+mobile+market+share&um=1&hl=en&sa=N&biw=1440&bih=805&tbm=isch&tbnid=YSLVPeHNyzCf4M:&imgrefurl=http://www.africantelecomsnews.com/resources/AfricaOpp_South_Africa.shtml&docid=0pzASqCEzD9_bM&imgurl=http://www.africantelecomsnews.com/graphics/SouthAfrica_Figure2.JPG&w=301&h=270&ei=283iT7LbFs-yhAfIrZzdAw&zoom=1&iact=hc&vpx=172&vpy=188&dur=2001&hovh=213&hovw=237&tx=151&ty=136&sig=111569812394687418575&page=1&tbnh=128&tbnw=145&start=0&ndsp=29&ved=1t:429,r:0,s:0,i:75


39

agreements set the bar of power relations in the industry, which ultimately alienate

smaller operators and widen the gap of profiteering by the duopoly39.

6.6. Political Links

Both Vodacom and MTN boast prominent stakeholders with links to government in

their ownership structures. Cyril Ramaphosa, MTN’s director and chairman, is a well-

known veteran and the former Secretary General to the ruling ANC. Ramaphosa has

since left politics, but continues to hold strong ties to the current government. Jabulani

Moleketi sits on the board of directors at Vodacom. Moleketi is a high-ranking

personality who is also the chairman of the Development Bank of South Africa and a

former Deputy Minister of Finance and MEC of Financial and Economic Affairs in the

Gauteng Provincial Government.

7. REGULATION

The South African government views the telecommunications sector, and rightly so, as a

key driver for the social, academic and economic development of the people. Thus at the

forefront of its policy making and decision taking are attempts to address and ensure

that equitable growth is achieved though universal access to ICTs, and consequently

telecommunications services.

The guiding definition on the political economy of the internet and mobile phone

industries speaks to the outcomes and prevailing conditions which emerge as a result of

the co-existence, interactions and impact of the political (policies, regulations) and

economic climates of the growing mobile and internet sector in any society. This study

has given a macro perspective on the South African internet and mobile ecosystem

while showcasing the existing and prevailing regulatory environment both within the

country and the region. This section deduces, from the information currently available

as at the time of this research, how prevailing political economy forces influence the

evolving sectors of the internet and mobile phone industry.

39

Econex The Economics of Mobile Interconnection Rates in South Africa 2009


40

7.1. Regulation and Regime for Internet and Mobile Phones

The economic features of the country (described by the researcher as a developed

developing country based on its GDP amongst other factors), the mobile and internet

sectors, and the incentives they provide for anti-competitive practice provide a good

foundation for a strengthened regulatory oversight. These features also have a direct

impact on the sectoral players’ ability to meet the regulatory provision of affordable

service to low-income consumers, meeting the goals of the Universal Access Service

(UAS) policy. In reality, though, the industry players do not adhere to the anti-

competitive provisions or the regulations around UAS in 70% of their business strategy

and dealings.

It emerged from interviews that this is at times a result of inadequate knowledge in the

case of the mobile operators, who are now operating in a wider environment with

smaller players who hold exactly the same operating licences as themselves. Large

economies of scale also have implications for affordability and access. The economies of

scale for the network component arise from having a high proportion of fixed costs and

very low marginal or incremental costs in providing a service. For instance, it is often

said that the cost of routing a call is almost nothing, but clearly, the cost of establishing a

network to connect people is significant.

There is also a much smaller implementation and organisational capacity within the

regulator to follow through on monitoring their implementation. In interviews

conducted for this research the issue of continuing political interference is also a major

constraint. This is not to say that nothing is being done, but rather that the gap of unfair

competition practices and the non-provision of UAS is wide when compared to

instances where they are being flouted. Industry organisations such as ISPA continue to

play a role via its working groups on fair competition and regulatory submissions.

7.2. Competition Laws

A distinct feature of telecommunications is the existence of network externalities for the

consumer. This means that the value of joining a particular network depends on how

many other people are also on the network and the implicit and explicit cost of

connecting with users on other networks. Network externalities thus have a significant


41

impact not only on competition between telecommunication networks (basis for

regulatory rules requiring the compulsory interconnection of public networks), but also

on the consumers. Thus the South African Consumer Protection Act (CPA) that came

into effect on 1 April 2011 lead to the establishment of the National Consumer

Commission (NCC). This commission is tasked with, amongst other functions, seeing to

the fair treatment and protection of the rights of the consumer/user in the telecoms

industry. This is a function currently carried out by the regulator to some extent, and

thus there are plans to identify the right models of cooperation between ICASA and the

NCC to continue to assist the consumer in the telecoms industry in addressing valid

complaints.

8. CONCLUSIONS AND RECOMMENDATIONS

‘I can say to you as... that the policies are in place but it’s the political and

organisational will and capacity to operationalise and implement that is lacking’

(Anonymous at ICASA, 2011)

8.1. Conclusions

The continuing challenge, as noted in the section on policy and regulation, is how

government can further enable the private sector via its policies and regulation that will

support profitability to invest extensively in rural areas. This directly impacts the

economic development of the rural areas, which hitherto have largely been left behind

in the telecoms boom. At the other end of the spectrum are the service providers and

operators whose first priority in the early days of work is to sell its services on the basis

of its reach and coverage. However, even when adopting such strategies South African

operators invariably confront another problem – the lack of a consistent regulatory

environment and most often the presence of dominant state monopolies. Also

overcoming specific barriers such as continuing duopolies and monopolies, poor local

economies and the increase in consumer demand to justify the needed investment to

upgrade new telecommunications networks continues to be a challenge. It also requires

new capital for financing the development of new infrastructure to reach the un-

reached.


42

The challenge thus remains that regulation and policy typically continue to consistently

lag behind technological advancement. For the South African government to formulate a

policy that enables the establishment of affordable communications networks and

multiple services for the whole population, reaching all its nooks and crannies, it will

need to re-address its policy and regulation making processes. The continuing

realisation of the enormous potential of the telecommunications industry must continue

to be supported strategically by the government by continuing to create an enabling

regulatory environment for new players; by established sectoral players supporting fair

competition through, amongst others, proper pricing and infrastructure sharing; and

lastly foreign direct investment. This can be achieved by a more sustained lobbying

strategy with governments and market players, as done by ISPA, to strengthen the

foundations of a cohesive regulatory environment and fair competition.

The revolution in communications and computing technology also continues to produce

an ever increasing surge of, amongst others, eCommerce, entertainment services and

opportunities. While these services continue to sweep through developed economies,

inadequate eDevelopment enabling environments have isolated most African countries.

The situation is even more severe in a country such as South Africa with a

geographically dispersed and economically unequal and disaggregated society.

8.2. Recommendations

The following strategies are thus recommended for adoption as particular areas that

advocacy projects, initiatives and/or engagement programmes can help to address the

challenges currently being faced by the mobile and internet industry:

A policy and regulation review and re-development initiative translating policy

into actionable items, thus assisting government institutions with identifying

implementation strategy and supporting its operationalisation. This could also

include a monitoring strategy to ensure no political interference.

An increased engagement with industry associations, governments and

individuals to help drive change re: interconnectivity, co-location, competition,

etc. The concept of multi-stakeholderism is key to ensuring the sustainability

and effectiveness of an advocacy strategy.


43

Review of the USAASA to suit needs in 2011 onwards: this initiative should

factor in the role currently being played by government and industry, including

highlighting initiatives such as the broadband initiative by municipal and local

governments.

Continuing consumer and business education and awareness programmes on

how SMME can leverage existing telecoms infrastructure to grow their business

would increase local communities’ economic strength. This would necessitate

the establishment of support mechanisms to enable such SMMEs and individual

users to sustainably leverage such opportunities as presented by broadband

projects positively. This would range from entrepreneurship initiatives through

to the creation and growth of more VANs across the nation.

9. ADVOCACY STRATEGIES

In conclusion, the recommendations identified above can only succeed where there is a

balance of power amongst all stakeholders. In practical terms, this means that each

initiative or project should be designed with the goal of giving optimum sector

strengthening and building outcomes to all stakeholders as much as it is feasible40. The

mistakes of prior enabling and historical imbalance correcting measures, from lopsided

funding favouring donors to projects skewed to promote specific technologies and

platforms only, should be avoided. This can be achieved by:

Localised initiative specific leadership, which is equipped and rightly skilled to

implement beyond the project stage

Ensuring that from inception long-term effects are identified, impact

determined and scenarios for resolving them are indicated beyond donor

presence/funding cycles

Clearly defined monitoring and evaluative measures being built into the

initiatives plan (allocated funds, personnel etc)

Ensuring that the initiatives are locally relevant and that the target community

takes ownership.

These measures, which are non-exhaustive if built in, will enable a successful advocacy.

40

In some cases this will require prioritising of stakeholder importance based on needs and impact assessment.


44

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Vodacom (2010) Customers (last accessed 30 November 2010), from http://vodacom.investoreports.com/vodacom_ar_2010/business-overview/customers/.


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WorldWideWorx (3 July 2009) Mobility 2009 Reveals SA's Cellular Gap, (last accessed 2 June 2011), from http://www.worldwideworx.com/2009/07/03/mobility-2009-reveals-sas-cellular-gap/.

WorldWideWorx (14 January 2010) SA Internet Growth Accelerates, (last accessed 2 June, 2011), from http://www.worldwideworx.com/2010/01/18/sa-internet-growth-accelerates/.

Other Web References

http://www.info.gov.za/aboutsa/glance.htm

http://www.bbc.co.uk/scotland/education/ms/southafrica/political/constitution/structure.shtml

http://www.state.gov/r/pa/ei/bgn/2898.htm

http://www.southafrica.info/about/democracy/polparties.htm

http://en.wikipedia.org/wiki/Economy_of_South_Africa

http://www.economywatch.com/world_economy/southafrica/structure-of-economy.html

http://www.southafrica.info/business/economy/econoverview.htm

http://www.oecd.org/dataoecd/48/38/1826412.pdf

http://www.economist.com/node/9856113

http://www.info.gov.za/aboutsa/economy.htm

www.eskom.co.za


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LIST OF ACRONYMS

3G ........................... Third Generation Mobile Technology

4G ........................... Fourth Generation Mobile Technology

ADSL ...................... Asymmetric Digital Subscriber Line

ANC ........................ African National Congress, the ruling party ............................................... South Africa

B2B ........................ Business-to-Business eCommerce

B2C ......................... Business-to-Consumer eCommerce

BBBEE................... Broad-Based Black Economic Empowerment ........................................... South Africa

BEE and BEEE ... Black Economic Empowerment Policy ......................................................... South Africa

BoP ......................... Balance of Payments

CBR ........................ Computer Business Review

CINX ....................... Cape Town Internet Exchange ......................................................................... South Africa

CPA ........................ Consumer Protection Act ................................................................................... South Africa

CPA ........................ Consumer Protection Act .................................................................................... South Africa

CST ......................... Community Service Telephone

DoC ........................ Department of Communications ..................................................................... South Africa

DRC ........................ Democratic Republic of Congo

DSTV ...................... Digital Satellite Television

EASSy .................... East African Submarine System

ECA ........................ Electronic Communications Act ...................................................................... South Africa

Eskom ................... The national power-generating authority .................................................. South Africa

FSN ......................... Full Service Network

GDP ........................ Gross Domestic Product

GEAR ..................... Growth, Employment and Redistribution .................................................... South Africa

GII ........................... Gender Inequality Index

HDI ......................... Human Development Index

HDR ....................... Human Development Report

HSDPA .................. High-Speed Downlink Packet Access

HSPA+ 900 .......... Evolved High Speed Packet Access

IBA ......................... Independent Broadcasting Authority ........................................................... South Africa

ICASA .................... Independent Communications Authority of South Africa ..................... South Africa

ICT .......................... Information and Communications Technology

IIC ........................... International Institute of Communications

Infraco .................. Broadband Infraco Limited, state-owned company ................................ South Africa

INX ......................... Internet Exchange


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IP ............................. Internet Protocol

IS ............................. Internet Solutions - an ISP company ............................................................. South Africa

ISP .......................... Internet Service Provider

ISPA ....................... Internet Service Providers Association

IT............................. Information Technology

ITU ........................ International Telecommunications Union

JINX ........................ Johannesburg Internet Exchange ................................................................... South Africa

MDDA .................... Media Development and Diversity Agency ................................................. South Africa

MEC........................ Member of the Executive Council in Provincial Government ............. South Africa

MMDS ................... Multichannel Multipoint Distribution Service

MPI ......................... Multidimensional Poverty Index

MTN ....................... Mobile Telecommunications Network - a multinational

telecommunications group

MVNO .................... Mobile Virtual Network Operator

NCC ........................ National Consumer Commission ..................................................................... South Africa

NCOP ..................... National Council of Provinces .......................................................................... South Africa

NEPAD .................. New Partnership for Africa's Development ................................................ South Africa

NUMSA ................. National Union of Metal Workers of South Africa .................................... South Africa

OSISA .................... Open Society Initiative for Southern Africa

PAYG...................... Pay As You Go payment mechanism

PC ........................... Personal Computer

PPP ......................... Purchasing Power Parity

RDP ........................ Reconstruction and Development Programme ........................................ South Africa

RIARC .................... Reseau Des Instances Africaines De Regulation De la Communication

SA............................ South Africa

SABC ...................... South African Broadcasting Corporation .................................................... South Africa

SADC ...................... Southern African Development Community

SANCO .................. South African National Civics Organisation ............................................... South Africa

SATRA ................... South African Telecommunications Regulatory Authority .................. South Africa

SATSPA................. South African Telecommunications Service Providers Association.. South Africa

SEACOM ............... A submarine cable operator with a network of submarine and terrestrial

SIM ......................... Subscriber Identity Module

SME ........................ Small and Medium Enterprises

SMME .................... Small, Medium and Micro-sized Enterprises

TRASA ................... Telecommunication Regulatory Association of Southern Africa

UAS ........................ Universal Access and Service


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UNDP ..................... United Nations Development Programme

USA ........................ Universal Service Agency

USAASA ................ Universal Service and Access Agency of South Africa ............................. South Africa

VAN ........................ Value Added Network

VNO ........................ Virtual Network Operator

VSAT ...................... Very Small Aperture Terminal

WBS ....................... Wireless Business Holdings (Pty) Ltd - an ISP company ...................... South Africa

WiMax................... Worldwide Interoperability for Microwave Access

WTO ...................... World Trade Organisation

XDSL ...................... x-Digital Subscriber Line

ZAR ........................ South African Rand (currency) ......................................................................... South Africa

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