World Dialogue on Regulation

The current dialogue theme neatly captures the dilemma facing the South African telecommunications sector. Traditional regulatory approaches argue that investment and access is a trade-off. The traditional approach is primarily concerned with regulating an incumbent monopoly, usually in the fixed line sector. A key example in South Africa, was the fixed line incumbent, Telkom, obligation to roll-out 2.8 million lines in the early part of this millennium. Even though Telkom rolled-out these lines, the vast majority were disconnected due to high prices. An alternative approach, and the one adopted by the EU,  is that investment and access are complementary objectives to be achieved using the mechanism of competition. The Framework Directive clearly sees National Regulatory Authorities (NRAs) as playing a key role in the transition from monopoly to effective competition. For example, the Directive lists the principles of information provision (Article 5); consultation and transparency (Article 6) and specifically holds NRAs accountable for competition within their sector (Article 8). It is this explicit link between the mechanism of competition and the role of the NRA that the South African Electronic Communications Act lacks.

A superficial overview of the EC Act would give the impression that competition is the primary purpose of the legislation. As an improvement over the previous legal regime, the EC Act  dedicates an entire section of the Act (Chapter 10) to the determination of ineffective competition and pro-competitive remedies. One of the overall objectives of the Act is to “encourage investment and innovation in the communications sector” (Section 2 (d) of the Act).

However, it never explicitly links the role of the NRA with these objectives.

The lack of any accountability in regulation is one of the three “legs of failure” inherent in the South African telecommunications sector. The result is that the South African NRA, ICASA, does not have an overarching view of the relationship between investment and access and its own role within that framework.

The second leg is an uncoordinated  policy approach of government. It leads to a policy incoherence which is linked to  the traditional approach to regulation, that sees investment and access as trade-offs. The result is a government focused on (intentionally or unintentionally) squeezing out private investment and replacing it with government investment. For example, in an increasingly liberalising market, government has proceeded – contrary to where this policy appears to be headed – with a state-owned infrastructure provider  to the extent of disallowing private investment in the same infrastructure. Indicative of government’s belief in the investment / access trade-off is the fact that the EC Act will be amended to bypass  the licencing regime of the Act to allow  for state-owned infrastructure providers. New private infrastructure suppliers must wait for the Minister to issue an Invitation to Apply for a new licence. In the apparent failure to link the role of the NRA with the objective of increasing competition, this critical area thus remains in the domain of the executive, which still holds responsibility as shareholder and policy maker for the sector.  

The third ‘leg of failure’ is the lack of a clear policy direction, notwithstanding the stated intention of the legislation governing the sector. This is most clearly illustrated in the perceived paradox that government sees between investment and access.