The title of this post is a term coined at the MyBroadband forums.
Unlike most of the broadband-deprived masses of South Africa I’m not a Telkom basher. Allow me to qualify that, lest I be misunderstood. I’ve received bad service from them before and complained. But I haven’t ever delivered statements like “Telkom is crippling the small business and hampering economic growth.”
Up until recently I argued that the cost and restrictions on broadband in South Africa were necessary due to the limited market and infrastructure. In a country where everyone doesn’t even have a landline and the minority use the Internet at home how can you expect broadband to be cheap? That said, I never quite understood why the cost of normal telecommunications (fixed-line and mobile) is so expensive. Another nagging thought was that even though not everyone had access to a fixed-line service, nearly everyone in the country (including beggars) have a cell phone.
So we don’t mince definitions, I’m going to be speaking of broadband in Telkom’s terms. Which is to say, anything 192kbps and up is broadband.
South Africa’s Internet access (and broadband Internet in particular) is provided by the SAT3/WASC and SAFE undersea cable systems that meet at Melkbosstrand in South Africa. As far as I know SAT-1 and SAT-2 are still in service. Given the nature of the cable systems, I assumed that they are expensive to maintain and/or access costs are quite high.
I would also argue that the amount of bandwidth available on the cable systems is limited. That’s why Telkom needs to regulate consumer bandwidth use by using the “capping” system it employed. If Telkom allowed too many ADSL (or other broadband) subscribers the speed of the service would degrade and consumers would be complaining about the bad service rather than the expensive price.
This argument made sense to me, and still does to an extent. But an article a read recently completely changed my view of Telkom. It was printed in the BusinessReport (which is published in the Pretoria News, I think) on 24 August 2007 and is available online.
Now I feel that if the information contained in the journal article referenced in the BusinessReport article (“Another instance where privatisation trumped liberalisation: the politics of telecommunications reform in South Africa – a ten year retrospective” by Willie Currie and Robert Horwitz) is accurate, the argument above is invalidated. And it should be accurate because I guess you can get in a lot of trouble for saying nasty things about Telkom that aren’t true.
Basically, the Thintana Consortium that bought the South African government’s 30% share in Telkom in 1997 arranged it so they would be above South African law for the 5 year exclusivity period the government agreed to give Telkom to “prepare for competition.” The consortium consisted of SBC (a US-based telecoms group) and Telekom Malaysia. Evidently the authors of the article were interviewed last year and stated that SBC sent it’s whole corporate office legislative team (usually based in San Antonio, Texas) to South Africa to help draft the Telecommunications Act.
Evidently SBCs strategy was to maximise the investment of Thinthana during the 5 year exclusivity period and then sell out. It is estimated that the 30% stake was bought for R5.45 billion and was sold in 2004 for a total of R12.7 billion. This does not include the dividends or what is called management fees in the article over the 6.5 year period.
There are probably many things I don’t understand about economics and “The Big Picture” but couldn’t a billion or two USD (according to WikiPedia on 5 September 2007) of Telkom’s annual profits be spared? Maybe it’s not enough for international infrastructure development… but national infrastructure? What about decreasing line, installation and call costs so that more people can have access to a phone? All this will cost the investors some of their precious profit but maybe, just maybe, providing access to more people will increase revenue? And over time that could probably translate into profit?
Obviously not because if it were profitable to provide the South African people decent service for a decent price it would have been done already.
Muargh Muargh Telkom is from the devil? Muargh Muargh… oh wait. We already knew this.
It is part of the great conspiracy of the ruling class: keep the poor enslaved and uneducated. Telephone services, electricity, high school and tertiary education, property, transport and high fuel prices – as long as these commodities are kept out of reach of the majority, then the positions of the ruling class are not threatened. Conniving. But that’s politics! It never is for the good of the people.
I wouldn’t go that far. I do believe that it’s about money. The oppression of the poor to keep the ruling class in power is but a side effect.
However, often the good of the people is good for money. The trouble with discussing something like this and hauling in conspiracy theories is exactly as you say: It makes the discussion political, rather than economical.
Which in my mind can equate more simply to subjective and objective. Politics is about debate and difference of opinion. Economics is about numbers. Almost like a game, even. Given a set of parameters, make it so you come out with the biggest score. Teams economist, accountant and analyst ready… Go!
Well, I am in the process of installing Telkom ADSL and Telkom is my service provider – so this whole discussion has given me pause… am I totally screwed? And now Telkom has won one of the precious pay-TV licences in SA – have we created a monster from which there is never ever going to be any escape????
Broadband internet these days are getting much faster and cheaper too. ~~*