Promoting Competitive Outcomes in the Fixed Line Telecommunications Sector in South Africa

The South African telecommunications sector began its liberalisation path in the early 1990s with the opening of the VANS, customer premises equipment and mobile telephony sectors. However, for fixed line services the government opted for selling an equity stake to a foreign consortium and granting the incumbent an exclusive monopoly until 2002. The policy regime for the post-exclusivity period was announced in August 2001 and permits the entry of only one more fixed operator. This structural limitation on competition has been met with concern that consumers will gain little from the new environment.

This paper explores the possibilities for promoting competition and competition-equivalent outcomes within the structural constraints of the current policy environment. It argues that there is still considerable scope for improving the gains for consumers. The paper begins by examining the policy and institutional context in which the telecommunications industry in South Africa operates and the limits the new policy places on competition. It then asks the question of whether effective competition is a desirable outcome or not. Following this is a brief discussion of the type of entry barriers and anti-competitive practices that the entrant might face. Using this context, the paper looks at the options open to the regulator, the Competition Commission and the government in promoting competition or competition-equivalent outcomes within the constraints of the current policy environment. In conclusion, some recommendations are made about how to proceed over the next few years to ensure consumers gain from reform in telecommunications.