By Ana Monterio - Moneyweb

A number of studies show that South Africans are required to fork out more than their foreign counterparts to make telephone calls and surf the Internet. Government has reacted through reviewing its policy and the legislation governing the sector. Some changes, however, such as legalising carrying voice over Internet protocol (VoIP), have not resulted in lower prices, as it has not allowed service providers to interconnect with Telkom�s infrastructure and enable calls to be terminated on an existing landline number.

The Department of Communications is hosting a two-day colloquium on telecommunication pricing to gauge the industry�s opinion of how the department and the regulator, Icasa, should go about lowering prices.

Taylor Reynolds, an economist in the communications policy division of the Organisation for Economic Cooperation and Development (OECD), provided a global perspective to the debate, explaining how the transition from high- to low-cost (and in the case of Internet, faster) services was achieved in certain countries, and which lessons South Africa could implement to achieve the same.

Reynolds emphasised that effective competition in the market leads to lower prices, faster speeds improved quality of service and innovative new services:

Prices are not the issue; we need to take a step back and see what we can do to introduce competition. This is achieved when there is an independent regulator with sufficient power. Lower prices will result.�

He added that government�s role is to introduce competition as quickly as possible and that government and regulators should only step in where there are market failures: �Otherwise, let the private sector sort it out,� said Reynolds.

Applying the argument for an independent regulator to the South African context, one has to examine the convergence bill, currently being examined by the parliamentary portfolio committee for communications.

In its current form, Icasa is not granted total independence, as the communications minister needs to give the final go-ahead before certain licences are awarded, and the minister can make determinations without consulting the regulator. This therefore gives scope for incumbent operators to lobby government.

Reynolds said that on the broadband Internet and VoIP side, it is imperative that the unbundling of the local loop (the final stretch of infrastructure that connects subscribers to telephones and Internet) is needed to increase competition:

�The major input cost to delivering service is infrastructure and therefore access to infrastructure. We see lowered prices where there is best access to the local loop; the new entrant has to have a revenue stream while building up its own infrastructure.�

Reynolds noted that duopolies traditionally have not provided sufficient competition on their own, giving the UK and Australia as examples. �However, having a very strong competitor to the incumbent operator has been very successful, such as in Korea.

He says access to broadband (high-speed Internet, which is transmission at more than 256 kilobits a second) is a key component to reducing prices in other telecommunication market segments, such as VoIP. He said that in Denmark, the penetration of Skype (a free or low-cost call operator which uses the Internet to transmit voice) is the highest on the globe at 50%, however, this has only been possible because of cheap broadband connections.

Source: www.moneyweb.co.za