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
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 twoyear 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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Political Economy of Internet and Mobile Phones: South Africa
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.
2.
CONSTITUTION................................................................................................................................ 9
2.1.
3.
4.
5.
Freedom of Expression ......................................................................................................... 9
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
INFRASTRUCTURE ......................................................................................................................... 19
4.1.
Telecom infrastructure ......................................................................................................... 20
4.2.
Electricity............................................................................................................................... 21
4.3.
Broadband............................................................................................................................. 22
STATUS OF INTERNET AND MOBILE PHONES ............................................................................... 23
5.1.
ii
Conclusion .............................................................................................................................. 8
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
Political Economy of Internet and Mobile Phones: South Africa
5.2.
6.
7.
8.
9.
Status - Mobile Phones Penetration ..................................................................................... 28
5.2.1.
Access ............................................................................................................................ 28
5.2.2.
Number of Mobile Phone Companies........................................................................... 29
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
REGULATION ................................................................................................................................. 39
7.1.
Regulation and Regime for Internet and Mobile Phones ..................................................... 40
7.2.
Competition Laws ................................................................................................................. 40
CONCLUSIONS AND RECOMMENDATIONS ................................................................................... 41
8.1.
Conclusions ........................................................................................................................... 41
8.2.
Recommendations ................................................................................................................ 42
ADVOCACY STRATEGIES ................................................................................................................ 43
REFERENCES .......................................................................................................................................... 44
LIST OF ACRONYMS ............................................................................................................................... 47
iii
Political Economy of Internet and Mobile Phones: South Africa
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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Political Economy of Internet and Mobile Phones: South Africa
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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Political Economy of Internet and Mobile Phones: South Africa
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
2
Political Economy of Internet and Mobile Phones: South Africa
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?flashp
lugin=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.
3
Political Economy of Internet and Mobile Phones: South Africa
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
4
Political Economy of Internet and Mobile Phones: South Africa
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$75.7 billion (including machinery, transport equipment, chemicals,
petroleum products, textiles, and scientific instruments).
Table 1: South Africa Data Profile
Indicator
2005
2006
2007
2011
46,89
47,39
47,59
50.59
1,.2
1,1
0,4
1,2
242,06
254,99
277,58
408.01
GDP growth (annual %)
5,1
5,0
4,8
3.1
Inflation, GDP deflator (annual %)
4,8
6,8
8,1
5
3
3
3
2.5
Industry, value added (% of GDP)
31
31
31
31.6
Time required to start a business (days)
35
35
31
19
Market capitalisation of listed companies
(% of GDP)
233,6
273,9
291,1
209.61
Foreign direct investment, net inflows
(BoP, current US$) (millions)
6,522
183
5,736
5,717
424
424
424
1,371
Population, total (millions)
Population growth (annual %)
GDP (current US$) (billions)
Agriculture, value added (% of GDP)
Workers' remittances and compensation of
employees, received (US$) (millions)
Source: World Development Indicators database
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Political Economy of Internet and Mobile Phones: South Africa
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.
6
Political Economy of Internet and Mobile Phones: South Africa
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.
7
Political Economy of Internet and Mobile Phones: South Africa
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
8
Political Economy of Internet and Mobile Phones: South Africa
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:
9
Political Economy of Internet and Mobile Phones: South Africa
‘… 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
http://www.inmplc.com/
6
http://www.caxton.co.za/
5
10
Political Economy of Internet and Mobile Phones: South Africa
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 freeto-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 highdefinition television, the first in Africa. Multichoice provides digital media
entertainment, content and services to multiple devices, which include pay TV
7
8
http://www.avusa.co.za/
www.sapa.co.za
11
Political Economy of Internet and Mobile Phones: South Africa
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
11
http://www.mdda.org.za/
Addy-Nayo C (Unknown) 3G Mobile Policy: The case of Ghana
12
Political Economy of Internet and Mobile Phones: South Africa
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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Political Economy of Internet and Mobile Phones: South Africa
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
14
Political Economy of Internet and Mobile Phones: South Africa
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
17
http://www.info.gov.za/view/DownloadFileAction?id=67890 last accessed 27 April 2011
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
15
Political Economy of Internet and Mobile Phones: South Africa
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
16
Political Economy of Internet and Mobile Phones: South Africa
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.
17
Political Economy of Internet and Mobile Phones: South Africa
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
18
Political Economy of Internet and Mobile Phones: South Africa
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.
19
Political Economy of Internet and Mobile Phones: South Africa
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
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
23
20
Political Economy of Internet and Mobile Phones: South Africa
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
21
Political Economy of Internet and Mobile Phones: South Africa
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, ‘openaccess’ 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
22
Political Economy of Internet and Mobile Phones: South Africa
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
2000
2001
2002
2003
2004
2005
2008
2009
Users
2 400 000
2 750 000
3 100 000
3 283 000
3 523 000
3 600 000
4 590 000
5 300 000
Population
43 690 000
44 409 700
45 129 400
45 919 200
47 556 900
48 861 805
43 786 115
49 052 489
% Pen.
5.5 %
6.2 %
6.8 %
7.1 %
7.4 %
7.4 %
10.5 %
10.8 %
Usage source
ITU
IWS
ITU
World Wide Worx
World Wide Worx
World Wide Worx
World Wide Worx
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.
23
Political Economy of Internet and Mobile Phones: South Africa
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
Q4 2009
Q1 2010
Q2 2010
Q3 2010
Average kbps
Peak kbps
485
465
522
495
–
835
959
928
Average monthly usage
–
142
216
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 postapartheid 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.
24
Political Economy of Internet and Mobile Phones: South Africa
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 subSaharan 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
25
Political Economy of Internet and Mobile Phones: South Africa
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
26
Political Economy of Internet and Mobile Phones: South Africa
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 dialup in 2009.
27
Political Economy of Internet and Mobile Phones: South Africa
Table 4: Internet - user population in South Africa (2009)
Total wireless broadband subscribers
Unique wireless broadband users
ADSL broadband users
Total broadband users
Dial-up internet users
Corporate users (mainly leased lines)
SME users (additional, mainly ADSL)
Academic users
Total internet user population
1 494 000
930 000
630 000
1 560 000
250 000
2 060 000
506 000
540 000
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).
28
Political Economy of Internet and Mobile Phones: South Africa
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.
29
Political Economy of Internet and Mobile Phones: South Africa
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
30
Political Economy of Internet and Mobile Phones: South Africa
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
31
Political Economy of Internet and Mobile Phones: South Africa
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
32
Political Economy of Internet and Mobile Phones: South Africa
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
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.
33
33
Political Economy of Internet and Mobile Phones: South Africa
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 allencompassing 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
34
Political Economy of Internet and Mobile Phones: South Africa
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
NeoConnect Lit
e PrePaid ¹
Virgin Mobile
MTN 75MB
Cell C Prepaid
100MB
MTN 10MB
8.ta 100MB Pre
Cost
R0
.00
R0
.00
R49
.00
R50
.00
R10
.00
R50
Out
bundl
5M 10 20M 50 100M
R/MB
e
B
MB
B
MB
B
R/MB
0 R0.20 R0.20
1
2
4 10
20
MB
Inclu
ded
200
MB
500
MB
40
100
3072 5120M 1024
MB
B
0MB
2048
0MB
1024
MB
2048
MB
409 614
.6
.4
1228 1843
.8
.2
1331 1997
.45
.05
3946 5994
3328 6656 13312
.25
.25
.25
10090 20330 40810
1024
2048
4096
3072
6144 12288
0 R0.60 R0.60
3
6
12
30
60
120
300
75 R0.65 R0.65
49
49
49
49
100 R2.00 R0.50
50
50
50
50
65
.25
50
130
.25
250
325
.25
850
204
.8
614
.4
665
.85
1898
10 R1.00 R1.00
10
10
20
50
100
200
500
1024
2048 3072
5120 10240 20480
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
35
Political Economy of Internet and Mobile Phones: South Africa
paid
Cell C Contract
100MB
Vodacom Stan
dard Prepaid M
yMeg 8
Vodacom Stan
dard Contract
MyMeg 8
Cell C Prepaid
250MB
8.ta 250MB Pre
paid
Cell C Contract
250MB
NeoConnect Lit
e 99 ¹
Cell C Contract
24GB with mod
em
.00
R50
.00
R9
.25
2560
5120 10240
50
50
50
50
50
100
250
512
1024 1536
8 R2.00 R1.16 9.25
13
.25
33
.25
93
.25
193
.25
393
.25
993
.25
2041
.25
4089 6137
.25
.25
10233 20473 40953
.25
.25
.25
8 R2.00 R1.16 9.25
13
.25
33
.25
93
.25
193
.25
393
.25
993
.25
2041
.25
4089 6137
.25
.25
10233 20473 40953
.25
.25
.25
250 R2.00 R0.40 100 100
100 100
100
100
600
1648
3696 5744
9840 20080 40560
250 R1.00 R0.40 100 100
100 100
100
100
350
874
1898 2922
4970 10090 20330
250 R0.40 R0.40 100 100
100 100
100
100
200
99
.8
2048 R0.39 R0.07 149 149
100 103
.6
149 149
107
115
139
149
149
149
409
.6
180
.92
149
819 1228
.2
.8
262 344
.84
.76
149 548
.36
1536 R0.08 R0.16 239 239
239 239
239
239
239
239
Cell C Contract
5120 R0.39 R0.06 299 299
60GB with mod
em
NeoConnect Lit R469 20480 R0.08 R0.02 469 469
e 469 + modem
.00
MTN Data only R749 3072 R0.00 R0.24 749 749
Uncapped Lite (
.00
+modem)
299 299
299
299
299
299
279
.96
299
469 469
469
469
469
469
749 749
749
749
749
749
Neotel NeoGo ²
100 R0.50 R0.50
R9
.25
R100
.00
R100
.00
R100
.00
R99
.00
R149
.00
R239
.00
R299
.00
0 R0.08 R0.08 99.4
2048
4096
8192
508
.6
1347
.08
918
.2
3343
.88
1737.
4
7337.
48
361
.88
299
525
.72
299
935
.32
2295
.80
1754.
52
6289.
40
469
469
469
469
469
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
36
Political Economy of Internet and Mobile Phones: South Africa
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
37
Political Economy of Internet and Mobile Phones: South Africa
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
38
Political Economy of Internet and Mobile Phones: South Africa
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 wellknown 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
39
Political Economy of Internet and Mobile Phones: South Africa
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 anticompetitive 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
40
Political Economy of Internet and Mobile Phones: South Africa
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 unreached.
41
Political Economy of Internet and Mobile Phones: South Africa
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.
42
Political Economy of Internet and Mobile Phones: South Africa

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.
43
Political Economy of Internet and Mobile Phones: South Africa
REFERENCES
African Telecoms News (2005) Major African Mobile Markets: Future Growth Prospects
2006 - 2011, (last accessed 1 June 2011), from
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Political Economy of Internet and Mobile Phones: South Africa
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Political Economy of Internet and Mobile Phones: South Africa
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www.eskom.co.za
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Political Economy of Internet and Mobile Phones: South Africa
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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Political Economy of Internet and Mobile Phones: South Africa
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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Political Economy of Internet and Mobile Phones: South Africa
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
.
49