South Africa has become the first country in Africa to impose a heavy fine on an incumbent telecommunications operator for abusing its dominance in the market.
The Competition Tribunal has fined Telkom ZAR449 million (US$55 million) for abusing its dominance of the telecom market between 1999 and 2004. The Competition Commission in February asked for a ZAR3.5 billion fine.
The fining of Telkom by the Tribunal is expected to have a ripple effect in the region, whose telecom market is still dominated by incumbent operators that have been accused of bullying private operators.
In 2010, under the influence of the African Union, African ministers of information and communication technologies agreed to fast track the harmonization of telecom policies and regulations in order to end monopolies and enhance communication in the region. The move was expected to bring to an end monopoly policies that are blamed for the poor and expensive communication services in the region. But nothing has changed so far.
Incumbent operators still dominate the region's telecom market. resulting in near suffocation of private operators, which have to pay huge sums of money for using incumbent operators' facilities, including international gateways. But monopolizing the telecom market by incumbent operators has been the only sure way for those operators to survive competition from the private operators, which are investing heavily in new technologies.
The Telekom fine is, however, expected to signal the beginning of the end of monopoly policies.
"A warning signal has surely been sent to the Zambian and other governments that monopolizing the telecom market as [is] the case with Zamtel will cost them dearly in future," said Amos Kalunga, a telecom analyst from Computer Society of Zambia.
The new Zambian government in January this year repossessed Zamtel from Lap Green Networks of Libya, claiming that the company was fraudulently sold by the previous regime.
The Tribunal concluded that Telkom had used its upstream monopoly in the facilities market to the advantage of its subsidiary. Telkom's conduct was found to have caused harm to both competitors and consumers, and to have impeded competition and innovation.
"The temptations to use single, government-owned communications infrastructure service provider to control the sector has negative consequences for the competitive ICT sector," said Marian Shinn, shadow minister of communications in the opposition Democratic Alliance.
Telkom's competitors including Value Added Network Services Association and 20 ISPs joined forces and lodged a complaint with the Competition Commission over Telkom's anticompetitive behavior and abuse of its dominance in the telecom market in 2004. The Competition Commission then referred the matter to the Competition Tribunal. But Telkom challenged the referral in the High Court. After five years of litigation, the Supreme Court of Appeal found Telkom guilty of the offense in 2009 and referred the matter back to the tribunal.
The tribunal hearing was conducted in February this year and the Commission alleged that Telkom refused to supply essential access facilities to independent value-added network service providers.
Telkom allegedly induced its customers not to deal with vans, charged their customers excessive prices to access services and favored its own customers by giving them a discount on distance-related charges.
Telkom did not deny it acted illegally, but argued it was justified in acting that way. Telkom claimed that by providing valued-added services, the vans providers were engaged in illegal conduct. Telkom further argued that the vans providers had adopted a business model that effectively trespassed on Telkom's exclusivity rights.
The Tribunal ruled that Telkom's conduct resulted in a substantial lessening of competition in the vans market.
Telkom is expected to pay half the penalty within six months of the Tribunal's decision and the balance within 18 months. However, the company said it is still studying the judgment by the tribunal and promised to make an announcement about it in due course.