The impact of telecomunication reform on universal access in South Africa

Gregory, Angela Stuart (2006-03)

Thesis (MBA)--Stellenbosch University, 2006.


From the 1990s onwards, significant developments have occurred in the international telecommunications sector that have affected the South African telecommunications industry and peoples' access to the telephony. Rapid developments in Information and Communication Technologies together with the reorganisation of telecommunications operators through commercialisation, privatisation and market liberalisation have resulted in monopoly operators moving away from their public service mandates. Globalisation and adherence to World Trade Organisation rules are causing operators to rebalance their tariffs, long-distance rates are decreasing while the cost of local calls is increasing. High-end users of telecommunication services are benefiting while low-end, largely residential users are being priced off the network. The end result is a negative effect on universal access to telecommunications. This study examines the extent of telecommunications reform within the South African telecommunications industry as it affects the provision of telecommunication services and the government's goal of achieving universal access in South Africa. Quantitative research methods utilising secondary data were utilised to establish that the state owned operator, Telkom, has transformed itself from a public service operator to one that is fully commercialised and prepared for competition. This study finds that despite the large roll-out programme in fixed-line telecommunications, there has been only very limited uptake for rural and low-income users. Although Telkom's exclusivity period initially caused an acceleration of the growth in net new lines from Telkom's greater investment levels, this acceleration only lasted until 2000/1 when Telkom started to enforce timely accounts payment more strictly. This resulted in an actual decrease in the total number of active lines in 2001 and 2002, despite new lines being rolled out. Household figures suggest that low-income households disconnected in large numbers. Fixed line telephony access was given to people who could not afford telephones and hence they were later disconnected. The end result was that fixed lines ended up growing at a similar rate to what they were prior to the exclusivity period, suggesting that the grand subsidisation of universal access was most likely a waste of resources and only resulted in temporary ownership improvements. A further problem now faced by government is the number of people who were disconnected from Telkom and remain indebted to the company. These households are prevented from getting a fixed-line phone until they repay their deb!. This has potentially far-reaching effects on their lives through destroying their credit rating. In contrast to fixed line telephones, the growth in cellular subscribers has grown beyond all expectations. Almost all the gains in ownership have come from the adoption of cellular by rural and low-income users. This study demonstrates that cellular is the rational choice for most low-income consumers given the different tariff structures and the average monthly spend on communication. The study further suggests that future use of universal service funds should be more technology neutral, this will enhance the role of cellular telecommunications in such plans. Removing the burden off fixed line for universal service provision may enable the acceleration of telecommunication liberalisation in South Africa. Obvious benefits are better prices and products for business users. Fixed-line technology remains the core technology for business users who require bandwidth for data services and make considerably more calls than residential users, making fixed-line the cheaper technology. Amongst the current biggest users are cellular network operators. Improving prices on leasing and interconnection should lower cellular call rates, making it even more attractive to low-income users. Finally, the new Intemational Telecommunication Union definitions for universal access and service now include cellular technology and move away from a fixed-line focus. These definitions are very much in line with the results identified in this study.

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