Watchdog wants Telkom fined

Johannesburg - The Competition Commission on Wednesday asked the tribunal to levy a 10% penalty on Telkom's turnover for the year to end-March 2009, based on findings of abuse of dominance.

The investigation follows five complaints lodged by the Internet Service Providers Association and as well as service providers Verizon South Africa, Multichoice Subscriber Management Services and Internet Solutions.

According to the Competition Commission, these complaints were lodged at different times from 2005 to 2007. The commission combined them for investigative purposes as they raised overlapping issues.

In its probe, the commission found that Telkom abused its near-monopoly position in the market for the provision of telecommunications network facilities.

"It did this by charging excessive prices for the basic infrastructure needed by its downstream competitors, the ISPs, to access a range of telecommunications services, while keeping its own ISP service charges low. In this way, Telkom also raised its downstream competitors' costs, making it difficult for them to sell cost-effective services to end consumers," it said.

Telkom prices double the average

The commission concluded that Telkom charged excessive rates after comparing its prices to its costs, prices in other countries, prices of other operators offering similar services and prices to Telkom customers who posed a competitive threat to it. These comparisons indicated, among other things, that in 2006 Telkom's prices were more than double the average of South Africa's major trading partners.

Furthermore, in 2007 Telkom's prices were 30% more expensive than the average of a basket of 14 countries, it found.

The commission said it also noted that Telkom's share had been increasing over time, while its downstream competitors had consistently lost market share. This pointed to an inability on their part to compete effectively with Telkom.

"The excessive prices charged by Telkom affect the prices ISPs charge their customers. Given the widespread use of the internet and the extensive use made of virtual private networks or VPNs by medium to large businesses to link various locations of a single enterprise, there is no doubt that these high prices detrimentally affect consumers and hinder economic development in South Africa," the commission said.

- I-Net Bridge