Covid-19 has accelerated our transition to a digital economy, and times of crisis and volatility always mean increased opportunity for M&A.
Given that the digital economy cuts across all markets in which goods and services use internet access for production, distribution and trade, it is especially important to have a regulatory environment that guards against dominance, monopolisation and consolidation.
The acceleration to a digital economy across the globe is creating opportunities for new entrants and innovative business models because of increased demand. But it is also increasing dominance among bigger players that may abuse their positions and hamper healthy competition to grow their market share.
Telkom has taken Vodacom to the Competition Tribunal because it deems the roaming agreement between Vodacom and Rain as a merger. Why are Telkom’s economists and experts so convinced that this is a merger? Could it be that Vodacom is using Rain’s valuable radio frequency for delivery of 4G? If so, it makes the “partnership” between Vodacom and Rain incredibly lucrative for Rain, perhaps to the tune of hundreds of millions of rand a month.
However, without any statistical proof of how the roaming stats stack up, there is no way to prove that there is what may be “indirect leasing of spectrum”.
There are a few unknowns that require clarity to understand this symbiotic relationship, such as: are non-discriminatory clauses imposed by Vodacom? Do the parties allow carrier aggregation (and is this allowed under the current regulation)? Who is contracted and subcontracted to install Rain sites? Whose sites are being utilised? What infrastructure sharing coexists (site furniture, fibre backhaul)?
These are important to draw a fair conclusion whether Rain is treating Vodacom’s roaming subscribers as a priority over its own subscribers. A roaming partner will always protect its own customers’ service experience before allowing roaming visitors on its network that can potentially degrade its own customers’ experience. We do not know the answers to these questions.
Telkom is not the only party that is rightly concerned about competition in the telecoms and ICT sectors. The Competition Commission released a document on SA’s digital economy for public comment in September. It is good to see, from the issues laid out in the document and the intentions stated, that it is as concerned with issues of unfair competition within the digital sector as many smaller players.
But time is of the essence. The rapid evolution of the digital economy in developing countries already threatens a “new era of global concentration”, and therefore a greater digital divide between the internet haves and have-nots.
As an ISP we continue to experience what we believe is an abuse of dominance by fibre network operators. We, and all the other independent ISPs, are at their mercy when they prioritise servicing of their own customers.
In a previous article for Business Day I lamented fibre network operators muscling out internet service providers due to acting as both the infrastructure wholesalers and sellers, which means these companies hamper healthy competition, which ultimately affects pricing and delivery to the end user. This has been allowed to take place because of a serious lack of teeth on the part of the regulator.
The Competition Commission has released a discussion paper for comment that sets out various scenarios where anticompetitive behaviour in the digital economy requires regulation. The document also notes deliberate strategies to retain early leadership and even mentions most-favoured pricing rules with partners and self-preferencing of data and platform access to leverage dominance and exclude or limit rivals.
We hope that as independent ISPs our concerns will be addressed, because as our competition lawyer, Amy Jones of Truter Jones, says: “The Competition Act makes provisions that prohibit a dominant firm to refuse to give a competitor access to an essential facility when it is economically feasible to do so.”
The document, which will be reshaped and formed to ultimately become policy, is supposed to guide and inform behaviour in the sector. It is our hope that fibre network owners that want to play as both wholesalers and sellers will take note of the following: “Such mergers deny consumers the benefit of additional competition and a potentially less concentrated market in the future. Another source of potential competition is from the move into adjacent markets as leading tech firms pursue conglomerate synergies. Such acquisitions give the conglomerate platform a foothold in an adjacent market that can be leveraged later, but also deny consumers of entry and more competitions.”
We are vehemently opposed to deals of large telcos such as if Vodacom were to buy CIVH, as it would result in consolidation of Vodacom’s market power in the telecoms and digital space. Such acquisitions give the conglomerate platform a foothold in an adjacent market that can be leveraged and denies consumers entry into the market.
We need less extractive businesses in SA, where profit is the only consideration. As market players in our growing digital economy we have a responsibility to citizens to put people before profits. The Competition Commission rightly points out that we need “an enabling regulatory environment — including sound competition policy — along with a vigilant, informed consumer base, innovative business culture, and willing commercial partners that can turn the tide in SA and ensure the digital economy delivers on the promise of inclusive economic growth”.
The race is on.
• Swanepoel is RocketNet CEO.
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