The Competition Commission says gated residential estates and complexes that have created “fibre monopolies” — limiting residents to a single internet service provider (ISP) — should open up to more competition to give residents improved choice.
The issue of fibre monopolies in gated residential complexes has arisen once again, with the Internet Services Providers’ Association (ISPA) among those who have raised concerns about homeowners’ associations and body corporates signing exclusive contracts with single ISPs.
It warned that this not only reduces the choices of homeowners but also eliminates competition.
Competition Commission spokesperson Siya Makunga said the commission had received numerous complaints from people living in residential estates and from ISPs about exclusive contracts. This prompted the commission to conduct a public advocacy campaign in 2022 focusing on pro-competitive regulation in estates and complexes.
He said the main object was to ensure wider consumer choice in the number of service providers available and to increase the participation of smaller service providers and black-owned ISPs.
More than one fibre provider is ideal ... Body corporates and property developers should reject any fibre installation that does not allow for multiple service providers to compete.
— Sasha Booth-Beharilal, chair of ISPA
“Our investigation found that homeowners’ associations and body corporates sometimes appoint a single service provider and may exclusively appoint a single estate agent to sell properties in the estate.”
He urged unhappy consumers to contact the commission.
Sasha Booth-Beharilal, chair of the ISPA, said ensuring healthy competition started with installing fibre infrastructure that allowed for non-exclusive connectivity.
“More than one fibre provider is ideal. At the very least, homeowners’ associations, body corporates and property developers should reject any fibre installation that does not allow for multiple ISPs to compete.”
Booth-Beharilal said allowing consumers to choose their own ISP was in line with official government policy since 2016 when the national integrated ICT policy White Paper was published, highlighting the government’s objectives.
In the White Paper, the government said it would implement an “open access” regime that would “support traditional open access principles of fairness, transparency and non-discrimination”.
It said this would “lead to the creation of efficient, uniform, competitive and responsive open access networks that will enable all players to compete on equal terms, thereby enabling multiple downstream competitors to share infrastructure”.
Booth-Beharilal said closed networks were contrary to the ideal of a level playing field when it came to internet services.
Communications & digital technologies minister Solly Malatsi told Business Times on Friday that he favoured an arrangement whereby everyone had freedom of choice regarding internet access.
“Individuals should be free to choose their package and their ISP. The constitution is the supreme law and it clearly empowers residents to make choices,” Malatsi said.
Fibre provider Openserve has urged residential complexes, estates and other gated communities to move away from exclusive contracts with single ISPs.
Selby Khuzwayo, chief regional officer at Openserve, said the company had received enquiries from homeowners’ associations (HOAs) wanting to get out of contracts with their providers.
“Sometimes, in the rush of finding an ISP, these complexes just go with whoever approaches them. Advertising properties that have Wi-Fi connection is attractive to consumers, but with time they may encounter challenges.”
He said while in the beginning, exclusive deals may have some advantages, including financial benefits, it can be difficult to get out of contracts, which sometimes lock the buyer in for five to seven years.
Khuzwayo said open access infrastructure ensures that every person in the residential building can decide who their service provider should be, allowing for a direct relationship with clients.
“It’s safer not to tie the whole complex to one provider because once the contract is signed, the operator will hold the complex to the full length of the contract.
“It’s important for people to know what they are signing up for and to understand the contract. “We offer an open access network, so when we install our infrastructure, residents may choose whichever service provider they want.”
Openserve fibre now passes more than 1.2-million homes in South Africa. Thousands of kilometres of fibre are being rolled out by different companies around the country who want a share of more than 12-million unconnected or underserved homes. The government, though its SA Connect programme, is also working to connect rural communities to the internet.
Maziv, parent company to Vumatel and Dark Fibre Africa, said it provided connectivity only on the basis of open access, thus allowing any ISP to service customers using its infrastructure.
The company said while such contracts were between residential developments and ISPs, it believed freedom of choice and healthy competition were good for consumers and the industry.
Andre Wills, MD at Africa Analysis, said exclusive service agreements have often been criticised for reducing competition, driving up costs and limiting consumer choice, but this was not just with fibre connectivity. He said such agreements were also common in contracting for services such as security, waste management, landscaping, utilities and property management.
With fibre, Wills said, the issue was not as simple as it sounded, as there was a need to balance the rights of the property owner and the open access principle.
“Private estate owners or HOAs typically have the right to control the infrastructure and service providers within their property, including entering into exclusive contracts. This autonomy is part of the rights that come with owning or managing private property.”
He said “forcing” open access might be perceived as an infringement on the rights of the HOAs, especially if they believed that exclusive agreements offered certain benefits, such as better prices, service guarantees or infrastructure investment from a specific provider.
However, he advised that HOA boards or estate managers needed to consider certain aspects when entering into such agreements to ensure that they were legal and fair to residents. These include:
- understanding the authority the HOA has to enter into the agreement;
- consultations with homeowners to ensure that there is support for the fully exclusive contract; and
- making sure that the agreement complied with the law and other regulations.
“Our view is that entering exclusive contracts within private estates should remain the right of those private estates,” said Wills.
He said the process followed in the inception of the contract determines whether exclusive contracts hinder the open access policy.
According to Wills, if the initial deployment followed a competitive bid process with a time limit on exclusivity, it did not go against open access. In instances where residents were unhappy with the fibre or exclusive agreements, Wills said the dispute would hinge on whether the HOA constitution and complex rules were followed.
“Residents can challenge the validity of the contract if the HOA rules were not followed.”
When the contract was legally binding but most residents were dissatisfied, they would need to follow the processes outlined in their HOA constitution or complex rules. These rules typically provide mechanisms for residents to express grievances or demand amendments to such agreements, said Wills.
He advised that a “light-touch” regulatory approach would help offer solutions to balance property owners’ rights against the open access policy.
“Regulators could mandate that exclusive agreements be subject to a consultation process with residents. This ensures transparency and that homeowners have a say in whether they want exclusive or open-access contracts.”
He said organisations such as the Community Schemes Ombud Services could be empowered to inspect and review exclusive contracts before they were finalised, ensuring they served the community’s best interests.
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