Telkom will pay a Competition Commission fine of R200-million over the next three years, and will separate its wholesale and retail pricing.
The company and the Commission have concluded a settlement agreement to resolve a series of complaints lodged against Telkom between 26 June 2005 and 19 July 2007 by Internet Solutions (IS), Verizon and the Internet Service Providers Association (ISPA).
The main aspects of the settlement package are:
* An admission by Telkom of a contravention of sections 8(c) and 8(d) (iii) of the Competition Act;
* An administrative penalty of R200-million in cash payable over a 25 month period;
* Undertakings by Telkom regarding the functional separation between Telkom’s retail and wholesale divisions along with a transparent transfer pricing programme and code of conduct to ensure non-discriminatory service provision by Telkom to its retail division and ISPs;
* Pricing commitments in the form of price reductions over the 2014, 2015 and 2016 financial years in respect of certain products, and an undertaking that the price reductions are not reversed in the 2017 and 2018 financial years. The price reductions will have an indicative value of R875-million over the 2014 and 2016 financial years; and
* An undertaking to roll-out points of presence at strategic locations in the public sector during the 2014 financial year.
Dominic Cull, regulatory advisor for the Internet Service Providers’ Association (ISPA), has broadly welcomed news of the settlement.
Of more significance that the actual fine, Cull says the settlement breaks new ground by attempting to deal with the causes of the original transgression.
Telkom will separate its retail and wholesale divisions and put in place a transparent pricing programme to ensure non-discriminatory service provision by Telkom to its retail division and third-party Internet service providers.
“The settlement addresses the reality that Telkom is both an active competitor and the provider of the basic infrastructure and services that the whole industry relies upon,” Cull notes. “This is far more constructive than simply giving Telkom a fine, and consumers are set to benefit, not just the complainants.”
Cull warns, though, that the effectiveness of the settlement will only be able to be judged through its implementation. In particular, he says, ISPA will be watching to ensure that it is enforced adequately and that the monitoring of Telkom’s subsequent conduct is effective.