Competition, Barriers to Entry and Inclusive Growth: Telecommunications Sector Study

Abstract

Historically South Africa has favoured incumbents/national champions over rivalry (competition) in the telecommunications sector. However, the importance of competition has become more apparent with each new development in the sector. Given the changes in this dynamic sector it is important to evaluate progress on regulating for competition and the obstacles to meaningful participating in the sector by firms. The paper assesses barriers to entry in the market for broadband and voice services in South Africa through focusing on the experiences of Dark Fibre Africa as an entrant in fibre-based broadband, members of WAPA in wireless and Cell C as a challenger in mobile. The paper draws on interviews and publically available documents and data to assess the nature and extent of barriers to entry and expansion in the telecommunications sector. The assessment considers three categories of barriers to entry namely, access to facilities, the slow pace of regulation and strategic responses by incumbent firms. The research finds that though there has been some headway in improving competition, there is still a long way to go. The research finds that entry has a positive impact on competition outcomes and that there are benefits to regulating for competition. Following ICASA’s mobile termination rates decision, competition in prepaid voice services broke out between the mobile operators, however, own-price and cross price elasticities analysis shows that there is considerable scope the incumbent operators’ market power, including through stronger regulation of network open access conditions. The paper concludes by making recommendations on what can be done to facilitate the roll out of broadband to achieve SA Connect targets in terms of access, speed and affordability.