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Outrage at Telkom bid to take over the Internet
The paratstatal faces a Competition Board inquiry after refusing to co-operate, writes GREG GORDON
TELKOM's Internet activities are set to be formally investigated by the Competition Board after the telecoms giant refused to divulge information to the board this week. Telkom is also facing a revolt from its Internet customers, who are considering withholding payment for services until the Competition Board dispute is resolved. The parastatal this week said it would not supply the board with financial information on its Internet arm, SAIX, thereby reneging on an earlier undertaking. Telkom argued that it now falls under the jurisdiction of a new regulatory body - the SA Telecommunications Regulatory Authority (Satra). The Competition Board and Satra are meeting this week to decide whether to proceed with joint or separate action against Telkom. Board chairman Pierre Brooks said this week that he was considering a formal investigation under the Maintenance and Promotion of Competition Act. Telkom has raised the ire of private Internet service providers since its entry into the market last year amid charges that it was cross-subsidising its Internet services unfairly. Adding fuel to the fire is Telkom's call to classify Internet protocols as a basic service, which would give it exclusive rights to run the national grid for six years under its licence condition. On Friday, 11 Internet service providers who buy their Internet connections from SAIX condemned Telkom's action and indicated they were considering transferring payments to a trust fund until the issue was resolved. "We are puzzled by Telkom's actions of actively negotiating and entering into agreements with the Competition Board for the past 12 months and then refusing to honour them. Telkom conveniently withdrew from the agreement at the critical point when its conduct was to come under scrutiny. "We question their motives and conclude that they may have something to hide. Their incoherent and fluctuating policies make it impossible to deal with and rely on them," the statement by the service providers said. By dragging its heels on providing the information to the board, Telkom could, however, win the Internet services war by attrition. The Internet Service Providers' Association (ISPA) - a lobby group made up of private service providers - says if Telkom is competing unfairly, it will eventually kill their business. Joint chairman David Frankel, who is also head of The Internet Solution, comments: "About 50% of an ISP's costs are Telkom-related - we have to buy services from them. SAIX will not prove to us that it's not benefiting from cross-subsidisation, nor that it gets preferential treatment when new lines are installed. By withholding its financials from the Competition Board, we are no closer to a clearer picture into Telkom's Internet activities." Because it is the sole telephone network provider, Telkom has access to all records of what lines service providers are ordering, as well as the services they are offering and to whom. It has yet to prove to the Competition Board that it is not using this information unfairly. ISPA and the board are outraged at Telkom's call to classify Internet protocols as a basic service. "The Internet protocol was developed in the early 70s and is what makes the Internet work - it's a free protocol, no one owns it. Telkom says it falls within their exclusive domain which is outrageous," Frankel says. A Competition Board spokesman agrees: "It's ludicrous - to classify Internet connectivity as a basic service and therefore to claim it as an exclusive Telkom service is sheer arrogance." Private service providers are watching Telkom reap the rewards of the services they pioneered. They grew the local Internet market quickly and contributed to Telkom's coffers in the process. When Telkom finally woke up and entered the market it was assumed it would do so on an equal footing. If the Competition Board launches an inquiry it will also investigate the activities of another Telkom subsidiary, Intekom, which provides Internet access and services. Intekom MD, Paulo Froes, says his company's books are open to scrutiny. "We believe the real issue facing Telkom is one of protection - the Telecommunications Act gives it five years of protection providing it rolls out certain services. Why not give it Internet connection as an exclusive service? Why fight it?" By playing off one regulatory authority against another Telkom has bought itself some time. But it has also strengthened the resolve of the Competition Board, which is smarting from Telkom's slap in the face.
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