South African communications needs at least 25 players, not two

The South African telecoms market is suffering under a “duopoly” – formed of Vodacom and MTN – Holdsworth told delegates at the Broadband Summit, which is resulting in limited service offerings and causing the cost of communications to remain some of the highest on the African continent.

“What do you get from a duopoly?,” asked Holdsworth. “You get expensive, unimaginative services…That is part of the problem.  There is no competition in this country.”

According to Holdsworth, the market needs to be opened up to new entrants. New entrants, he argues, lower prices significantly in efforts to gain market share and provide a high quality of customer service. As such that puts pressure on rivals and drives competition.

“We have to introduce competition.  That is the solution, not price regulation,” Holdsworth said, adding that the country needs at least 25 players in the market in order to achieve active competition.

If competition is implemented in South Africa, he estimates that the price of communications will be reduced by between 50 and 70 per cent.  

The country can not wait for Vodacom and MTN to initiate price cuts, says Holdsworth, as they want to maintain market dominance and provide good returns for shareholders. As such it would be irrational for the operators to suggest cuts or heightened competition.

To initiate such cuts is the job of the Department of Communications, he argues, which must provide a framework for competition and price reductions.

Pro-competitive measures need to be implemented by the authorities, including equivalence of inputs – which Holdsworth says is imperative to enable new market entrants to compete -, cost-based pricing, the reduction of termination and origination rates – with Holdsworth arguing for termination rates for fixed and mobile calls of between 10 and 15 cents – and the regulation of SMS, MMS and data bundle pricing.