| Wed 28 Oct 2009, 13:00 | | THEE - Competition Commission Refers Abuse Of Dominance Findings Against Telkom |
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JSE
THEE
THEE - Competition Commission Refers Abuse Of Dominance Findings Against Telkom
Press Release
The Competition Commission
28 October 2009
Competition Commission refers abuse of dominance findings against Telkom
The Competition Commission has referred its findings of abuse of dominance
against Telkom to the Tribunal for adjudication and has asked the Tribunal to
levy an administrative penalty of 10% on Telkom`s annual turnover for its
financial year ended 31 March 2009.
The investigation follows five complaints that were lodged by the Internet
Service Providers Association ("ISPA") and other internet service providers or
ISP`s, namely, Verizon South Africa (Pty) Ltd ("Verizon"), Multichoice
Subscriber Management Services (Pty) Ltd ("MWeb") and Internet Solutions ("IS").
These complaints were lodged at different times during the period 2005 and 2007
but for purposes of investigation the Commission combined the complaints, as
they raised overlapping issues.
During the investigation the Commission engaged with and received cooperation
from the Independent Communications Authority of South Africa ("ICASA"), in
accordance with the Memorandum of Understanding between the two regulators. The
cooperation of the two regulators will continue during the prosecution of this
matter, particularly with respect to remedies for the conduct.
In its investigation the Commission found that Telkom abused its near-monopoly
position in the market for the provision of telecommunications network
facilities. It did this by charging excessive prices for the basic
infrastructure needed by its downstream competitors, the ISP`s, to access a
range of telecommunications services, while keeping its own ISP service charges
low. In this way, Telkom also raised its downstream competitors costs, making it
difficult for them to on sell cost effective services to end consumers.
The Commission concluded that Telkom charged excessive prices after comparing
Telkom`s prices to its costs, prices in other countries, prices of other
operators offering similar services and prices to customers of Telkom who posed
a competitive threat to it. These comparisons indicated, amongst other things,
that in 2006 Telkom`s prices were more than double the average of South Africa`s
major trading partners. Furthermore, in 2007, Telkom`s prices were 30% more
expensive than the average of a basket of 14 countries. Significantly, the
Commission also noted that Telkom`s downstream competitors have been
consistently losing market share while Telkom`s share has been increasing over
time, pointing to an inability on their part to compete effectively with Telkom.
The excessive prices charged by Telkom affect the prices which ISPs charge their
customers. Given the widespread use of the internet and the extensive use made
of virtual private networks or VPN`s by medium to large businesses to link
various locations of a single enterprise, there is no doubt that these high
prices detrimentally affect consumers and hinder economic development in South
Africa.
ENDS
Further info:
Keitumetse Letebele, HOD Communications
012 394 3183 / 082 783 3397 / keitumetsel@compcom.co.za
Date: 28/10/2009 13:00:01 Produced by the JSE SENS Department.
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