Telkom faces R3bn in penalties if guilty of abuse of dominance
October 29, 2009
By Florence de Vries
Fixed-line operator Telkom could be hit with penalties of more than R3 billion if the Competition Tribunal finds it guilty of abuse of dominance as an internet service provider (ISP).
The Competition Commission yesterday referred its findings of abuse of dominance against Telkom to the tribunal for adjudication and has asked to levy an administrative penalty of 10 percent of Telkom's annual turnover for its financial year to March. If guilty, Telkom may join the ranks of SAA and Sasol, which have paid fines of R100 million and R188m, respectively.
The commission's probe follows five complaints lodged by the Internet Service Providers' Association and other ISPs Verizon South Africa, MultiChoice Subscriber Management Services and Internet Solutions.
The complaints were lodged at different times between 2005 and 2007 but the commission combined the complaints as they raised overlapping issues.
In its probe, the commission, with the help of the Independent Communications Authority of SA, found that Telkom abused its near-monopoly position in the market by charging excessive prices for the basic infrastructure needed by its downstream competitors to access a range of telecoms services, while keeping its own ISP charges low. In this way, Telkom also raised its competitors' costs, making it hard for them to sell cost-effective services to end consumers.
The commission's Nandi Mokoena said it was hoped that Telkom would lower its pricing since the high rates had a devastating effect on what the consumer and local businesses paid for services.
Telkom had engaged with the commission over an extended period and would prepare a response to the referral in accordance with the relevant procedure.
Analyst Mark Ansley said it was clear that the government, through this probe via the commission and its probe into lowering interconnect rates, was determined to reduce telecoms costs in South Africa.
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