Competition and Regulation in the Telecommunications Industry in ...

Competition and Regulation in TelecommunicationsThere are also a large number of service providers who lease capacity fromthe networks and retail to the public at their own tariffs. There are currentlyover 100 Internet Service Providers (ISPs) in South Africa, of varying size. Atthe end of 2000 there were a few large ISPs - M-web, Worldonline and Xsinetin dialup access, and Internet Solution in leased line access. The difficulty indetermining market structure in this sector is that the market changesdramatically each year. The most recent development has been theintroduction of Absa freemail that is apparently signing users at a rate of 8000per week (Business Report March 2001).Private data servicesThe industry was launched when VANS service provider licences were issuedin 1991. There are currently about 60 license holders with approximately 12000 customers and a total annual revenue of around R180-200 million. Thetop three service providers have a market share of 75% and are Trafix,EDS/Vanco and FirstNet. Other significant networks include GOVNET, InfoVan, and Denel Informatics.4.5.3 ContestabilityThe VANS market has scale economies and sunk costs but not on a scalenear that of a PSTN or mobile network. This makes it a relatively contestablemarket, reflected in the greater number of market players. The key positionthat Telkom holds as the only provider of lines to all these operations, raisesconcerns over whether it is favouring its own companies in these markets.There is also scope for strategic behaviour from other players in the market asthey exploit customer switching costs or market power.4.6 Other Mobile Services4.6.1 Relevant MarketsBefore the arrival of mobile telephony, a range of other mobile servicesexisted. Most important are paging, radio trunking and wireless data services.Unfortunately for the operators of these services, the launch of mobiletelephony has cut deeply into their market. The reason is that mobiletelephony has an expanding range of service products beyond basic voice arevery close substitutes to these other mobile service products. Cellular phonesoffer paging style services (SMS, informational services), radio trunking (longdistance radio communications) and wireless data (email and increasinglyInternet). The result is that these sectors have stagnated.4.6.2 Market StructureThe discussion focuses on the companies specialised in these products.However, competition can be seen to include the mobile networks.Paging SectorThe paging industry was the first to have private operators issued licencesand is well established in South Africa. In 1999 there were 21 pagingcompanies with an estimated market of 110 000 pagers and revenue of R12148