Cover story

The Competition Tribunal acceptance of the settlement between the Competition Commission and Telkom in the case between Telkom, ISPA and several ISPs will have a far-reaching impact on the local sector and telecomms pricing. All things being equal, that is.The settlement reached and presented to the Tribunal contains an admission by Telkom that it priced various of its products to its competitors at a higher rate than it bundled said products and made them available to its own customers during the period the complaints were filed in 2005 to 2007. This margin squeeze made it impossible for ISPs to compete with Telkom. The fact that they were forced to use Telkom’s services to build their own networks exacerbated this situation.The right of ISPs (and/or VANS) to provide their own infrastructure, granted through the Altech court case in August 2008, will have alleviated some of this pricing pressure, but not all of it.In terms of the settlement between Telkom and the Competition Commission, Telkom has, among other things, committed itself to:➤ cease its anti-competitive conduct, where it has not already done so, within six months of the date of the confirmation of the ruling – 18 July 2013;➤ pay an administrative penalty of R200 million to the Competition Commission;➤ R66 666 666 within 30 days of the confirmation date, R66 666 666 exactly a year later and a further R66 666 668 another year later;➤ within six months of the ruling, implement a functional split of its Wholesale and Retail operations. This involves treating competitors and its Retail arm in a nondiscriminatory fashion, and protecting confidential competitor information that its Wholesale division is privy to from its Retail operation; ➤ also within six months, adopt and implement the Transfer Pricing Programme that includes the following commitments:➤ pricing services to its competitors and its Retail arm in a non-discriminatory manner (i.e., charging the same price) for common components (i.e. components that Telkom Retail and competing operators have to both source from Telkom);➤ pricing non-common components to competitors and its Retail arm at cost plus a reasonable return;➤ Telkom Retail will implement a pricing policy that covers its costs, including the cost Telkom Wholesale charges it plus its own costs;➤ regulate transactions between Telkom’s Wholesale and Retail arms;➤ keep separate internal accounts of its IP VPN and internet access products so that the Competition Commission can monitor them;➤ reduce the prices of the Wholesale products implicated in the complaint in 2014, 2015 and 2016 to the value of R875 million➤ implement a competition law compliance programme.

Competition Tribunal chair Norman Manoim congratulated Telkom on the outcome and stated that: “It’s certainly the most impressive consent agreement that I have seen here in my years at the Tribunal and, no doubt, it took a lot of hard work and many hours of negotiation.”