Local big-business association, the South Africa Foundation, yesterday published a report which puts forward 12 proposals for reform in the telecommunications sector, which, it believes, if implemented, would best resolve the current high costs of telecommunication in South Africa and increase access to the services and technologies.

Previous studies and international comparisons show that the cost of telecoms in the country is exceptionally high, and policies aimed at broadening access and lowering barriers to entry, such as the recent universal services policy, are seen to have failed, the report's author, James Hodge, of Genesis Analytics, said.

In fact, the report, titled 'Reforming Telecommunications in South Africa: Twelve Proposals that will lower costs and increase access', argues that the universal services policy, which saw Telkom pouring an estimated R17-billion into infrastructure and connections, served to push prices up, making the services even more inaccessible for large parts of the population.

The foundation's executive director, Michael Spicer, said that the industry is experiencing something of a watershed period, as the second network operator prepares to enter the market, and a number of discussions are being held regarding pricing and the drafting of legislation such as the Convergence Bill and the Icasa Amendment Act.

“We are not facing new problems, but what has changed is that there is a growing political will to address them,” he added.

President Thabo Mbeki last month called for the SNO's market entry to be fast-tracked, to address the high cost of telecommunications in the country.

The South Africa Foundation report, which follows a study released in April on the cost of telecoms in South Africa, focuses specifically on short- and medium-term reforms, which would have the biggest influence on costs and competition in the sector, while ensuring the telecoms companies can remain profitable, Hodge said.

While there is less concern over competition issues in the mobile sector, Telkom continues to maintain high prices for its services due to a lack of competition and adequate regulatory oversight.

The introduction of the SNO is expected have some effect, but policy, regulatory and legislative reforms are necessary to ensure the industry is opened up and brought in line with international practices, Spicer said.

The report calls for an unbundling of Telkom's fixed-line loop, at cost-based prices, to lower barriers to entry and increase competitiveness of the SNO and value-added networks (Vans) operators.

Further, it motivates that Vans operators be permitted to provide their own backbone infrastructure, which is not currently the case.

With regard to industry regulation, the report calls for the Independent Communications Authority of South Africa (Icasa) to assume a heightened regulatory role, and for increased independence and accountability from the regulatory body.

Tariff structures should be simplified, with no minimum charges or per-minute billing and mandatory price comparison tools should be regulated to enable consumers to make informed comparisons, which will lead to an improved competition environment, it says.

Other factors involved in consumer 'switching behaviour' between operators should also be tackled, such as number portability and shorter contract durations.

In direct relation to cost cutting, the report recommends that interconnection, between fixed and mobile services as well between mobile networks, be lowered to cost-based prices.

Hodge said, in a presentation to the media, that some 40% of Telkom call revenue is from fixed-to-mobile calls, and 75% of the cost of these calls comprises interconnection fees to mobile operators.

As a result, the report estimates that a cost-based interconnection regime would reduce Telkom bills by 10%-15%, without hurting the company's profits.

Telkom should be required to offer a residential tariff plan, comprising a flat monthly fee and free local calls, in line with international practice, Hodge said.

The report calls for stronger action on anticompetitive behaviour and recommends that the competition tribunal be given jurisdiction over the sector.

Further, while proposing that Icasa receive increased government funding, the report calls for a review of licence and spectrum fees payable by telecoms firms to the regulator.

The licence fees are intended to cover the costs of regulation, but Hodge pointed out that MTN and Vodacom alone pay some R600-million a year in licence fees in South Africa, more than covering Icasa's annual operating budget of some R130-million.

Finally, the report calls for a complete review and overhaul of the universal services policy.

“Nobody disputes that universal access is a legitimate and necessary goal, but the rollout needs to be efficient and effective,” Spicer argued.

He said that the system should be refined to become more targeted, to make use of more flexible instruments and be better monitored.

For example, there is a need to ensure that community phones are placed in areas where they are really needed and that the best instruments, especially with a view to cost, are used.

The South Africa Foundation intends to use the report to lobby government and officials and in ongoing dialogue with the deputy Presidency on how best to achieve the government's 6% growth target, Spicer said.

Further developments are also expected to emerge next week from a scheduled colloquium on local telecoms pricing, which is expected to outline an official plan of action.