We Need Regulators With Specialist Skills To Deal With Growing Competition In ICT Sector

By Simon Swanepoel

Covid-19 has accelerated our transition to a digital economy and disrupted growth in bricks-and-mortar industries. The acceleration of adoption of a digital economy across the globe is creating opportunities for new business models and new players because of increased demand. But it’s also increasing dominance amongst bigger players who stifle healthy competition in order to grow their market share.

Since March this year, as the CEO of a rapidly growing and highly-rated internet service provider (ISP), I have noticed many more sharks circling in suddenly crowded waters. South Africa needs to rapidly invest in upskilling regulators that have the specialist technical skills, business acumen and agility to go after opportunistic agreements that lead to concentration and consolidation. While as South Africans we know all too well the burden of over-regulation, once entrenchment occurs it is very difficult to reverse.

The Competition Commission released a document on South Africa’s Digital Economy for public comments last month about the digital economy in South Africa. It’s good to see, from the issues laid out in the document and the intentions stated, that they’re concerned with issues of unfair competition within the digital sector as many of us smaller players are.

But time is of the essence. The rapid evolution of the digital economy in developing countries already threatens a ‘new era of global concentration’ and therefore a greater digital divide between the internet haves and have-nots. And because the digital economy cuts across all markets, it’s imperative that we have a regulatory environment that guards against dominance, monopolisation and consolidation.

“Intentional regulation is required to avoid outcomes that could harm the development of small businesses, consumers and ultimately the economic growth so needed in South Africa’s developing economy. The need for intentional regulation has become all the more urgent with the advent of COVID19 which is set to move more products and services online at a rapid pace.”

In a previous opinion article for Business Day, I wrote about fibre network operators muscling out internet service providers due to acting as both the infrastructure wholesaler and seller, which means these companies hamper healthy competition, which ultimately affects pricing and delivery to the end user.

As an ISP, we continue to experience what I believe is an anti-competitive leveraging of dominance by fibre network operators. We are ranked number #1 in internet service providers by Hello Peter but we are at the mercy of fibre network operators when they prioritise servicing of their own customers.

The Competition Act makes provisions that prohibit a dominant firm to refuse to give a competitor access to an essential facility when it is economically feasible to do so.

The document, which will be reshaped and formed to ultimately become policy, is to guide and inform behaviour in the sector going forward and it’s our hope that FNOs will take note of the following, “Firms in a dominant position and those with market power should avoid refusing competitors access to an essential resource; engaging in an act that prevents impedes another firm from entering or expanding in a market; requiring a supplier not to deal with a competitor; bundling unrelated products or services together for sale; and discriminating on trading conditions between buyers, particularly SME’s.”

The document notes deliberate strategies to retain early leadership and even mentions MFN pricing rules with partners and self-preferencing of data and platform access to leverage dominance and to exclude or limit rivals. “This requires competition law to not only consider new theories of harm but also to act proactively against entrenchment strategies to keep markets competitive and prevent irreversible concentration. It also requires competition policy tools to facilitate access by potential entrants.”

The Data Services Market Inquiry (DSMI) has found that competition issues exist within the infrastructure layer, which is concentrated. The DSMI recognised the need to develop alternative broadband infrastructure, especially fibre-based and public WiFi networks to enhance competition. As the shift occurs to FTTH and 5G mobile infrastructure networks, it is important to ensure that these markets do not consolidate in a manner detrimental to competition.

We need less extractive businesses in South Africa, where profit is the only consideration. As market players in our growing digital economy, we have a responsibility to citizens to structure our sectors and business for future benefit of all. The Competition Commission rightly points out, we need “an enabling regulatory environment – including sound competition policy – along with a vigilant, informed consumer base, innovative business culture, and willing commercial partners can turn the tide in South Africa and ensure that the digital economy delivers on the promise of inclusive economic growth.”