ICASA report on Telkom dispute settlement

In determining this settlement ICASA’s main objective has been to ensure that any agreement is in the public interest. One of the major motivations for commencing with settlement talks was to try to protect consumers - an end that is not always met by lengthy and costly court battles. We believe that this settlement does achieve this - and therefore meets our mandate of acting in the public interest. It is also in the public interest that this matter is settled for the upcoming IPO of Telkom - to maximize investment in South Africa. That was a further motivating factor behind the settlement.

The actual agreement contains several aspects to it. Firstly, whilst ICASA has agreed that Telkom will not change its rates for this year, Telkom has agreed that its local call charge increases over the next two years (till 2004) will be reduced in order to ensure that the consumers feel the benefits accruing from the reduction that would start from next year. The net effect over three years (2002 - 2004) therefore will be the same as if Telkom had used the new rate regime this year.

Secondly there has been some disagreement between Telkom and ICASA about whether or not their current rates even complied with the previous rate regime. Whilst it is important to note that there has been no determination on whether or not Telkom did or did not comply, the operator has agreed to forfeit a total amount of R320million from its total allowable tariff increase for the period 1 January 2003 to 31 December 2004.

ICASA was initially concerned that the delayed benefit to the consumers would be too late for many customers - who would be cut off from the network due to this year’s high increases. In order to accommodate this concern the two parties have agreed to what we have dubbed a "lifeline service" in order to keep people connected. In terms of this service, residential customers who can’t afford to pay their bills will be offered the option of a minimal service where they will still be able to receive calls but will only be able to make outgoing to emergency services. These calls will be free of charge. Customers will only have to pay a rental charge for this service, which Telkom has assured us will not exceed the current rental costs and will eventually be reduced. This we believe is a landmark settlement as it addresses the concerns which have been expressed about the high percentages of customers who have been cut-off and thus assists all of us in ensuring we meet our country’s universal access targets.

In addition Telkom has agreed to provide a voicemail service to unserviced users so that they can receive messages through a virtual telephony system.

That summarises the benefits for residential customers arising out of the settlement.

In order to promote interconnectivity and to stimulate business in South Africa the agreement also binds Telkom to introduce internet packages during this year. The details of these packages are still to be worked out.

What has ICASA agreed to? The Authority has agreed to start the process of amending the Rate Regime Regulations in order to address Telkom’s concerns about whether or not some of the clauses are vague and therefore difficult to implement. It is important to stress that the amendments are only "editorial" and do not in any way affect the substance of the regulations. Whilst ICASA does not believe that any of the clauses are vague, we have agreed to make these changes in order to reach finality on this and ensure that Telkom does comply with the new rate regime during its next filing. We do not believe that it would be in any one’s best interests to wait till the end of the year for the court to determine whether the Authority or Telkom is right and want rather to fast track this process.

Finally I would like to emphasise that we believe that this settlement - which has arisen out of lengthy and sometimes difficult negotiations - has achieved considerable gains for consumers. The Authority’s aims in going to court was to ensure that consumers benefited from lower local call costs. We believe we have achieved this aim through this settlement. We would like to thank Telkom for its cooperation in achieving these goals.