How Telkom tried to own the Internet in SA

Telkom tried to gain monopolistic control over South Africa’s Internet in the mid-nineties, only to be stopped by a group of Internet service providers (ISPs) under the umbrella of the Internet Service Providers’ Association (ISPA).

In 1997, the South African Telecommunications Regulatory Authority (Satra) was approached to rule on whether Telkom’s monopoly extended to Internet services as well.

This followed a submission by the Internet Service Providers’ Association (ISPA) to the Competition Board, due to Telkom entering the Internet services market with SAIX.

Telkom claimed these rights – to become the sole provider of Internet services in SA – as part of its monopoly on basic telecommunication services, granted to it by the Telecommunications Act (103 of 1996).

At the time, Telkom argued that a monopoly over Internet services would assist the company to bring Internet access to poor and rural areas faster. This, according to an article by Andy Oram, would have served government’s universal service goals at the time.

“Telkom accused the competing Internet providers of playing the opposite game – cherry-picking (aiming at highly-concentrated, high-paying customers),” Oram said.

ISPA, which represented the needs of independent Internet service providers (ISPs), opposed Telkom’s bid to have full control over South Africa’s Internet environment.

ISPA argued that a Telkom monopoly would hinder, rather than promote, universal access, believing that SMMEs were in a better position than Telkom to reach disadvantaged areas – both in terms of speed and efficacy.

ISPA was not the only party which opposed Telkom’s monopoly claim. In fact, everyone who made submissions to Satra opposed Telkom’s bid – except Telkom itself.

Satra appointed an Advisory Committee – which included a variety of representatives (including some from Telkom and ISPA) – to review the issue and submit a report to Satra.

On 14 October 1997, after receiving the report from the Advisory Committee, Satra ruled that no single entity would have control over the country’s Internet Protocol (IP). It basically ruled that Internet services should be supplied as a value added service rather than as part of Telkom’s PSTS license.

Telkom was not happy, and it approached the Pretoria High Court to take Satra’s ruling on review.

In the subsequent legal wrangling between stakeholders, it became clear to everyone that the process Satra had used to make their pronouncement was flawed.

It also became clear that pursuing this case would not really benefit anyone, and all parties lost interest in the legal battle.

As time progressed, Telkom started to rely on ISP resellers to sell its SAIX services, and to argue that ISPs had no right to exist was not a viable commercial strategy any longer. The company subsequently stopped arguing that its monopoly extended to Internet access.

This was not the last battle fought surrounding Internet access in South Africa. ISPA lodged follow-up complaints with the Competition Commission, which eventually resulted in Telkom having large fines imposed on it.

Telkom Internet fight timeline

Remembering the fight

Ant Brooks, who sat on the Satra Advisory Committee which dealt with this matter, remembers this battle well.

Brooks explained that Telkom was facing a Competition Board inquiry into their activities in the Internet space at the time, and using the monopoly argument was mainly a strategy to engage in forum hopping.

“The argument that ‘the Internet’ fell within Telkom’s monopoly domain was a convenient way to at least temporarily remove the matter from the Board’s jurisdiction, and even if unsuccessful (which it eventually, and arguably was) it was still a great delaying tactic for Telkom to use,” Brooks explained.

“Telkom’s basic argument was that services provided using the Internet Protocol could only be provided by a holder of a “PSTS” licence and not a “VANS” licence.”

Telkom did not enjoy much support. Brooks said that just about everyone (except Telkom) fought against the operator’s application to gain a monopoly over Internet services.

“There were 34 public submissions – including one single page fax from a consumer which contained just a single sentence which was rather uncomplimentary towards Telkom. I don’t recall any of them supporting Telkom’s position – except Telkom’s own submission, of course,” said Brooks.

To review the matter, Satra established an advisory committee (“Adcom”) to review the matter and make recommendations.

“Given that the panel included both Telkom and ISP participants, it predictably could not reach consensus, and the committee’s final report was a majority view (everyone except Telkom) plus a dissenting minority opinion (Telkom’s),” Brooks recalled.

Based on this report, Satra issued “Pronouncement – P0001” on 14 October 1997, which clarified that “IP is to be provided under a VANS licence under section 40 of the Act”.

“Bizarrely, Satra included recommendations on setting up a public Internet exchange point as an annexure to this ruling, for no reason that I can fathom,” Brooks added.

Telkom’s reaction to this pronouncement was to immediately head to court to take it on review. “The matter was, however, never heard since both regulatory and market developments made the issue moot. For all I know, that case might still be on the court roll,” said Brooks.

Brooks said that they made certain that Telkom’s monopoly would have never been extended to IP as well.

“ISPs, who had by that stage been providing Internet services for several years, would likely have taken the matter all the way to the Constitutional Court if necessary,” said Brooks.

“I’m not convinced that there was any reasonable legal argument that Internet services fell within Telkom’s monopoly, and I believe that Telkom probably knew that too. I am convinced that Telkom’s actions at the time were largely a delaying tactic to avoid scrutiny of their anti-competition activities.”

Telkom was asked for comment about the issue, but the company did not respond by the time of publication.

Satra Telkom Internet ruling

Satra Telkom Internet ruling

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