Investment, not competition, key to broadband development
An investment-focused information and communication technology (ICT) industry, as opposed to a competitive and lower-priced environment, was key to driving broadband access growth, MTN South Africa CEO Zunaid Bulbulia said on Wednesday.
“We are at a crossroads,” he said, noting that South Africa needed to examine whether it should continue to produce a competitive sector promoting lower prices, or move to create a more investment-friendly industry?
“An investment-friendly sector is better than excessive competition and lower prices. We need to make the environment conducive to investment and encourage consolidation to develop a sustainable industry encouraging continued investment.”
His comments came as the Independent Communications Authority of South Africa tabled a proposal to cut mobile termination rates and expand asymmetry rates for smaller players, which many hoped would lead to lower prices and greater competition.
However, Bulbulia said that stimulating competition would limit investment, citing Europe’s experience over the past decade.
Regulators and governments had pursued “huge” competition and had issued 19 mobile operator licences in 2002. Eleven years later, a large number of these operators had gone bankrupt and many had returned their licences, he explained.
Many of the seven left standing in a now highly fragmented industry had halted investment, as the return on investment was less than the cost of capital.
This slowed network development and growth, affected quality and resulted in lagging new technology adoption, which was critical to the technological mix required to ensure universal broadband access.
Taking the opposite approach, Bulbulia said, was the US, which had actively encouraged consolidation and the sale of the smaller operators to the larger ones, which culminated in two major operators and led to an unprecedented scale of investment and technological development.
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