Economic regulation

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Economic regulation

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Abstract

A regulation is the “employment of legal instruments for the implementation of social-economic policy objectives” (Govender 2008: 10). In this way, according to OECD (2001), regulation “refers to the various instruments (both formal legal and such informal tools as “guidance”) used by government to control some aspects of the behavior of private economic actor. Regulation can also include rules issued by non-governmental bodies to which governments may have delegated regulatory powers. All regulations are supported by explicit threat and punishment for non-compliance”. In this respect, it is interesting to study the nature and extent of economic regulation with reference to the fixed-line telecommunications sector in South Africa and more especially Telkom.

Firstly we need to understand what regulation means, what monopoly is and who implement regulations. Regulation – is a control which is imposed to a company which dominates the market with the intention of promoting competition not monopoly and promoting healthy business as defined by Selznick.

Introduction
The warranty of regulation of the fixed-line telecommunications sector in South Africa
The extent to which regulation of the sector has been successful and yielded the intended consequences
1. Sector regulation
2. Aim and objectives of the creating a fixed-line telecommunication in the country
Pitfalls of the current regulation regime
Conclusion
References

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[...] On the basis of the points indicated above we can now answer the question whether regulation is necessary or not and why. Our point of departure is that the company should qualify whether to be regulated or not. Let's look at things which warrant regulation. The business can only be regulated when: - It is a single seller occupying the entire market - The product sold is unique in the sense that there is no substitute sufficiently close to the consumers to turn to. [...]

[...] Secondly regulation will send a wakeup call at Telkom to deliver quality services within a competitive environment. Secondly consumers will be saved from abnormal prices without a contest. In business sense, if the Independent Communication Authority of South Africa can step in and impose regulation on Telkom the following important facets of a healthy business will be promoted: - It will stop Telkom from making a windfall profits without the benefit of consumers - Without regulation Telkom may deprive the public of the adequate information of the truth about the business as there will be no other business offering the same service. [...]

[...] Regulation in the telecommunication arena is done by the Independent Communications Authority of SA (ICASA) and competitions authorities. With two role players in the regulation of Telkom, viewing each case out of a different angle, it is very difficult for the two authorities to find common ground for their judgments and anti-competitive lawsuits may be the result (Theron et al. 2006: 577). Regulatory authorities control tariffs which limit the flexibility in pricing and thereby reducing revenue and net-profits. If this was not the case, faster expansion would have been possible and every household in the country could have a fixed phone or internet line, BUT, the other side of the story is also true who wants a fixed line if it cost him a fortune when the unregulated market makes itself guilty on predatory pricing. [...]

[...] Pitfalls of the current regulation regime According to Theron (2006), fixed telephone services cannot be described in terms of the same relevant market than mobile phones from a demand side of view because of pricing and mobility. Although fixed lines were in the South African market for a very long time, it was only in 2006 that a new Second Network Operator (SNO) was introduced (Theron et al. 2006: 575). This step on its own would have increased competition and might have made regulation unnecessary if other factors such as horizontal integration were put out of the equation. [...]

[...] Many aspects of the Telecommunications Act provided only limited guidance and regulatory principles and so much of the initial work of ICASA was to put some concrete guidelines together for the purpose of regulation. The regulatory aspects left to the discretion of the regulator included interconnection, facilities leasing, GPMCS (global personal mobile communications services) and license conditions. Despite this show of independence, the Act permits the Minister of Communications to amend, withdraw or substitute any decision by the regulator. The autonomy of decision making is compromised by the provision that all regulations must be approved by the Minster of Communications and the overlapping Ministerial. [...]

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