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Title:Ownership and competition in South African telecommunications
Authors:Black, P.A.ISNI
Baird, P.O.
Heese, A.
Periodical:South African Journal of Economics
Geographic term:South Africa
External link:https://doi.org/10.1111/j.1813-6982.1997.tb01361.x
Abstract:The telecommunications industry in South Africa has undergone a process of restructuring, with the old Department of Post and Telecommunications recently being broken up into two separate entities, one responsible for postal services and the other for telecommunications proper. The newly established telecommunications company, Telkom, while still wholly owned by the State, has been afforded 'commercialized' status to allow it to compete more freely and seek out a new 'strategic equity partner'. However, this has proved easier said than done. Telkom's service is generally considered to be poor, while a lack of capital has prevented it from introducing value-added services and extending its network to any significant extent. In this article, the authors consider the nature of principal-agent relations under different ownership regimes, discuss the historical development of telecommunications in South Africa, outline the dilemma that Telkom currently faces and describe and evaluate current government policy. They conclude that in sum the problem of Telkom can be viewed as a principal-agent failure in the sense that the agent (or government) is failing to best meet the needs of its principal (the South African public). Universal service is not necessarily the most desirable social objective, but even if it were, it is highly unlikely that Telkom - in its current form - would achieve the proposed rollout most efficiently. Bibliogr., notes.