| Telkom’s
proposed average tariff increase of 2.7% for 2004 may initially
look reasonable – but puzzling claims and possible omissions
from the monopoly’s proposed tariff adjustment could
cost business and consumers millions next year, according
to the Communications Users Association of South Africa (CUASA).
“Although
CUASA has not received confirmation from Telkom on their proposed
tariff increases, we assume that a statement released to SENS
is official enough to serve as the basis for informed comment.
We are seeking clarity on various discrepancies associated
with the proposed tariffs – as it appears that Telkom’s
increases could be around 1.8% higher than they should be,”
says CUASA’s Ray Webber.
According
to the SENS release, Telkom has filed its 2004 tariff adjustments
with ICASA in accordance with the Telecommunications Act.
Current regulations impose a price cap on a basket of services
of 1.5% below inflation – based on the year’s
movement in the Consumer Price Index measured at 30 September
in the year preceding the increase.
In
the SENS statement, Telkom claims that it is allowable for
the monopoly to carry rate benefits that were not used in
the previous year forward. The statement reads: “In
the 2003 annual tariff increases, Telkom did not utilise the
full allowable rate benefits. The amount carried over to the
2004 tariff increases will have a 0.5% impact on the allowable
increase in tariffs.”
“This
claim made in the SENS statement appears to deviate significantly
from our recollection of events surrounding the monopoly’s
previous bout of rate hikes,” says Webber. “Telkom’s
increases for 2003 were surely made at the maximum to which
they were allowed in terms of the Act. Where they find an
extra half percent based on a previous period is a mystery
to us.
“Yes,
we accept that based on an incorrect CPI figure of 12.5% in
September, 2002, Telkom could, in theory, claim an increase
of 11% in their tariffs for 2003. However, CUASA, other organisations
and individuals were instrumental in bringing irregularities
in the 2002 rates hike to the attention of ICASA. At the time,
we conducted our own investigation into actual rate increases
based on a large services company. We found that that actual
cost increases deviated substantially from what Telkom claimed
they would be,” says Webber.
“ICASA
provisionally approved Telkom’s 2002 rates hike at the
time, pending their own investigation into the matter. ICASA
later decided that the monopoly should forfeit R320-million
in terms of these discrepancies. According to media reports
at the time, Telkom stated that the R320-million equated to
1.5%, which they decided to forfeit in one financial year
(2003). Therefore, Telkom did not increase their rates by
11% in 2003, but rather by 9.5%. We feel that this did not
leave a surplus of 0.5% to further add to their already high
fees,” he says.
By
our calculations, with a September 2003 CPI figure of 3.7%,
Telkom’s increases should not be greater than 2.2%,”
says Webber.
“Furthermore,
Telkom’s rate increases in 2003 were based on CPI figures
which were later corrected by Statistics South Africa. At
the time, it was reported in various media that Telkom’s
increases were based on a CPI index of 12.5%. It would appear
that the official CPI index for the same period at Statistics
South Africa has now been adjusted to 11.2%.”
"We
do not know if Telkom is required by the Act or Regulations
to adjust their figures in accordance with CPI corrections,
but they surely have an obligation to their clients to ensure
a fair rate for their services,” says Webber. “We
have no doubt that Telkom would have incorporated corrections,
had Stats SA made any mistakes which resulted in CPI last
year having been calculated to be lower than is should have
been. By this argument, Telkom’s proposed rate increases
for 2004 are a further 1.3% off the mark,” he says.
“Taking
all these factors into consideration, it would appear that
Telkom’s rate increases for 2004 are significantly higher
than we believe they should be. In the first instance, the
increase should not exceed 2.2% based on the Act. Then secondly,
if we take away the CPI mistake percentage of 1.3, this should
bring Telkom's maximum allowable percentage increase to 0.9%,
as it appears to us that Telkom has been reaping the benefits
of a statistical error for almost a year,” says Webber.
“Much
more investigation and clarity is needed to find out exactly
how Telkom arrives at their proposed 2.7% increase. However,
based on past experience, we suspect that Telkom may, yet
again, be pushing up their prices at the expense of consumers,
business and South Africa as a whole,” he says.
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