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How SBC (AT&T) Pillaged South Africa's Economy
Posted by
kdawson
on Sun Aug 26, 2007 02:18 PM
from the privatization-trumping-liberalization dept.
from the privatization-trumping-liberalization dept.
Kifoth writes "For 8 years, SBC and Telekom Malaysia controlled South Africa's only telecommunications company, Telkom. Telkom had a government granted monopoly in order for it to connect the large parts of South Africa that had been neglected under apartheid. Instead of helping, SBC abused their position and raised Telkom's prices to be among the highest in the world. The billions they made here ultimately went to fund their AT&T merger. From the article: 'SBC, described as "congenitally litigious", is said to have played a major role in the failure of South Africa's telecoms policy to develop a competitive telephone service. Under SBC's control Telkom not only failed to meet its roll-out obligations but behaved "as a tax on industry and a drag on economic growth."'"
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Hmm... (Score:5, Funny)
Seriously, I didn't see this one coming.
Re:Hmm... (Score:5, Insightful)
When are governments going to learn? If you are going to privatize, you have to OPEN up the market rather than create a quasi-governmental monopoly. This reeks of mercantilism, which is a pre-capitalistic notion that it is better for a government to protect its industries than open the market to trade and/or competition.
Mercantilism always has bizarre and harmful unintended consequences.
Parent
Re:Hmm... (Score:4, Insightful)
The problem here is that an inexperienced government got taken advantage of by SBC. SBC has a history of buying their way into a monopoly then abusing that position to no end. In several cases they have even gotten the local governments to ban VOIP and then blocking those ports at the isp leave.
Parent
Re: (Score:3, Insightful)
No it isnt. It's no different than roads, sewage or other pieces of infrastructure.
You simply have the state own them, let contractors bid for the construction, then make the infrastructure available (for a fee, a tax, or neither) to those who need the infrastructure. In the case of phones you simply let various phone companies sell their services over the infrastructure (and you can charge them over time for the expense of building it.
Re:Hmm... (Score:4, Interesting)
What you described in not a truly Free Market, as in Pure Competition. You are showing that a regionally sanctioned Monopoly is still a Monopoly just not over the entire country.
It's analogous to each US State having their own single controller over basic services. You will find people proclaiming that there is no Monopoly. They list 50 different companies, yet will quickly change subject when they are challenged on the fact that a real Capitalist system would demand/require that all 50 competitors have equal access to all 50 states.
When that happens, and fails then I'll be willing to work on a more advanced open system that has safeguards from a government point-of-view.
Since we don't have any sort of real Capitalist system in the world we should stop the age old war of Capitalism vs. Socialism.
I'm personally sick of the fact that I've got only 1 cable company to choose from [Comcast] and only 2 major Satellite companies [DirecTV and DISH] to choose from where I get my digital media.
I'll not be impressed until there are at least 10 competitors in the region to fight for my money.
This goes for the auto industry, telecom industry, and any other industry that isn't the regulated like one's local PUD.
I've got one major telco to work with that isn't a cable provider: QWEST.
Ma Bell was broken up into 12 Regional Monopolies.
Reagan blew it and that's no surprise.
Ma Bell should have been broken up into 12 companies independently competing with each other and other new vendors across the U.S. Unfortunately, they decided to subdivide the backbone of the existing hard trunk by region and didn't invest into making a generic backbone with vendors running their own services to the trunk to then work across the entire backbone.
Services should separate the vendor, not the total fiber layed.
People would rather talk about being a Capitalist Republic instead of demanding one.
Parent
Re:Hmm... (Score:4, Interesting)
Let me explain this to you...the poor don't bankroll politicians campaigns, the rich do.
Golden Rule
Most politicians in most countries are quite corrupt.
I am sure south africa is no exception to this.
The world needs a way to monitor the affairs of their politicians,
because for example here in the states, they often spend more to
get into office than they will receive as a paycheck the entire
time they are in office.
The math doesn't add up.....until....you account for under the table
gifts to them, their children, thei offshore accounts, numbered accounts
in switzerland, etc etc.
As Open Source is good for code, the world needs Open Government,
where those who serve are well paid and jack assery like this
I am about to mention is considered a crime, and sent to court accordingly:
http://www.tispa.org/node/14 [tispa.org]
$200 billion rip off right here in the USA.
The telecoms have a history of total theft, and nothing short
of destroying them totally and putting Co-ops in their place
has any chance of succeeding against this carpet baggers
of the new generation.
The WorldCom's , the global crossings, the Bells, Adelphia,
it just goes on and on.
It needs to be a regulated utility, and when it is foudn they
ripped us off "intentionally" they need their asses fined into oblivion.
Parent
Re:Hmm... (Score:4, Informative)
Man, how do you screw up the golden rule? "He who has the gold, makes the rules."
Parent
Backlash against domestic suppliers (Score:3, Insightful)
However, most of these companies were also involved in making military stuff that propped up the apartheid regime. Likely they were "punished", to the detrament of all.
Re: (Score:3, Insightful)
-jcr
Who said anything about communism? (Score:2)
Government enacted monopolies are anathema to free markets.
Uhhh.. yes. And what does that have to do with a critique of capitalism gone awry? You are aware that there are positions between libertarian free markets and completely state-controlled economies, right?
Re:Who said anything about communism? (Score:5, Insightful)
Parent
Re:Who said anything about communism? (Score:5, Insightful)
One defining characteristic of capitalism is accumulation of capital/maximizing the profit. A monopoly is a very good way to do so. (Does Microsoft ring a bell?)
This particular monopoly was a government-granted monopoly but monopolies also develop under free-market conditions. Did you never wonder why capitalism needs all this laws and regulation to protect the *free* market? I guess it's not because companies like competitors and want them to stay.
Finally, this monopoly was granted to ensure Telkom a profit for building infrastructure in remote areas. Public services are a typical problem of capitalistic economies since they tend to be unattractive for companies.
And with the monopoly granted Telkom did what a capitalistic company has to do, it maximized its profit by raising the prices.
All I can see is capitalism at its very best. Not very pretty but nothing surprising.
Parent
Re:Who said anything about communism? (Score:5, Informative)
thinking like that is one of the big problem I see that allows shit like this to happen. This thing called "company" you speak of does not "do" anything. it is something virtual, the point of which is to maximize profit, but no, not by raising prices. it is to charge the maximum it can for the demand. for services such as in this case, demand is close to inelastic, and competition, in an "actual" capitalistic market, would prevent this service from being actualized till supply is much cheaper. Once the government steps in and takes the competition away, hence creating an artificial supply curve, it is the government's job to dictate the prices, as we are no longer talking about capitalism. The government needs to set the supply curve if they chose to take away what brings supply lower - hence taking away the capitalism.
This is not at all capitalism. it is a capitalistic company allowed to roam free in a non-capitalist scenario. The people working for this company allowed to roam free are under contract to not steal from it's customers. It is the government's job to monitor this, if they take away competition, a vital part of capitalism. Those people broke the contract in an enron kind of way. It is the job of the government to take these people, who committed a criminal breach of contract. Forcibly the money back from from the "company" that stole it, refunding the people who were victims of criminal theft. Then prosecute the actual people that made the breach of contract decisions, and prosecute them for theft of billions of dollars. Prosecute them the same way as if they were to go into a bank and steal that amount. And revoke the company's license to exist as a company (within that country's jurisdiction).
Parent
Actually, since you mention Adam Smith (Score:5, Insightful)
The funny thing about Adam Smith is that he may well be the most mis-understood and mis-quoted author. People seem to assume him to be the shining beacon of laissez-faire market-solves-all-by-itself proponent, especially when they themselves subscribe to that kind of a view.
He actually proposed a _lot_ of government involvement in infrastructure. Ok, so what he said is public works and institutions (remember the institutions part too), with emphasis on public works that would facilitate commerce in general. He sees it as the government's duty to provide and maintain good road, bridges, navigable canals, harbours, etc, in other words: infrastructure.
That's actually a lot of taxation and public spending to maintain that, with Britain's economy at the time when Adam Smith wrote that.
(It's funny how so many of those discussing why the industrial revolution in Britain miss the factor that their canal network was a precursor to railroads that served the same purpose: getting raw materials from here to there in large quantities and cheaply.)
At any rate, blimey, telephone is infrastructure.
If I'm allowed to go into an OT detour into his public institutions views too, he also was for public schooling (above and beyond what any country does nowadays, as it would involve a school in every parish), public health (to "prevent leprosy or any other loathsome and offensive disease"), and generally wasn't too much for a lean and cheap government the way I see it, since he has nothing against expense for "supporting the Dignity of the Sovereign". He also didn't seem too bothered by government co-ownership in some (heavily-regulated) corporations, either.
So basically, it's funny to see him quoted as some beacon of ol' school conservative laissez-faire, either by the proponents or detractors of it, when really that's not what he proposed at all.
To get back to his invisible hand, basically all he says there is what we nowadays call supply and demand. If there's a demand for product X and a profit to be made in fulfilling that demand, someone will start making more of it. You don't need the crown to tell someone to start producing X, someone will start it anyway, "led by an invisible hand." He's not horribly wrong, either: as long as the market has a certain structure, we already know that it works.
The only problem is that the ideal(istic) capitalist free market is not the perversion it tends to become when left unregulated. The assumption that the free market solves everything is based on a structure where there are many producers for each good, the different brands of goods are perfectly interchangeable (e.g., you could drop an AMD CPU into your Intel mobo if you don't like Intel any more, or could switch between Windows and BSD or Solaris without noticing any difference in what you can do with that computer), the buyers are perfectly informed, etc.
That was the only kind of market you could possibly get in the 18'th century, but nowadays it's possible to subvert it massively. And the incentive is there too. That ideal market is a commodity market, and there's not much money to be gained in it. As they say, the only way to make a small fortune in the commodity market is to start with a big fortune. The big money is in making your product non-interchangeable (e.g., by making other stuff work with only your brand of it, see: Microsoft), keeping the number of competitors low (e.g., by raising artificial trade barriers), and keeping the public as uninformed or even mis-informed as possible (e.g., marketing, PR and FUD.) So that's what the perverted direction the market tends to take by itself: if it's more profitable to do that, the succ
Parent
Re: (Score:3, Interesting)
Wow, very informative!
You're right; with my education (Environmental Engineering), I didn't know much about Adam Smith bwyond the "invisible hand" reference. It looks like he would have gotten along much better in modern-day Canada than the USA.
Since the discussion is a day old, let's go off topic a bit.
Since you mention infrastructure, there is a school of thought proposed by Paul Hawken, Amory Lovins, and others, that roads and other automotive-related infrastructure should not be funded through in
Re: (Score:3, Interesting)
While the more frugal of citizens might see a reduced impact on their wallet, more than likely any savings would be quickly eaten up by increased costs on t
Re: (Score:3, Interesting)
That's why I went into what Adam Smith says, rather than whether he's ri
Re: (Score:3, Informative)
Indeed, I would dare say that for most states it tends to be an income generation tool where fuel taxes are spent on many things well beyond just highways and rest stops. And there is more food for thought he
Headline should read: (Score:3, Insightful)
Re:Headline should read: (Score:5, Informative)
A public process in this arrangement, as the article points out, would have caught this and corrected it. Public governments are thus not indictable. Yes, you can indict the government for letting it happen, but the ultimate source of the problem was corporate greed that lead to the collusion of government and a corporation, where if done systematically it would be called fascism.
Ultimately, it's still SBC's fault, despite whatever proximate causes/contributors enabled it.
Parent
Re:Headline should read: (Score:4, Informative)
Parent
government monopolies != market libertarianism (Score:3, Insightful)
What do you expect would happen when the government jails anyone who tries to compete? Yes, it is the government's fault.
Re: (Score:3, Interesting)
The headline seems quite valid unless you're a fundamentalist market libertarian that can never find fault with a corporation since it's always the government's fault.
Government granted and enforced monopolies are the opposite of free market libertarianism.
What do you expect would happen when the government jails anyone who tries to compete? Yes, it is the government's fault.
That's an interesting point, but it doesn't really change the sentence that you're quoting, and I would take it a step further and make the point that Russ Beaton (econ professor at Willamette University) once made: "The best economies have no monopolies but the goal of every good enterprise is monopoly; therein lies the contradiction of unlimited capitalism.". The free-market libertarians in this thread are telling me that it's not SBC's fault that it bribed government officials and/or made back-room mon
so basically (Score:4, Funny)
Re: (Score:2)
Monopolies are bad (Score:2, Informative)
Re:Monopolies are bad (Score:4, Insightful)
Liberal economic policies help in a lot of things, but utilities are one of the cases where it's an infrastructure investment that still is most efficiently done cooperatively, particularly since you have to deal with public rights-of-way and all that. Services on top of the infrastructure should be liberalized, of course.
We really do need to get people to think beyond left and right more these days and more on what works best for the particular situation.
Parent
Re: (Score:3, Funny)
No phones without monopolies (Score:3, Insightful)
All Monopoly = Bad (Score:3, Interesting)
Re: (Score:2, Interesting)
Re: (Score:2)
or indeed if it is a monopoly (or near monopoly) that appears naturally through market forces.
given that a monopoly is the likely outcome for last mile communication service (yes some areas have duopolies but that is due to the fact that pre-digitisation phone and TV had very different need
Reminds of "Econmic hitman." (Score:2)
Mediocre writing, interesting story though.
Don't blame SBC (Score:3, Insightful)
Gov granted monopoly, gov set prices (Score:3, Insightful)
A Monopoly (Score:5, Informative)
A company with a "government granted" monopoly abused it. Shocking!
Incidentally, any true monopoly must be government granted. Without the government's force to keep competition away, it's merely a really effective competitor in an open market, like Wal-Mart.
A monopoly, whether government owned (e.g. the US Post Office) or government granted (e.g. AT&T and the Baby Bells in the US, before cellphones, cable company phone service, etc.), is not required to innovate and improve to retain customers, like a free-market business is. Because of this they will tend to deliver a lower quality product at a higher price.
Then Blame the SA Government (Score:2)
To the SA people, you got the government you elected, so blame yourselves, then fix the problem at the ballot box!
Re: (Score:2, Insightful)
Re:Then Blame the SA Government (Score:5, Funny)
Please do not insult rattlesnakes by comparing them to telco execs. There is no comparison.
Parent
Re:Then Blame the SA Government (Score:5, Insightful)
They're doing exactly what's expected of them, and you're a fool if you think they are supposed to care more about you than their shareholders, and maybe employees.
You're a fool if you think unethical behaviour is somehow okay simply because they make money from it. I and many others expect them to act ethically.
They are "supposed" to do (whatever that means) whatever is in my and everybody else's best interests. Personally I want to live in a ethical society and will do everything in my power to penalize and control unethical companies. Most people think likewise.
---
Monopolies = Industrial feudalism
Parent
Re: (Score:2)
Re: (Score:3, Interesting)
Pillaged is Such a Harsh Word (Score:4, Funny)
As a South African ... (Score:5, Informative)
... I have to say that Telkom is absolutely terrible. Have a look here [hellkom.co.za] for more info.
Telkom have consistently been a stumbling block to technological progress in the country, especially with regards to internet access. Telkom owns all the international links to the rest of the world from SA, and most of the bandwidth and international calls have to be routed through them. In fact, the price of ADSL has been so prohibitive that many individuals have pursued cellular alternatives, paying per MB, for light browsing instead.
While it's easy to criticise the private companies who have been managing it, Telkom is a parastatal, and not wholly private; roughly 39% is still owned by the South African government, so I'm fairly certain they weren't too unhappy about the affair. There has been evidence of cronyism at the company, too, most likely as a direct result of this: in 2004 a government pension fund [bbc.co.uk] was used "to buy telecoms shares for a group of former government officials". This was part of the government's Black Economic Empowerment (BEE) requirements that firms need to be 1/4 black owned before 2010, and falls within a pattern shown [csmonitor.com], by 2004 government surveys, that "68 percent of BEE deals went to just 6 black-owned businesses, all of which were owned by top members of the ANC party."
The whole thing stinks, and Saffas get screwed, as usual.
Re:As a South African ... (Score:4, Interesting)
Parent
So which is it -- are monopolies good or bad? (Score:3, Insightful)
The other side of the coin is also prevalent in telecom and other industries -- companies with a psycho executive board that has no concept of the time beyond next quarter. Too often, we hear stories of executives laying off a percentage of the workforce just to make the numbers that year. Or outsourcing things like IT or customer service because some MBA told them that these aren't "core competencies.' Try getting broadband service out of the telecom companies if you live out in the middle of nowhere, for example...it's not easy. No profit-oriented company wants to support it. This was part of the reason the phone monopoly existed, and why you still pay universal service fees on common-carrier service.
So, monopoly = bad. Unchecked competition = bad. Now what?? I would argue that #2 is better in a perfect world as long as we can reduce the focus on short-term gains. However, now that absolutely everyone is counting on the stock market/casino for their retirement, I can't see that happening. Because of that, #1 is still sometimes the best choice in our imperfect, corrupt world.
Terrible but Irrelevant? (Score:3, Informative)
The only serious downside to having no landlines was a lack of internet connectivity -- nothing fills the early internet dialup niche: there's no flat-fee land line plans, and cell phone internet access is fairly expensive (though cheaper than in the US, I believe). So very few people are connected to the internet if they're lucky enough to have a computer. That is unfortunate. But in the end the people I met are not seriously hampered by the situation. They're amazingly adaptable, cheerful, and texting like crazy
Anyways; good luck to SA. I hope to go again some day.
Re: (Score:3, Insightful)
They couldn't have committed the malfeasance they're accused of with out the ANC letting them. A few bribes would have done the trick. Problem is not muli-nationals; it's corrupt goverment officials who sign "exclusive" contracts. It's easy to tax foreign companies and allow multi-comptetitor access to markets. Problem is 3rd world kleptocracy.
Yeah, totally.
You're right, of course.
CLEARLY, those who actually executed the bribes are not at fault in this case, even if it was illegal.
Re: (Score:2)
What's stopping them? Nothing at all. Better to pay a single USD for 10 pounds of food, and give it to 30 workers, than each worker ten cents.
Re: (Score:3)
Monopoly:
"exclusive control of a commodity or service in a particular market, or a control that makes possible the manipulation of prices."
Government