This follows an investigation by the Commission into complaints lodged in 2002 against Telkom by the South African Value Added Network Services Association (SAVA), Omnilink and others.
The commission has also asked that Telkom pay an administrative fine of 10 percent of its annual revenue, which was R37.6-billion in the year ending March 2003.
Forfeiting up to R3.7-billion would easily wipe out Telkom's 2003 net profit of R1.6-billion, reports The Business Day.
A VANS is essentially a telecommunication service provided to a customer over a telecommunication facility ? including any wire or cable that may be used for telecommunication ? by a provider who is licensed to do so by Icasa, during which value is added for the benefit of the customer. VANS include email, electronic data interchange and internet service provision.
Telkom is the de facto monopoly provider of telecommunications facilities required by VANS providers to enable them to provide services to their customers, the Competition Commission said in a statement.
Telkom "at a unique advantage"
In addition, Telkom also competes with the VANS providers, who must obtain facilities from Telkom in the market for value added services. This places Telkom at a unique advantage strategically vis-a-vis its competitors, as it is able to leverage its position as the monopoly provider of facilities in the competitive market for value added network services.
Menzi Simelane, Commissioner at the Competition Commission, said: "Our investigation has revealed that Telkom has abused its dominant position by engaging in a pattern of anti-competitive practices. These include Telkom imposing unreasonable conditions for it to provide telecommunication services to the VANS. Telkom refuses to provide these facilities unless the VANS providers conclude contracts which subject them to Telkom's dictates.
"As the VANS cannot operate without these facilities and must obtain them from Telkom, they have no choice but to subject themselves to Telkom's dictates," he added.
The effect of these practices, including legal actions and threats of service termination, has been to chill competition in the VANS market. This anti-competitive conduct is likely to have a serious impact on both the ICT sector and broader economic development, he said.
Telkom entrenched dominant position
The Commission's investigation revealed that as a result of its actions, Telkom has further entrenched its dominant position in the broader telecommunications sector, at the expense of competition for the provision of VANS, and consequently to the detriment of the development and growth of the ICT sector generally.
SAVA's complaints of anti-competitive conduct by Telkom are alleged on the grounds of Telkom's refusal to provide telecommunications facilities to certain VANS providers to construct their networks; its refusal to peer with certain VANS providers, as well as its refusal to provide facilities to certain VANS providers for use in peering (the interconnection of separate networks by internet service providers (ISP) to allow communication by customers of ISP providers for the provision of the internet); its refusal to lease access facilities to VANS providers directly and insisting on VANS providers acting as agents of their customers in leasing access facilities from it; its discriminatory pricing with regard to leased line services; and its provision of bundled competitive services with monopoly services.
Omnilink alleged Telkom provided VANS to Nampak (previously Omnilink's customer), at a price below the price Telkom would have charged Omnilink for the infrastructure and facilities required to offer the service, and which Telkom would also require in order to offer an equivalent service.
Telkom abused its dominance
The Commission found that Telkom has abused its dominance as alleged and has referred the complaint to the Tribunal for determination. In respect of the bundling complaint, the Commission has decided not to refer it to the Tribunal, as the investigation did not reveal sufficient evidence of abuse of dominance by Telkom.
SAVA is a voluntary association established to represent the interests of VANS providers. Omnilink is a subsidiary of Internet Solutions (Pty) Ltd.
Telkom "notes" Commission decision
Telkom said on Tuesday it has "noted" the Competition Commission's decision.
"We will respond to the Competition Tribunal in due course, once we have been served with their notice of motion," said Telkom's Legal Services Group Executive, Mandla Ngcobo.
Ngcobo added that the Commission's further decision not to refer the "bundling complaint" to the Tribunal demonstrated that the company had not unfairly leveraged its position as a provider of facilities in the VANS market.
"Telkom has consistently provided telecommunication facilities to VANS providers within the current legal and regulatory framework and the parameters as set out by the Independent Communications Authority of South Africa (Icasa) in their previous rulings. We are confident that Telkom, as a Public Switched Telecommunications Services (PSTS) provider, has not abused its dominant position.
"These disputes with SAVA relate to long-standing issues which are still pending before Icasa. While certain of these have been dealt with, the rulings were set aside on review and referred back to ICASA for their consideration, and others have yet to be finalised," said Ngcobo.