The illogic of the CCCP

I speak, of course, of the Communal Cable Company Plot. If I say so myself, this is a far more catchy and descriptive name than “InfraCo” for Alec Erwin’s latest state-owned folly. Erwin is South Africa’s minister of Public Enterprises, which is one of those truly beautiful contradictions in terms.

In short, InfraCo was set up using transmission infrastructure that was supposed to become part of Neotel, which was supposed to be the sole competitor to telecoms incumbent Telkom. Paul Vecchiatto, writing on ITWeb, quotes a fellow named James Theledi, who heads up the Universal Access Ag… Wait. USASAA. No. USAASA. Universal Service and Access Agency of South Africa. Theledi explains why the CCCP was established:

He says the thinking was that Neotel would not be able to leverage the infrastructure, which it should have received as part of the deal to create the second national operator, to lower costs as it would compete with Telkom to attract customers.

“There was a genuine worry that Neotel would not be able to pass on the lower prices,” he says.

Now someone is going to have to explain to me why Neotel’s prices are dependent on whether it buys access to infrastructure from a CCCP that prices access at cost, or owns the very same infrastructure itself. The latter cost cannot possibly be more than the former cost. And either way, cost does not determine Neotel’s own prices. Being a private company, it will aim for the maximum price the market will bear, in an effort to recoup its investment.

There’s a serious logic disconnect here. There may be other reasons for establishing the CCCP, such as hobbling the private sector by undercutting it using tax-funded assets, but aiding Neotel or its customers can’t possibly be among them.