Communications and media

Genesis Analytics is recognised as the leading provider of competition and regulatory economic advice in the communications and broadcasting sector in South Africa and across Africa. The telecommunications sector is an evolving market that has experienced significant regulatory reform in recent years as well as extensive technological change. Genesis has in-depth sector understanding of the telecommunications industry, with a long history of involvement in policy and regulatory developments in the sector.

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Expertise Areas

Regulatory economics

Genesis is also a leading provider of regulatory economics advice, offering the full spectrum of expert economic and regulatory accounting services to governments, regulators and private firms. We have played a central role in critical policy and regulatory debates across numerous sectors.  

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Damages Quantification

In addition to our competition, regulatory and behavioural economics experience, we have a diverse range of experience in litigated and contested processes, including damages quantification, international trade disputes and policies and other arbitration and High Court proceedings. Our evidence-based and rigorous analysis brings certainty and clarity to arbitration hearings and High Court proceedings in a number of fields, including communications and broadcasting.

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Competition Economics

We offer clients a comprehensive range of expert economic services in the area of competition law, and remain the provider of choice for most top law firms when they need to retain expert economists to advise on critical matters. Our application of rigorous economic analysis, using quantitative and conceptual approaches, has resulted in blue-chip companies across Africa routinely relying on us for expert advice and support when they interact with competition authorities.

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Behavioural economics

In our experience organisations often design solutions based on the behaviour of a hyper-rational consumer.  The Applied Behavioural Economics practice understands that humans routinely use biases and heuristics to make decisions, and that this often results in atypical or unexpected outcomes.

Broadcasters and telecommunications firms typically deal with large volumes of customers at arm’s length. We have proven that businesses like these can derive considerable value from designing for the fallibility of human decision-making, whether that be in product design, marketing, sales, service, channels, or other functional areas. 

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Projects

Icasa employs Genesis to sharpen SA telecoms competition

Project name:
ICASA priority market study

Service:
Regulatory economics and accounting

Sector:
Communications and media

Area of Expertise:
Sector strategy and regulatory frameworks

Client:
The Independent Communications Authority of South Africa (ICASA)

Date:
2016 ongoing

Country:
South Africa


The government’s vision for South Africa as set out in the National Development Plan (NDP) recognises the role of technology as a key enabler of economic activity: “By 2030, ICT will underpin the development of a dynamic and connected information society and a vibrant knowledge economy that is more inclusive and prosperous.” (National Planning Commission (2011), National Development Plan 2030: Our Future – Make it Work (“NDP”), p190)

Affordable access to broadband services was also highlighted in the National Broadband Policy - SA Connect. However, key telecommunications markets remain ineffective due to high prices (exemplified by the recent “DataMustFall” campaign), low access and competition complaints about the behaviour of dominant operators. As a result, the social and economic benefits envisaged by the NDP via ICT development have not come to full fruition. 

Having established a long-standing relationship with ICASA, Genesis Analytics has been retained by the regulator to assist with their Priority Market Study to identify key markets that are not characterised by effective competition and may require regulatory intervention to ensure that the goals of the NDP can be met.  

In particular, Genesis will identify the product and service markets in the telecommunications sector that are susceptible to ex-ante regulation and require prioritisation for regulation. Genesis will also consider possible pro-competitive remedies for the priority markets which have been identified.

A vital part of the project will involve engagement with key stakeholders in the telecommunications markets to understand the problems they are facing, which would lead to subsequent engagement with the regulator.

ICASA set to probe SA's high data costs

Financial model sets new mobile termination rates

Project name:
Expert economic advice and financial cost modelling for the development of new termination rates

Service:
Regulatory economics and accounting

Sector:
Communications and media

Client:
ICASA

Date:
2014 – 2015

Country:
South Africa


The Independent Communications Authority of South Africa (ICASA) issued new termination-rate regulations during the first half of 2014, which were challenged in the High Court by some of South Africa’s mobile network operators (MNOs), particularly MTN and Vodacom (Challenge to ICASA by MTN and Vodacom). After the court ruled that ICASA had to develop new termination-rate regulations later that year, Genesis was asked to assist in this regulatory process.

‘Termination rates’ are the prices telecommunications operators pay each other to terminate calls originating on each other’s networks (for example, when an MTN customer calls a Vodacom customer, MTN pays a termination fee to Vodacom). For a variety of pro-competitive reasons, regulators around the world set these rates equal to the costs operators incur to provide termination services to each other.

Financial models built by Genesis on behalf of ICASA uncovered the termination costs of South Africa’s fixed and mobile telecommunications operators. This enabled ICASA to introduce truly cost-oriented termination-rate regulation in South Africa for the first time. To maximise their pro-competitive potential, the regulations progressively reduce termination rates over time, to encourage future termination cost reductions. The regulations also recognise that smaller MNOs have higher termination costs and accommodate this through asymmetric rates, making more manageable the adjustments required of smaller MNOs.

Genesis’s independent expertise improved decision-making in two different respects. It first helped the High Court to understand that, while ICASA’s initial 2014 regulations would not harm any operator, scope existed to develop new regulations that would deliver better competition and consumer outcomes. It then helped ICASA to realise this objective, resulting in a best-practice regulatory outcome that has sparked greater price competition between South Africa’s telecommunications operators, particularly between the MNOs.

Genesis Analytics was a critical component of a regulatory process that lowered the costs of communication in South Africa, an outcome that benefits every South African consumer.

Assessment of damages in R1-billion claim

Project name:
Assessment of a damages claim in the communications sector

Service:
Damages, trade and other litigation

Sector:
Communications and media

Client:
Large firm in the communications sector

Date:
2014

Country:
South Africa


Genesis provided an independent assessment of the appropriate damages quantum following the repudiation of an agreement between two large South African companies in the communications sector. The analysis was performed on behalf of the defendant in a claim that exceeded R1-billion.

The assessment involved the determination of the loss of profits arising within the context of the agreement having been repudiated before the business was launched. The challenge in this case arose from forecasting the loss of profits where there was no prior business history and where the available data on financial performance was limited.

We assisted the legal team throughout the litigation process, ensuring that sufficient evidence was gathered through the discovery process so that we were able to provide a defendable and reasoned expert opinion on the damages claim. Our project team combined its experience in economics, accounting and modelling with its in-depth understanding of the communications sector to develop a robust economic model in order to quantify the damages claim.

The case was ultimately settled and the input provided by Genesis helped the legal team and the client to determine an appropriate amount as the basis of the settlement negotiations. 

Telkom series of abuse of dominance cases

Project name:
Telkom series of abuse of dominance cases

Service:
Competition economics

Sector:
Communications and media

Area of Expertise:
Abuse of dominance and prohibited practices

Client:
Competition Commission

Date:
2011 – 2013

Country:
South Africa


Genesis was specifically selected by the Competition Commission of South Africa to provide expert reports and testimony in the prosecution of a series of abuse of dominance cases brought against the fixed-line incumbent, Telkom. The multi-faceted complaints focused on exclusionary and exploitative practices designed to inhibit downstream competition in internet access and corporate virtual private networks, including margin squeeze, inducement and excessive pricing.

Combining our deep understanding of telecommunications markets with a meticulous evaluation of the strategy and pricing documents, Genesis was able to determine that Telkom priced its own downstream services below the cost of the necessary wholesale inputs it provided to its competitors and, in so doing, was engaged in a deliberate margin-squeeze strategy. This evidence, and the effective rebuttal of the Telkom defence, was instrumental in the Competition Tribunal finding against Telkom on margin squeeze in the first case, and ultimately imposing a fine of over R400-million.  

In the second case, Genesis used a sophisticated financial model to demonstrate that if Telkom’s own downstream services paid wholesale inputs charged to competitors, then it would be loss-making. A thorough analysis of market data also revealed that this had an exclusionary effect on competitors. Genesis also demonstrated that pricing for certain transmission products was excessive relative to the costs.

The Genesis report was material in moving Telkom to settle the second complaint. Genesis was asked to take a lead role in the settlement negotiations, which fundamentally reshaped the market by bringing about a functional separation between wholesale and retail services, cash fines of R200-million and price reductions of almost R900-million. In approving the settlement, the Competition Tribunal described it as the most sophisticated and far-reaching settlement it had ever seen. 

Winning customers with behavioural economics

Project name:
Optimising the onboarding of customers using behavioural economics

Service:
Applied behavioural economics

Sector:
Communications and media
Manufacturing

Client:
Pan-African home entertainment provider

Date:
2014 – 2015

Country:
South Africa


A Pan-African broadcaster requested the Applied Behavioural Economics team to assist in changing customer behaviour during the customer onboarding stage, which is crucial in setting expectations and establishing behavioural norms. For example, in the onboarding stage customers learn about the various products available to them and how much these cost. They typically also learn more subtle behaviours, such as which service channels are useful for which queries.

In this engagement we optimised the onboarding process to increase product up-sell, cross-sell and first-time payment behaviour. We were able to equip customer service representatives with the tools to achieve these objectives and have positive conversations with customers. For example, staff could conduct a needs analysis with customers using only three questions, dramatically increasing their ability to match customers to the correct product (without complicating the conversation).

Through this work the customer service representatives were able to increase up-sell by up to 26% on certain products, while reducing the proportion of customers who missed their first payment by 45%. This realised considerable value for the firm, given that the client struggled with these objectives for many years before our involvement.

Improving the onboarding of customers

Project name:
Improving the onboarding of customers

Service:
Applied behavioural economics

Sector:
Communications and media
Entertainment

Client:
Large home entertainment provider

Date:
2014

Country:
South Africa


During the onboarding phase of the customer journey, certain norms and expectations are established. Genesis was retained to assist in ‘nudging’ customer behaviour in specific ways during this phase, using the principles of behavioural economics. The project team piloted a new approach to onboarding, which led to a 47% reduction in missed payments and a 25% increase in upselling of certain products, as well as a more than doubling of self-service usage.

Improving self-service engagement with behavioural economics

Project name:
Improving self-service engagement and usage using behavioural economics

Service:
Applied behavioural economics

Sector:
Communications and media
Entertainment

Client:
Large home entertainment provider

Date:
April to July 2014

Country:
South Africa


A large home entertainment provider retained Genesis to assist in increasing its customers’ engagement with self-service channels. By introducing a new technique in the contact centre, the team was able to increase self-service channel engagement over the long term by 147%. This allowed the client to steadily reduce its investment in costly channels such as branches and the contact centre.

Expert advice in contested Media24 print merger

Project name:
Expert economic evidence and testimony in Media24's acquisition of sole control of Natal Witness

Service:
Competition economics

Sector:
Communications and media

Area of Expertise:
Merger analysis and public interest
Expert testimony

Client:
Natal Witness and Media24

Date:
2010 - 2012

Country:
South Africa


Genesis was retained to assess the effects of the proposed move from joint to sole control of the Natal Witness publishing group by Media24, which had evoked substantial opposition from other media groups involved in community newspaper publishing. 

The theories of harm included unilateral and foreclosure effects in newspaper printing and advertising, predation and bundling in publishing, and public interest concerns for small community publishers. 

The project team assisted the Competition Tribunal both by clarifying the appropriate conceptual approach and through a thorough evidence-based assessment of each of the claims. Conceptual clarity was brought to issues such as whether merger control should be concerned with potential predation after the merger or not. 

The careful construction of the evidence was particularly important to the printing foreclosure case, which hinged on a proper understanding of the alternatives available at other printers, as well as their capacity and pricing. Genesis successfully demonstrated that the competition concerns had no merit and that the public interest concern was adequately addressed by the conditions proposed by Media24. The merger was granted conditional approval by the tribunal. 

Meet the Team

Areas of Service Expertise

  • Regulatory economics
  • Damages Quantification
  • Competition Economics
  • Behavioural economics

Projects

Project

Icasa employs Genesis to sharpen SA telecoms competition

Genesis Analytics has been retained by ICASA to assist with their Priority Market Study to identify telecommunications key markets that are not characterised by effective competition and may require regulatory intervention to ensure that the goals of the National Development Plan can be met.  

View Project
Project

Financial model sets new mobile termination rates

‘Termination rates’ are the prices telecommunications operators pay each other to terminate calls originating on each other’s networks (for example, when an MTN customer calls a Vodacom customer, MTN pays a termination fee to Vodacom). For a variety of pro-competitive reasons, regulators around the world set these rates equal to the costs operators incur to provide termination services to each other.

View Project

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Leading the team

James Hodge

Director and Managing Partner (Competition and Regulatory Economics)

James Hodge
Director and Managing Partner (Competition and Regulatory Economics)
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Anthony Felet

Partner (Competition and Regulatory Economics)

Anthony Felet
Partner (Competition and Regulatory Economics)
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Fatima Maria Fiandeiro

Partner (Competition and Regulatory Economics)

Fatima Maria Fiandeiro
Partner (Competition and Regulatory Economics)
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Azande Ntanzi

Manager

Azande Ntanzi
Manager
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