[AfrICANN-discuss] South Africa: Communications Regulator in Bid to Balance Fair Prices and Profit

[LO MAMADOU]

South Africa: Icasa in Bid to Balance Fair Prices and Profit
Thabiso Mochiko
5 July 2010





Johannesburg — THE telecommunications industry is anxiously waiting for the Independent Communications Authority of SA (Icasa) to announce its final decision on the interconnection rate cut after a marathon three-day public hearing last week.

The regulator issued a statement on Friday but did not commit to any time frames regarding the release of the final call termination regulations. The regulations mainly seek to reduce the wholesale price or interconnection rate - fees that fixed and mobile telecommunications operators pay each other to terminate calls on each others' network, and also the terms and conditions of those interconnection agreements.

Icasa says stakeholders raised a multitude of concerns, chiefly about the proposed glide path - the process of reducing rates over a certain period - and how this may negatively affect their businesses. These concerns were raised mainly by Vodacom, MTN, Cell C and Nashua.

Counter to this, however, was the desired result of enhanced competition that would ultimately benefit consumers through a reduction in retail prices.

"In the interest of balancing the triple mandate of this exercise of ensuring fair prices to consumers, promoting competition in the ICT (information and communication technology) sector whilst ensuring a favourable investment environment," companies were given until this Friday to make further written submissions, Icasa said.

Companies such as MTN, Vodacom, Cell C, and Vox asked the regulator to delay implementing the proposed rate of 65c until next March because two reductions in one financial year will "devastate" and disrupt their operations.

Mobile operators buckled under pressure from the government and reduced the call termination rate from R1,25 to 89c a minute during peak period in March this year.

At the hearings, Cell C, Vodacom and MTN said that although they supported the regulatory process they were against the implementation of the 65c rate this year. They also said the decline was too aggressive, especially since there had been a "voluntary" reduction in March.

MTN and Vodacom asked Icasa not to implement a single rate for peak and off-peak as this too would harm their businesses. They asked for separate rates as it had been the practice for the past 15 years, and threatened jobs cuts and reductions in capital expenditure if the 65c was implemented this year.

The proposed glide path "is steep and unprecedented ... (and) if not modified the shock to existing business models will be devastating. There's a whole ecosystem that exists around high mobile termination rates. One needs time to effect those changes," said Shameel Joosub, MD of Vodacom SA.

Karel Pienaar, MD of MTN SA, said the proposed glide path was aggressive and would cause "huge trauma" in the industry.

The mobile operators' argument is not unreasonable but it remains to be seen how Icasa will balance that against the needs of consumers who have been promised cheaper calls. However, Saicom Voice Services and ECN Telecoms have called on Icasa to ensure that the reduction filters through to consumers.

According to Howard Sackstein, of Saicom Voice Services, despite the reduction to 89c consumers are still paying high tariffs.

He analysed a number of post- paid, or contract, packages from all three operators and estimates Vodacom's rates rose 14,05% since the 89c rate was introduced three months ago instead of falling to 10,1%. Cell C should have reduced rates by 18,1% while MTN should have come down an average of 12,1%. But MTN, Cell C and Vodacom maintained that prices have been coming down.

If Mr Sackstein's assumptions are correct, this puts more pressure on operators to reduce prices. It puts further pressure on Icasa to ensure consumers also benefit.

 

Source : business day
 		 	   		  
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