/ 30 July 2007

MTN ‘discriminates’ in charging Cell C

The Competition Commission said on Monday that it has found that the conduct of MTN of charging Cell C the commercial interconnection rate in the same areas that it charges Vodacom community-service telephone (CST) rates amounts to price discrimination.

The commission has therefore referred the matter to the Competition Tribunal for adjudication.

The referral arose from a complaint of anti-competitive conduct by MTN in relation to the interconnection fee it charges Cell C for its CSTs. These are telephones available for public use, operating on the mobile telecommunication networks, which are placed in areas where there is limited access to fixed-line telephones.

Interconnection refers to connection that occurs between the various telecommunication networks to enable subscribers of one network to call and receive calls from subscribers of the other networks.

The Competition Commission said that price discrimination occurs when a dominant firm, without any objective justification, charges different prices to purchasers for equivalent transactions. Price discrimination is prohibited by section 9 (1) of the Competition Act if it is likely to result in a substantial lessening of competition.

In terms of cellphone operators’ universal service obligations — imposed by the Independent Communications Authority of South Africa (Icasa) and set out in their respective licences — each of the cellular network operators is obliged to roll-out CSTs in “under-serviced areas” as defined in their licences. A reduced interconnection fee is charged for CST areas.

Complaint

In its complaint, Cell C alleged that whereas MTN charges Vodacom the reduced CST interconnection rate, it charges Cell C a commercial interconnection rate in the same areas.

In terms of its licence obligations, Cell C is obliged to roll out 52 000 CSTs in “under-serviced areas” over a period of seven years, while Vodacom and MTN are to roll out 22 000 and 7 500, respectively.

Cell C determined potential locations for the placement of CSTs with reference to a study of countrywide fixed-line teledensity compiled by the Human Sciences Research Council (HSRC). Icasa approved the method used by Cell C to determine where to place its CSTs as well as the proposed roll out on the Vodacom network.

However, MTN objected to the placement of CSTs by Cell C, alleging that Cell C had rolled out CSTs in areas that did not fall within the ambit of “under-serviced areas”.

As a result, MTN is charging Cell C the commercial interconnection rate of R1,25 per minute during peak periods and R0,77 per minute during off-peak periods — and not the CST interconnection rate of R0,06 per minute — for all calls made from every Cell C CST to phones on the MTN network.

On the other hand, MTN charges Vodacom the agreed-upon CST interconnection rate of R0,06 per minute when a user of a Vodacom CST, situated in the same vicinity of certain Cell C CSTs, phones MTN.

The commission found that MTN’s conduct is likely to have the effect of substantially lessening competition between the telecommunication network operators. — I-Net Bridge