Cell C has broken ranks with the incumbent cellphone operators, calling for interconnect fees to be cut to 75 cents a minute from the present R1.25 and saying that the cut will mean that consumers will benefit from the lower prices.
The dominant players, Vodacom and MTN, are meanwhile fighting a rearguard action, maintaining that lower interconnect fees will not necessarily mean lower call charges.
Cell C also said there should be no differentiation between calls made at peak and non-peak times. Interconnect fees are the prices networks charge one another when calls from one network terminate on another.
‘What really drives prices down is competition and lowering the interconnect rate will achieve this and level the playing field in the market,†Cell C’s Lars Reichelt told the M&G.
The proposal by Cell C follows government’s directive to the Independent Communications Authority of South Africa (Icasa) on Tuesday to lower interconnect rates to a cost-based rate by the end of November.
Parliament’s communications committee has proposed the interconnect rate be cut to 60c by November and by a further 15c annually until 2012. Cell C and Virgin Mobile, both smaller mobile players, have welcomed cheaper interconnect rates while Vodacom and MTN are reluctant to commit to them.
‘The mobile termination rates in South Africa are unjustifiably high and this has led to high price levels which damage the entire economy and the poor disproportionately,†Reichelt told the committee.
He called for an asymmetric interconnect rate to be introduced in keeping with international models. He suggested that smaller operators pay a lower interconnect charge than bigger operators, of 65c per minute.
A price cut means that Cell C will potentially be able to gain market share and create more competition. Vodacom and MTN, which have the lion’s share of the mobile market, raised their interconnect rates from the initial 20c to R1.25 shortly before Cell C began operations in 2001.
Vodacom and MTN have committed to discussing their cost structures in closed-door meetings with Parliament. They are set to lose out if interconnect rates drop, given the sizeable revenues they get from this source.
Vodacom’s interconnect revenue topped R8.6-billion (inclusive of income from Cell C for national roaming services) last year, while MTN netted R6.9-billion in 2008.
Fixed-line operator Telkom recorded R2.08-billion in interconnect revenue in the 2009 financial year. It paid out R5.4-billion the same year to the mobile companies and international network operators.
Reichelt dismissed claims that the lower interconnect rate would not result in cheaper retail calls for consumers. ‘It is an indirect measure, but the experience of other countries tells us that this will indeed happen.â€