Cellphone operators: 1, Nyanda: 0

Thanks for nothing. That’s what consumers should be saying to Communications Minister Siphiwe Nyanda.

Earlier this year, when Nyanda began making ominous noises about getting tough on the country’s cellphone operators, many embraced this new political will to reduce call costs.

Interconnection tariffs were the initial target and many politicians, members of Parliament and industry stakeholders were quick to jump on the bandwagon, having a go at SA’s mobile giants Vodacom and MTN.

However, there were many stakeholders in the sector who warned that if due process was not followed, South Africans could end with an even messier situation.

These more sensible voices were drowned out by the consumer anger over South Africa’s exorbitant cellphone call rates.

Now Nyanda has this week before Parliament announced that interconnect tariffs will indeed be cut—by a measly 39c—which is hardly what was needed to stimulate competition in the sector.

Nyanda announced on Friday that cellphone operators have agreed to reduce interconnect rates from early next year.

According to Nyanda, the peak interconnect rate will drop from R1,25 to 89c, while the off-peak interconnect rate will remain the same.

These new rates will come into effect on February 1 2010 for Vodacom and Cell C, and March 1 2010 for MTN, Nyanda said.

Why and how the cellphone operators agreed to implement the reduced rates on different dates is perplexing to say the least.

However the real travesty is that at 89c per minute the interconnect rate still remains too high.

Some commentators have argued for interconnect rates to be lowered to a cost-based rate, arguing for a rate closer to 25c.

Icasa’s chairperson Paris Mashile has argued that the cost based rate is actually 40c, which is still less than half the new negotiated rate of 89c.

Even Alan Knott-Craig—the former Vodacom CEO—recently stated that an interconnect tariff of 60c would be appropriate.

The real concern now is that Nyanda has compromised the work of Icasa by agreeing to such a miniscule interconnect tariff reduction and has played right into the hands of the mobile players.

Nyanda argues that the operators have agreed to introduce new affordable retail products by December 1 2009, which he says will act as a “big early Christmas and Easter present” for the nation”.

The question is if it’s that easy for them to do, why hasn’t it happened sooner?

The mobile operators have thrown Nyanda a bone; the problem is there is hardly any meat on it.

.
Lloyd Gedye

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