South Africa’s telecoms regulator has finally taken the bull by the horns and announced its plan to regulate interconnection rates.
The Independent Communication Authority of South Africa (Icasa) announced on Thursday that it would be slashing interconnection rates by 27% in July this year — from the current rate of 89c per minute — to 65c.
It also announced a “glide path” that would see the interconnect rate cut to 50c in July 2011 and 40c in July 2012.
Telecoms analyst Richard Hurst from IDC research house told the M&G that it was about time that Icasa showed it had some teeth and the rate cut was positive news for South African consumers.
Interconnection rates are the tariff that one cellphone operator charges another operator to terminate a call on its network. For example, if a Vodacom customer calls a MTN customer, Vodacom would currently pay MTN 89c for terminating the call.
Key bottleneck
Interconnection rates have been identified as the key bottleneck to stimulating real competition in the mobile sector, where call rates are seen as exorbitantly high.
Icasa’s announcement is a positive step for South African consumers, provided that the operators pass on the benefits to them by dropping the slashing call rates.
Icasa said on Thursday that it expected the fixed-to-mobile and mobile-to-mobile rates to be reduced as a result of the interconnect rate cuts and it would monitor this “vigilantly”.
Last year Icasa chairperson Paris Mashile announced that the cost-based rate for interconnection was 40c.
At the time, Communications Minister Siphiwe Nyanda was using political pressure to lower the interconnect rate.
In November 2009, Nyanda managed to get South Africa’s cellphone operators to agree to a 39c cut in the interconnect rate — from R1,25 to 89c — which was made effective early this year.
Nyanda was however heavily criticised for allowing the cellphone operators off too lightly and also for interfering in a process that was meant to be driven by Icasa.
Many stakeholders in the sector warned that if due process was not followed, South Africans could end with an even messier situation.
Consumer anger
These voices were drowned out by the consumer anger over South Africa’s exorbitant cellphone call rates.
On Thursday, Icasa also announced that the distinction between peak and off-peak rates was to be scrapped, as this is “more beneficial in terms of tariff transparency as well as a lighter regulatory burden”.
The off-peak interconnection rate is currently 77c per minute.
Fixed-line interconnection rates also came under scrutiny, with Icasa announcing that it will cut them to 15c per minute in July this year, to 12c in July 2011 and 10c in July 2012.
Icasa is scheduled to hold hearings on the proposed reduction in tariffs between June 9 and 11.
Nadia Bulbulia, Cell C’s executive head of regulatory affairs, said Cell C was currently studying the draft publication and would make its submission to Icases by June 2 this year.
“Cell C is particularly interested to unpack the methodology Icasa used to determine the proposed wholesale termination rates and the impact that this might have on the entire industry,” said Bulbulia.
A Vodacom spokesperson said the company was waiting for the new draft regulations on interconnection to be published in the Government Gazette on April 16.
“Vodacom will review the new draft regulations, when they are published, and will participate in the public consultation process,” said the spokesperson.
MTN said wholesale call termination was a complex issue and that it expected the draft regulations would contain elements that require legal interpretation and analysis of its regulatory and economic impact.
“Once MTN has reviewed the full set of documents, it will compile its response and file the required submission on the due date,” said Robert Madzonga, the chief corporate services officer.