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ICASA's six-month scramble

Bonnie Tubbs
By Bonnie Tubbs, ITWeb telecoms editor.
Johannesburg, 09 Apr 2014
The clock is ticking and ICASA needs to hit the ground running if it wants to restore certainty in the mobile sector by October.
The clock is ticking and ICASA needs to hit the ground running if it wants to restore certainty in the mobile sector by October.

The six-month period the Independent Communications Authority of SA (ICASA) has to carry out a costing study, revise its latest termination rate regulations, produce a new proposal, and get mobile operators' buy-in, is fast waning.

Failure to complete the multi-step process in time will return the industry to the pre-2010 world it once knew, where operators had carte blanche to charge each other as much as they elected to.

This is according to industry observers, who say the regulator needs to act fast to avoid a scenario beset by confusion and legal battles that will inevitably cause the mobile termination rate (MTR) saga to drag on indeterminately.

Now, over a week into ICASA's review period, pundits say it is critical that SA's mobile sector - currently in a state of limbo - is given some assurance and clarity by ICASA as soon as possible.

Dominic Cull, owner of Ellipsis Regulatory Solutions, says ICASA needs to hit the ground running. "Six months is not a long time for [the completion of] a regulatory process."

Cull says nine days after the court judgement was made and no word as yet, "ICASA is clearly still debating the best way to proceed - and it's not encouraging".

Heather Irvine, head of anti-trust and competition at Norton Rose Fulbright SA, says the sooner ICASA gets started on the process - producing a timetable and plan of action for the industry to plan by - the better for everyone.

"[Six months] is a challenge. ICASA signalled to the court that they could do it in 12 months, but I think the judge thought that would be too long a period for what is regulation that is fundamentally flawed - so she chose a date that doesn't prejudice Vodacom and MTN too much."

Part of the problem the industry now sits with, she says, is that ICASA did not announce it was reviewing the termination rates early enough in the first place.

Ovum analyst Richard Hurst says, should ICASA fail to meet its deadline, "we will see confusion in the market punctuated with legal battles as the delay drags on".

End implications

Irvine says if ICASA does not have new MTR regulations in place at the end of the six months (from 1 April) it was afforded by the South Gauteng High Court, "there will be no cap on the interconnect rates mobile operators can charge each other".

"So we will go back to the world we had before 2010 [when ICASA introduced the first set of declining rates] - that is, the operators negotiate between themselves what they want to charge."

There is no saying whether this will result in MTRs being hiked or staying the same, says Irvine. "Vodacom and MTN told the court that had no intention of charging more than the last regulated rate [of 40c] in the event the court set aside ICASA's 2014 regulations.

"Whether or not they would stick to that, we can't say. If ICASA does not have new regulations in place, [the operators] are at liberty to charge [whatever wholesale rates] they want."

She says Cell C feels it would be left vulnerable should the said scenario transpire, because "it would be in the interest of Vodacom and MTN to charge higher [MTRs] - it's a way to inhibit the smaller players from competing with them".

Phased process

ICASA says it cannot divulge details of the process it will be carrying out over the coming half-year, nor answer queries around the resources it has or may employ to successfully carry out the review it has been tasked with.

"As per the advice of our legal counsel, please note that we cannot engage the media any further on the judgement, the regulations or the way forward until further notice."

Africa Analysis analyst Dobek Pater outlines what ICASA's process - to be wrapped up by 1 October - should involve:

1. ICASA obtains data from the cellcos. "This could be the stumbling block and the determining factor whether six months is sufficient. Normally, cellcos are not prepared to part with such sensitive data. To this extent, ICASA may want to promulgate regulation to force the cellcos into disclosing the relevant data. It depends how quickly this process unfolds."
2. Develop the model and methodology with assumptions. "[ICASA should] meet with the operators to demonstrate their model/methodology and have them sign off on it that the model/methodology is correct. Once this is achieved, any further arguments can only be about the actual underlying data."
3. Model the data and assumptions. "[ICASA should] meet with the operators to discuss and preferably get their buy-in before publishing the new glide path."
4. Publish the new glide path.

DOC input

In light of the challenge that lies ahead for ICASA, and the regulator's historically-poor pool of resources, both Cull and Irvine say the Department of Communications should get involved to the end of getting the looming deadline met, and the market returned to order.

Cull says it must be pressed upon the minister of communications and the department that "this is a crucial issue for the cost of communications and it cannot afford to fail. This is a complex exercise, which should ideally be outsourced and funds obtained."

He does not believe ICASA has enough steam or resources of its own to complete the task it has ahead of it right now. "If you compare the resources at Vodacom and MTN's disposal, there is significant weighting on [the operators'] side."

Irvine says if the communications minister does not support the review process by allocating adequate resources to properly staff and fund the regulator and support its work - and if necessary, to defend its process, "it is unlikely that ICASA will be able to produce regulation which is in line with the empowering legislation, procedurally fair, and achieves its intended purpose, namely enhanced competition in a crucial sector of the South African economy".

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