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Interconnect rates 'not enough'

Nicola Mawson
By Nicola Mawson, Contributor.
Johannesburg, 30 Sept 2014
Asymmetry cannot be a market correcting measure, although it does aid smaller players to gain market share, says CEO Sunil Joshi.
Asymmetry cannot be a market correcting measure, although it does aid smaller players to gain market share, says CEO Sunil Joshi.

The Independent Communications Authority of SA's (ICASA's) last minute fixed termination rates have kept the concept of asymmetry, first mooted in 2010, but do not go far enough to improve competition in the sector, say commentators.

The regulator yesterday outlined its final call termination regulations - with just a day to go before the South Gauteng High Court's order expires - covering both the mobile and fixed segments of the market.

The regulator had to go back to the drawing board earlier this year after the South Gauteng High Court ruled, at the end of March, the regulator's previously mooted and subsequently contested termination rates were invalid. However, those rates could be implemented for six months.

Previously - under the expired 2010 regulations - the maximum level or asymmetry for identified licensees was 20% above the rate in the first year, dropping to 15% and then 10% in the final year of the glide path.

This has improved to 50% (for same area code calls) and 40% (for calls to different area codes) in the first year, before flattening to 36% in year two, and 20% in the final year of the glide path. However, the final rates' asymmetry measures fall short of what ICASA initially mooted in September, before its consultation period ended.

Not enough

Internet Service Providers' Association regulatory advisor Dominic Cull says providers were happy with the proposed draft, but wanted more behavioural remedies to level the playing field as some dominant players would impose heavy cash and performance burdens on smaller Internet service providers (ISPs) that offer voice services.

Cull says, while asymmetry was always available, it has come down "quite a bit" and does not improve the competitive environment, which faces structural issues, such as local loop unbundling and IP Connect interconnect. "On the face of it, it doesn't make a great deal of sense."

The rates amount to "rearranging the deck chairs on the Titanic" when it comes to improving competition in the sector, says Cull. He notes ICASA's gazette and reasons document will have to be analysed to understand the regulator's intentions.

Independent telecoms researcher Samantha Perry says asymmetry should, theoretically, encourage competition because it allows smaller players a margin in which to offer competitive pricing. However, ICASA has now introduced "substantially" less asymmetry, she notes.

However, without other issues being tackled, such as open access, asymmetry is a "drop in the ocean" when it comes to improving the competitive nature of the market, says Perry. She explains dominant players will abuse those who play in the voice over IP space, so it depends how asymmetry works in practice.

ICASA listened

ICASA, which has yet to publish the gazette and issue its reasons document, did not respond to a request asking what else it is doing to improve competition. Yesterday, councillor Nomvuyiso Batyi said the new rates, which come into effect on Wednesday, were arrived at after consideration of seven written inputs into the September proposals.

Chairman Stephen Mncube told journalists at the announcement that ICASA's focus on the cost to communicate had started to make its mark in the industry because some operators had reduced costs.

Telkom says it supports ICASA's efforts to lower the cost to communicate, but will have to study the rates before it can comment. Neotel CEO Sunil Joshi says it is greatly encouraged by the consultative process and the detailed costing studies that were undertaken in finalising this regulation. "In our opinion, this is a great step forward and in the right direction."

Joshi adds asymmetry assists smaller players to enter a market and gain market share, although this cannot be a market correcting measure.

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