Cape Town, 15 Oct 2009
Alternative telecommunications network operators Internet Solutions (IS) and ECN have argued strongly for an immediate cut to the interconnection rate in order to foster competition.
In separate presentations before the Parliamentary Portfolio Committee on Communications yesterday, both IS and ECN said the incumbent network operators (Vodacom and MTN in particular) have known for a long time that the current interconnect rate of 125c per minute is too expensive.
They also argued that, while this means the South African consumer needlessly pays more per call, it also stifles competition and both companies announced they were eager to provide alternative networks using cheaper technologies to bring costs down.
In its presentation, IS said a mobile termination rate (MTR) of between 60c and 80c a minute is affordable and would not have a material impact on the financial viability of the incumbents. It called for an immediate reduction to 60c per minute, with a 15% per annum reduction over five years to 27c.
ECN said 60c per minute, as suggested by Parliament, is still too high and that it felt the network operators would be able to weather a reduction to 25c per minute.
“It is noteworthy that community service telephone calls are terminated by mobile operators at 6c per minute. ECN doubts these calls are terminated at a loss. A glide path that provides for interconnection rates to be further reduced by 15c annually, on 1 November for each successive year until 2012, is too shallow,” noted ECN CEO John Holdsworth.
He added that the mobile operators are braced for decreases and ECN again recommends that reductions should occur every six months, with the ultimate aim of achieving cost-based interconnection as soon as possible.
IS also claimed the current structure leaves the incumbent operators with all the aces.
“The MNOs [mobile network operators] dominate with more than 40 million users and the interconnection terms are set independent of competition. Interconnection rates increased by 500% and new entrants are impotent to force MTRs downwards,” IS said.
Siyabonga Madyibi, IS's head of regulatory affairs, said the company is ready to use new technologies, such as WiMax, to roll out a national network cheaper than the incumbents were able to do. “We are little guys with big plans,” he said.
Holdsworth stated that ECN's ambitions are to build its own national mobile network. “We want the interconnect rate to come down now, so we can beat Telkom to the punch.”
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