The Independent Communications Authority of SA (ICASA) today startled the industry, slashing mobile interconnect rates to 40c by 2012. The authority says these cuts must show 100% pass-through to the consumer.
The regulator made the surprise announcement during a press conference held at its head office, in Sandton, this morning, generating cheers from alternate operators, like ECN, hoping to make it big in the telecoms market.
“The regulator could not have done a better job on these regulations. Every issue that we have ever had with interconnect has been addressed,” explained ECN CEO John Holdsworth.
ECN has been one of the generals in the war to have interconnect rates dropped. It has been pushing the authorities to take a firmer stance against the high termination rates charged by the mobile operators.
High interconnect fees have been blamed for the high cost of communication in SA, and consumers are expected to benefit from a lower rate, especially since the regulator has promised to keep tabs on the retail rate.
Not the same regulations
Councillor Thabo Makhakhe explained that the regulator has created a separate set of regulations to govern interconnection rates between operators. This is separate from the regulations gazetted this month, outlining how agreements between operators are managed.
The new regulations will be published in draft form tomorrow, and will then follow the public hearings process. However, the regulator seems adamant that the draft set will not change much, since it is a result of years of work, and has followed all the right processes.
Makhakhe said the regulator is proposing a new glide path scenario; however, the projected costs are far lower than an earlier glide path proposed by the operators to the Department of Communications.
The operators late last year suggested a glide path from R1.25 to 89c (peak times) in March this year, to be followed annually with more cuts; to 85c in 2011 and 80c in 2012. The first rate cut was implemented by the operators in March.
ICASA rejected the revised interconnect rate submitted by the operators early this year, saying the glide path proposed by the operators would prevent it actually doing its job.
Big punch
ICASA has now come out swinging, proposing to do away with off-peak and on-peak termination rates, preferring to keep one rate, which it expects would force transparency. “ICASA did consider a blended rate, but believes that a single set rate is more beneficial in terms of tariff transparency, as well as a lighter regulatory burden,” said Makhakhe.
ICASA's new rates take effect in July this year, with mobile operators expected to make yet another cut to 65c. In the middle of next year, they will be called to drop the rate to 50c, and again to 40c by 2012.
Fixed-line rates are also expected to take a knock, with rates dropping to 15c in July, dropping again next year to 12c and 10c in 2012.
Pass it on
“Fixed-to-mobile has already seen a 100% pass-through to the consumer, and we are pleased with that. We have yet to see any significant pass-though on the mobile-to-mobile side, and that is something the authority will be keeping a close eye on,” said Makhakhe.
The regulator has also finally recognised that there is little competition in the mobile market, and hopes that the new rates will facilitate competition. “ICASA will monitor price movements in the retail market for mobile services vigilantly over the coming months to evaluate whether further action is required,” he added.
Operators are likely to be frantically preparing their submissions to the regulator on the new draft regulations, and public hearings on the matter are planned for 9 to 11 July.
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