The Independent Communications Authority of SA (ICASA) has surprised the industry by introducing interconnection rates that will benefit SA's two smaller cellular operators.
The move may also end an ongoing battle between Cell C and 8ta over who should charge what.
Cell C has been fighting for higher call termination - or asymmetric - rates since its inception almost a decade ago. Cell C has argued that its weak market position should disqualify it from having to agree to an asymmetrical interconnect rate with 8ta.
Telkom's mobile arm wants an interconnect rate of 93c per minute, while Cell C seeks a rate of 89c. The third mobile operator, however, still wants preferential treatment when it comes to cellular giants Vodacom and MTN.
ICASA has referred the dispute to its Complaints and Compliance Commission (CCC), and the outcome of that wrangle is not known.
The matter may have been put to bed by ICASA's publication this morning of final termination rates, which pave the way for Cell C and 8ta to apply for higher termination rates.
ICASA spokesman Paseka Maleka says the ongoing matter at the CCC is separate to the final regulations, although the commission will take the final rates into account when deciding the matter.
ICASA's final regulation rates apply to calls that terminate on Telkom's fixed network, and MTN and Vodacom's mobile platform. While ICASA has left the door open for Cell C and 8ta to apply to charge higher rates, it is unclear whether MTN and Vodacom will contest the preferential rates for their smaller competitors.
ICASA councillor Thabo Makhakhe says the published final call termination rates apply to MTN, Vodacom and Telkom's fixed-line business. “They do not necessarily apply to all other licensees.”
He explains that “other licensees may qualify for a termination rate higher than the set rate for these three firms”. However, this depends on criteria including that the operator has less than 25% of the market, and faces higher costs than the current dominant players.
This leaves the door open for both Cell C and Telkom's mobile arm, 8ta, to request rates that are 20% higher in the first year, 15% higher between 2012 and 2013, and 10% higher from March 2013, which is the end of the glide period.
More competition
Makhakhe says the previous high cost of interconnect was necessary when there were only two operators that were required to cover 90% of SA's geography.
However, adds Makhakhe, this “benign regulatory environment is no longer suited to the country's need for a more competitive market for the provision of information and communications technology services”.
Denis Smit, MD of BMI-TechKnowledge, says the rate cuts are good news all round. He says that allowing higher interconnect fees for 8ta and Cell C, while controversial, will allow them to build networks and compete, which will ultimately benefit consumers.
Smit explains that ICASA has also set down a more reasonable glide path, which is likely to find favour with the operators. However, he says it is possible that MTN and Vodacom could challenge the fact that Cell C and 8ta can apply for higher rates.
Operators are not obliged to pass on savings, says Smit, but the rates will increase competition and this will place pressure on the cellular companies to pass on the reductions.
Fixed and mobile
ICASA has effectively divided the market into two, with market one covering mobile-to-mobile calls in SA, and market two covering calls made to a fixed-line.
Mobile termination rates will drop from March next year to 73c at peak and 65c during off-peak times. The following year, rates will drop to 56c and 52c. However, by March 2013, wholesale mobile terminations rates will drop to 40c, regardless of the time the call is made, says Makhakhe.
Fixed-line rates depend on whether the calls are local, and are being made from within one city to terminate in that city, or are nationwide.
Interconnect costs for local calls will drop to 20c for peak and 12c for non-peak next March. Termination rates for nationwide calls will drop to 28c during peak times, and 19c off-peak. In 2012, termination of local calls will drop to 15c and 12c, while national calls will see a drop to 25c and 19c.
At the end of the glide path period from March 2013, termination for local calls will drop to 12c during peak times and off-peak times. The rate for national calls will be 19c.
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