Johannesburg, 05 Mar 2013
South Africa could at last be on the cusp of having a more competitive telecoms market. In 2010, the country's telecommunications regulator, the Independent Communications Authority of South Africa (ICASA), implemented three interconnect rate cuts.
These rates are the tariffs that one telecoms operator charges another to terminate a call on its network. For example, if a Cell C customer calls an MTN customer, Cell C charges its customer a fee per minute (the retail charge). At the same time, MTN will charge Cell C a fee - called a mobile termination rate or MTR - for terminating the call on its network.
A study conducted on behalf of the World Bank reportedly blames these imposed MTR charges for the exorbitantly high, uncompetitive cellphone call rates across all South African mobile operators and concludes that they are stifling competition in the sector. The World Bank report also reveals that the Bank is of the opinion that the savings that have been incurred as a result of the past two interconnect rate cuts have generally not been passed on to consumers.
The third and final round of these wholesale interconnect rate cuts was to take place on 1 March 2013, and will bring the price down from the R1.25 it was three years ago, to R0.40 for mobile calls. National fixed-line calls will drop to 19c and local fixed-line calls to 12c. These significant reductions are expected to stimulate competition in the local telecommunications sector by making it easier for new players to enter the market.
Industry experts believe these rate cuts will be especially beneficial to the voice over Internet protocol (VOIP) market. "Indeed, these rate cuts will be a boon for VOIP, because, following this final rate cut, it will no longer be at a price disadvantage. Therefore, businesses looking for ways to save and manage costs will do so by adopting new-generation technologies, such as VOIP," says Mitchell Barker, CEO of WhichVoIP, an online platform that allows users to find and compare the services and prices of various VOIP providers in South Africa. "If they don't, this rate cut could be their last, because operators have already said that any further cuts will make it difficult for them to sustain their operations as they have had to endure reduced profit margins."
Even the least-cost routing (LCR) industry is expected to begin turning towards VOIP. LCR is essentially the simple process of selecting a network operator that will complete an outbound phone call at the lowest particular rate and then routing the call via that particular network in order to provide savings to companies and consumers. Several LCR providers have been reporting losses in recent years as more enterprise users switch over to VOIP.
Since VOIP carriers are not burdened by the high cost of operators' infrastructure legacy in the way that legacy fixed and mobile networks and LCR providers are, they are able to offer their services to consumers at the lowest possible retail prices, Barker notes.
"So the way for LCR providers to stay in the game would be to migrate their customers to VOIP solutions," Barker concludes.
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