Depending on the outcome of a High Court hearing this week, the new termination rate regime envisaged by the Independent Communications Authority of SA (ICASA) may - or may not - see the light of day.
The culmination of the ongoing termination rate tussle - tagged as likely to be the biggest fight SA's mobile industry has seen in recent history - is here, with a court case between the country's mobile duopoly and its telecoms watchdog set to play out over the next two days.
This comes just under two months since ICASA announced a new termination rate regime, including a three-year glide path and asymmetry rates that greatly favour later mobile entrants Cell C and Telkom Mobile.
As at September, Vodacom and MTN enjoy a 43% and 36% market share, respectively, while Cell C and Telkom Mobile hold 17% and 2.2% of the market, respectively.
ICASA says the hearing, initiated by MTN on 12 February and joined by Vodacom about two weeks later, will determine whether implementation of mobile termination rates (MTR) in their intended form takes place - or is delayed further.
MTRs are the fees mobile operators pay each other to carry calls on their networks. The regulator's new regime - an initiative to bolster competition and reduce communication costs - will see Vodacom and MTN pay smaller players Cell C and Telkom Mobile 44c, while the latter two will pay just 20c. The new structure is set to take effect on 1 April. The current termination rate is 40c.
In line with ICASA's new termination regulations, a three-year glide path will see MTRs reach 40c for Cell C and Telkom Mobile, and 10c for the two dominant players in 2016. The aim is to have an across-the-board MTR of 10c by 2017.
Counter-arguments
MTN, Vodacom and ICASA will take to the South Gauteng High Court podium tomorrow and Wednesday, after which a judgement will be made around the implementation date for lower MTRs and asymmetry - and the form in which these will be instituted.
MTN and Vodacom argue that ICASA's new MTR structure will adversely influence their ability to invest in network infrastructure in rural areas in particular. While they concede they are not against lower termination rates, they have pointed out there is no evidence that this will lead to lower retail prices.
The two mobile leaders are seeking an interim order to set aside the implementation of ICASA's new inter-network rates, as well as a review application challenging the validity of the process followed by the regulator.
MTN SA CEO Zunaid Bulbulia recently said: "How overcharging the larger networks' subscribers to call smaller networks will deliver cheaper prices for all South African [consumers], is something neither ICASA nor the recipient of the so-called asymmetry has managed to explain."
ICASA's Final Call Termination Regulations 2014 document states in Section 5.3: "The authority applied a long run incremental cost standard (LRIC)-based financial model to determine the termination rates for both markets one and two. This was based on information available to the authority."
However, Vodacom says ICASA did not ask for the information necessary to run an LRIC model.
Uncertain implementation
Shortly after MTN filed papers against the new MTR regime, ICASA said it would delay implementation by two months, in order for the legal case to be seen to. Subsequently, however, the regulator said one month would be sufficient and put the implementation date at 1 April - just a week away.
ICASA said at the time it was in the public interest that MTN's application for interim relief be resolved as quickly as possible. This was prior to Vodacom launching its own legal application. ICASA has not moved the MTR goalposts since, but the pending court case results in a further implementation date shift.
This morning, ICASA spokesperson Paseka Maleka explained that, on review by an external expert economist, the authority can justify a termination rate of 20c. However, he said, the rates for the outer two years may need reviewing. "In this case, we may review 2015 and 2016 - mainly in trying to avert a very lengthy legal challenge. We will be re-consulting for those years."
Maleka says, regarding implementation, while ICASA made a statement that it would implement the termination rates reductions on 1 April, "this is now the subject of the court case. It is after this hearing that ICASA may confirm whether implementation for the first year continues as initially communicated or it will be delayed further."
Speaking out
A number of parties have spoken out in favour of ICASA's action to slash termination rates and give smaller players a leg up, although industry observers have also questioned the extent of relief consumers would in reality feel.
Communications minister Yunus Carrim has, on a few recent occasions, slammed Vodacom and MTN for taking to the court and delaying the new MTR regime - which he sees as a catalyst for lower mobile costs ? from taking effect.
Speaking at the consultative conference on the National Integrated ICT Policy green paper earlier this month, Carrim said it was unacceptable that MTN and Vodacom legally opposed ICASA's move, in light of the high cost to communicate SA still faces.
He noted communications costs accounted for more than 30% of consumers' average monthly income. Carrim also snubbed claims that the new MTRs would dent two of SA's highest earning mobile companies' bottom lines.
Meanwhile, the Internet Service Providers' Association, Right2Know, Cell C and Telkom have also had their say against efforts by SA's mobile giants to block quick implementation of new inter-network fees.
This morning, Cell C CEO Alan Knott-Craig said in a statement: "I am proud that our regulator has come up with something that will give consumers and the SA economy a bit of hope for affordable mobile communications in the future.
"As the founding CEO of Vodacom, I know that I had a hand in creating the environment we find ourselves in now. I accept that I helped build an industry dominated by a duopoly. At the time, and during the first ten years of the industry, it was the right thing and the industry was about building high quality networks.
"But it should never have lasted this long - the second ten years of the industry appears to have been more about reaping extraordinary profit than about telecommunications."
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