Public hearings over the definition of under-serviced areas saw MTN and Cell C go head-to-head in what has become a multimillion-rand dispute.
The companies presented arguments over the roll-out of community service telephones (CSTs) in under-serviced areas. Both operators claim “millions” are owed to them by the other in interconnect fees and both dispute the definition of under-serviced areas.
The Independent Communications Authority of SA (ICASA) convened the hearings to resolve the dispute and hear presentations on how the incumbent operators, including Telkom and Vodacom, believe an under-serviced area should be defined.
As part of the licence agreements, operators are expected to roll-out low-cost phones to areas which have a teledensity of less than 10%. Telecoms providers are expected to roll-out 52 000 phones, a number which most of the companies have already exceeded.
Both MTN and Cell C presented their own interpretations of this clause in the licence.
Who pays the bills?
MTN's primary argument is that Cell C has interpreted the under-serviced area clause in its licence inaccurately and that interpretation is “dangerous and unlawful”.
The company says the roll-out if its rival's CSTs has encroached on areas that cannot possibly be considered “under-serviced” and contends Cell C has decided to roll-out CSTs “nationwide”.
MTN stated at the hearings yesterday that less than 20% of Cell C's CSTs are, in fact, in under-serviced areas. The company used sub-places, defined by Census 2001, as an example of the areas defined as under-serviced.
Under interconnection agreements between the incumbents, MTN must charge a lower interconnect fee, at R0.06 per minute, for CSTs. The commercial interconnect fee is R1.25 per minute.
Cell C charges users 90c per minute on the low-cost phones and MTN claims it carries the entire cost of termination on its network from Cell C's CSTs. MTN GM for legal and regulatory affairs Graham de Vries argued that its rival bears no cost and simply collects the profits on the low-cost service.
MTN says Cell C's and ICASA's interpretation of the clause in the licence will directly impact its own commercial business. “The cost of this subsidy would be borne by MTN's commercial business, making commercial mobile potentially less affordable and/or available through a waterbed effect.”
Greed versus need
Cell C's response was that MTN is trying to hold onto its market share by using “narrow interpretations” of the licence agreement and that it is “greedy”.
The third mobile operator has rolled out 100 000 community phones, which CEO Jeffrey Hedberg explained had sparked competition in low-cost telephony provision. He said that, after Cell C exceeded its licence requirements, both MTN and Vodacom stepped up their own roll-outs.
Hedberg said MTN's idea of a narrow interpretation of the clause would only encourage “the greed of the few and constrain the opportunities of many”. He added that the CST traffic constituted less than 2% of MTN's total network traffic.
In response to its competitor's claims of profit losses, economist James Hodge explained that since roll-out of the CSTs began in 2003, neither MTN nor Vodacom had experienced any profit pressure from CSTs. He presented a graph of the companies' revenue growth over the period.
Cell C also lambasted the Census data, saying there is little relevance in using its data as a starting point to determine under-serviced areas. According to the company's legal representative, David Liebowitz, sub-places defined in the Census include the Johannesburg Country Club, Bright Water Commons and several universities, which also do not constitute “under-serviced” areas.
Yesterday was the final day of hearings and ICASA will deliberate the matter.
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