The Independent Communications Authority of SA (ICASA) has come to a decision on the long-debated issue of termination rates, for both mobile and fixed-line networks.
ICASA says its determination on the future of termination rates - the fees operators pay to carry calls on each other's networks - is based on a review of industry conditions. "The authority [has made] this determination based on a review of the effectiveness of competition in the market for call termination."
Mobile termination rates (MTRs) have been put on a three-year sliding scale, which will see the inter-operator fees dropping by 50% next year - down 20c from the current 40c - and thereafter 5c a year, until it reaches 10c in 2016. ICASA previously said MTRs could drop as low as 15c.
Termination fees to a fixed location will be 19c, down to 12c over the set period (2014 to 2016).
The revised termination rates apply to Vodacom and MTN for mobile termination and Telkom for fixed termination.
Still ineffective
The latest termination fee focus comes as a knock-on effect from 2010, when the authority realised the termination rates that had existed up to that point gave rise to ineffective competition, because of inefficient pricing.
At the time ICASA imposed cost-oriented pricing on Vodacom and MTN for mobile termination and Telkom for fixed termination, based on a three year sliding scale that came to an end in March this year.
Today, at a media briefing outlining its latest termination rates decision, ICASA said that, to this day, the market is still ineffective, "with extremely high levels of concentration, where the market for termination to a mobile location and the market for termination to fixed and mobile locations have a Herfindahl-Hirschman Index (HHI) of greater than 4 000, where 1 800 is the estimated highest value before a market exhibits effective competition."
ICASA councillor William Stucke says the HHI is a guide that is commonly used to determine how competitive a market is. "A high HHI indicates an uncompetitive market, while equal competition [would yield] a lower HHI."
Separate scales
ICASA has also reached a decision on the issue of asymmetrical termination rates - a case that has been ardently pleaded by third operator Cell C.
The authority has deemed asymmetry for players with less than 20% market share necessary to foster competition, and has instituted a five-year sliding path - starting from March next year.
To the benefit of Cell C and Telkom Mobile, asymmetry rates will drop annually to meet the 2016 flat rate of 10c - starting from the current 44c high and dropping incrementally by between 4c and 7c annually.
The need for continuing asymmetry, says ICASA, is due to traffic imbalances, the promotion of investment, competition stimulation and the fostering of SMMEs.
ICASA says the draft termination rates will be gazetted shortly, after which stakeholders will have 14 working days to submit written comments.
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