ICASA will not bend on interconnect

The regulator will not be hamstrung by clauses in the interconnect agreements submitted by the operators last month.

In a dramatic turn of events, the Independent Communications Authority of SA (ICASA) has refused to review the applications submitted by MTN, Vodacom and Cell C detailing the terms of lower interconnect rates they have agreed to.

During the course of last year, the operators were called to task on high interconnect rates, which many agree has kept the cost of mobile communications high in SA. The Department of Communications, the Parliamentary Portfolio Committee on Communications and Independent Democrats leader Patricia de Lille all took on the operators to force a lower interconnect regime.

After weeks of arm-twisting and finger-pointing, the operators finally came to an agreement with communications minister Siphiwe Nyanda to reduce the rates to 89c a minute during peak times from March next year, dropping to 85c in October 2011 and again to 80c in October 2012.

However, after an intensive campaign and high public profile statements, the DOC stepped back from the issue, saying it was now up to ICASA to regulate the matter.

Yesterday afternoon, ICASA said it would not allow the current agreements to go through, because there are clauses built into the agreement that will keep the regulator from actually regulating interconnect in any way until the beginning of March 2013.

“These agreements sought to bind the authority to an undertaking not to review mobile termination rates until 1 March 2013. For this reason, the authority has decided not to review the interconnection amendment agreements as submitted,” explained the regulator in a statement.

The regulator's decision has a two-fold implication. Firstly, there is a real possibility that the expected rate cut in March will not happen, and secondly, it is a way for ICASA to reaffirm its dominance. ICASA says it will have its draft interconnect regulations by then, which will hopefully have an impact on the rates.

“It is hoped that the outcome of these regulations will be a reduction in call termination charges, as well as fair and equitable access to existing networks for all licensees,” says ICASA.

However, Frost & Sullivan analyst Spiwe Chireka says ICASA may well have done the right thing. If the regulator allowed the agreements to be reviewed and accepted, it would make it impossible to regulate any other required changes until 2013.

“That would effectively prevent the regulator from doing its job,” she says. Chireka adds that if it allowed itself to be influenced in any way, the operators could walk all over it. “It seems to be a case of establishing dominance,” she notes.

According to Chireka, there is a possibility that the incoming interconnection regulations could be vastly different from the proposed agreements. “If that is the case, it is wise for ICASA to hold back until the regulations are out.”

She says that if there are differences, then the operators will need to go back to the drawing board with their agreements.

Despite the new obstacle, the operators may well go ahead with the rate cut.

Vodacom CEO Pieter Uys confirmed that ICASA has some issues with the submission, and the parties are now trying to reach an agreement. He says they are meeting today to discuss the matter. "Something could still happen in March," he adds.

For every 10% trim on peak interconnect rates, Vodacom will lose R200 million on profit. To mitigate this, says Uys, the company is focusing on trimming costs in its South African unit. The call savings will be passed onto the consumer, and Uys expects this to spur competition among network providers, which could affect mobile call rates.

MTN GM for regulatory affairs, Graham De Vries, says the company still intends to implement the rates that have been the subject matter of much debate. “There are, however, regulatory requirements to comply with, such as the appropriate determination by the regulatory authority that the interconnection amendment agreements comply with the regulations.”

He says the company will look at the concerns raised by the regulator and see if there is a way to address them.

Cell C's new CEO, Lars Reichelt, says he is hopeful that a solution can be found to ICASA's concerns. “A reduction in interconnect is vital for the competitiveness of the market. Any reduction must have the approval of ICASA,” he notes.

He says the regulator has not offered any alternative to the agreements presented to it.

The DOC has not responded to ITWeb's query as to how it will respond to ICASA's decision to essentially reverse an agreement the department painstakingly put together with the operators last year.