Although SA's mobile operators fought tooth and nail against the draft version of the interconnect regulations, the industry has since offered a word of welcome to the finalised version.
The highly-contested regulations have been in the pipeline for some time now, as the Independent Communications Authority of SA (ICASA) sought to cover all procedural bases before publishing the final version.
Over the past months, ICASA came under fire from operators arguing that the time period for the proposed cuts would be too drastic a shock to existing business models.
Now the authority has stuck to its guns, imposing the same rate cuts, but extending the next cut to March next year. In addition, ICASA has introduced regulations to govern asymmetry rates in favour of the smaller telecoms players in the market.
Nonetheless, operators have welcomed the proposed rates and new glide path, although the various players have had different reactions to how the regulations will affect business.
Smoother gliding
One of the biggest points of contention to the draft interconnect regulations was the timeframe over which the cuts would have been enforced, as the initial proposal called for an interconnect rate cut of 50% this year alone, including a voluntary rate cut from R1.25 a minute to 89c, in March.
In addition to the voluntary cuts, the draft regulations proposed the rate be cut again to 65c, in July, with a glide path leading to 40c by July 2012.
However, the July reduction was delayed after mobile operators voiced their concerns at public hearings, arguing the proposed glide path was far too drastic and would likely shock existing business models.
Now ICASA has proposed the following glide path: mobile termination rates will drop from March next year to 73c at peak and 65c during off-peak times. The following year, rates will drop to 56c and 52c, respectively. However, by March 2013, wholesale mobile terminations rates will drop to 40c, regardless of the time the call is made.
Industry has welcomed the new timeline. “The agreed glide path gives us time to adjust our business model in order to accommodate the significant further revenue reduction that will result from the changes announced today,” notes Shameel Joosub, MD of Vodacom SA.
Consumers benefits?
While all players recognise the regulations will go far in promoting competition in the industry, many sit on opposing sides when it comes to whether the rate cuts will filter through to retail savings.
Independent telecoms provider Switch Telecom has pledged to review its retail tariffs in line with the new call termination regulations, to ensure consumers reap the benefits of lower call costs, as the regulator intended.
This review will result in the creation of a simpler call tariff sheet with fewer different rate categories that are easier to understand and remember. Switch Telecom's new rates will be effective from 1 March 2011, the same date as when the regulations come into effect.
Gregory Massel, managing director of Switch Telecom, says clear and consistent call termination rates should benefit consumers by enabling simpler, more transparent and more affordable retail pricing.
But mobile operator Vodacom has said this will not be the case in its business. “It's important to emphasise that this announcement does not produce savings for Vodacom to pass on to customers. It does, however, foster competition, which is in turn likely to lead to lower call charge,” offers Joosub.
MTN has previously argued that there is no link between interconnect rates and retail pricing.
“MTN has, at numerous occasions, highlighted that there is no direct link between mobile termination rates and retail prices; some prices go up, some stay the same, and others decline as part of normal competitive activity, not regulatory intervention,” explains Robert Madzonga, chief corporate service officer of MTN SA.
“MTN investigated the impact that a decline in interconnection revenues had on its operations and have made the appropriate plans to restructure its business model to reflect this. MTN will, of course, continue to offer innovative value for money products and services, while - at the same time - ensuring its network quality and grade of service is not detrimentally affected.”
The only real impact of interconnect cuts would be on off-net costs, which will in turn create competition, eventually resulting in consumer savings, but this is still years away, say analysts.
“We have always maintained that the hype surrounding the whole interconnect debate was misguided,” says WWW Strategy MD Steven Ambrose.
“There never was any correlation between the interconnect and the cost of cellular calls, and the Department of Communications was simply being populist in its advocacy of having these cuts in the name of lower telecommunication costs.”
Related story:
Interconnect battle laid to rest
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