The Independent Communications Authority of SA (ICASA) is unlikely to force mobile termination rates to cost, even when it finalises its regulations next year June.
Speaking in a candid media briefing, acting Independent Communications Authority of SA (ICASA) chairman Robert Nkuna emphasised that the regulator is looking at a cost-based model and not a cost model when it comes to regulating interconnect rates.
Nkuna explained that ICASA does not have an ideal rate for interconnect in mind; however, it is looking at the possibility of imposing a maximum interconnection rate of cost plus a 50% mark-up.
Yesterday, the regulator committed to having regulations in place that would force termination rates of the mobile operators down, by the end of the financial year. Nkuna explained today that ICASA started the process of developing interconnection regulations during the last financial year and it had now entered phase two of the process.
According to councillor Fungai Sibanda, the regulator is now trying to determine operators with significant market power and the next phase will be to look at the competitiveness of the market.
ICASA is determined to follow the procedures spelled out in Chapter 10 of the Electronic Communications Act, which forces it to follow public hearing processes, despite a policy direction delivered to it by the Ministry of Communications earlier this year, declaring that interconnect should be forced down to cost by December.
Nkuna said that the direction released by the ministry will still need to be subjected to public consultation before it can be accepted.
Breaking it down
He said the regulator has re-instigated the process to develop regulations around interconnect, because last week's discussions aimed at bringing down rates amicably crumbled. MTN and Vodacom suggested a 78c blended rate, which Cell C did not accept.
Nkuna added that the operators would not indicate what the actual rates for off-peak and peak times would be. He explained that, without the support of Cell C and without the required information from Vodacom and MTN, the regulator could not come to a decision.
He said ICASA has access to the actual costs the operators pay to terminate calls on their networks, and that Vodacom and MTN's newly-negotiated rate does not correlate with those costs.
MTN and Vodacom announced late on Friday that they had come to an agreement to drop rates to an average of 78c, which will slide a year later to 61c.
The regulator says it has not received a submission by either operator on the newly-negotiated rate and cannot comment on it.
Backtracking on commitments
MTN MD Karel Pienaar says the company has simply not had time to make the submission to ICASA, since it has been engaging with the Department of Communications. Operators yesterday met individually with the ministry to discuss their position on the interconnect debate, which Pienaar says was constructive.
He says the meetings were held in the hopes of getting Cell C on board the proposed rate cuts, and, while he would not reveal any more information about the meeting, he says a resolution is in sight.
Pienaar says the company fully supports the regulators' proposed cost-based interconnection rate; however, he has called on consumers and industry stakeholders to allow the company to lower rates gradually.
He says MTN needs time to adjust its financials to maintain investment in network roll-out.
Pienaar says the current drop will indirectly affect the roll-out of 3G services in certain rural areas that the company planned to implement over the next year. However, the investment in the national fibre network will continue.
“I seriously went back to the commitment in the roll-out of the national fixed infrastructure to see if we could back out of any of them, but those commitments were made months ago and we will go ahead with it,” he says.
Too little too late
Local alternative operator ECN, which has been leading the fight against high mobile interconnect fees, says it is still not convinced and is concerned that the slow response of the regulator will impact the smaller players.
ECN CEO John Holdsworth says it is within the regulator's power to force interconnect rates to cost immediately. “And that will probably be no more than 40c,” he adds. ECN has had a legal review of the Chart of Accounts and Cost Allocation Manual regulations, which already stipulate cost-based interconnect rates.
He is concerned that leaving the process to play out could mean that the current status quo could be maintained for years to come.
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