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ISPA questions ‘aggressive’ fixed call termination rate reductions

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 16 Apr 2024
The proposed cuts to fixed-line termination rates are more aggressive, says ISPA.
The proposed cuts to fixed-line termination rates are more aggressive, says ISPA.

Internet industry representative body, the Internet Service Providers’ Association of South Africa (ISPA), is questioning the country’s recently announced “aggressive” reductions in fixed call termination rates.

This, after telecoms regulator, the Independent Communications Authority of South Africa (ICASA), last month published the draft amendments to the Call Termination Regulations, of 2014 and 2018, for public comment.

Voice call termination is the service that one network offers another to carry voice traffic to its end-users.

The charge for this service has been the subject of concern, where it has been viewed as a constraint to effective competition, as well as a driver of high retail prices of telecommunications in South Africa.

ICASA notes these regulations are part of the broader measures to reduce the cost to communicate and are intended to be applicable from 1 July 2024.

It adds that these draft amendments mark the penultimate step in a process that began with the authority’s 2021 decision to review the existing call termination rates.

Everything being equal

ISPA notes these call termination costs are worthy of interrogation, as they are almost always passed on to the end telecoms consumer.

The association is calling for implementation of the planned convergence of mobile and fixed call termination rates towards eventual parity.

According to ISPA, ICASA has decided not to align South Africa’s fixed termination rate with the mobile termination rate in a move that goes against its own findings that acknowledge the convergence between fixed and mobile.

“The authority maintains that fixed and mobile services should be in separate markets for the reasons already provided under the fixed product market definition. The authority, however, acknowledges some level of convergence between the two services since the last review, which was driven largely by the COVID-19 pandemic,” says the regulator in a Government Gazette published in March 2022.

According to ISPA, the regulator said in a recent notice that it wants mobile termination rates slashed from 9c/minute excluding VAT (13c for smaller operators) to 7c (9c) on 1 July 2024 and 4c (4c) on 1 July 2025.

It points out that the proposed cuts to fixed-line termination rates are more aggressive – from 6c/minute now, ICASA wants these reduced to 4c from 1 July 2024 and to 1c from 1 July 2025.

ISPA member Switch Telecom states that 1c is an extraordinarily low fixed termination rate (FTR) by global standards.

In addition to SA’s FTR being a fraction of the FTR in highly-developed markets, ISPA points out that SA is a geographically large country with relatively low population density.

“The real-world cost of deploying fixed-lines is far higher than in Europe, for instance, where the FTR is 40% higher than ICASA is proposing. Furthermore, SA has unique challenges relating to unreliable power, which adds to the cost of providing reliable services,” says the industry body in a statement.

It adds that Telkom, SA’s fixed-line operator, has already expressed dismay at ICASA’s decision to cut fixed call termination rates and mobile termination rates asymmetrically.

For their part, many of ISPA’s members provide voice services and their experience is that fixed-mobile substitution in the voice market is increasing. This is a worldwide trend, the association says.

Blurring lines

According to ISPA chairperson Sasha Booth-Beharilal: “The argument for parity has little to do with interconnection revenue, but rests on the fact that the distinction between fixed and mobile calls is blurring. The result is that the average cost of terminating a fixed call is now the same, if not more expensive, than terminating a mobile call.”

The first call termination review took place around 2010, resulting in ICASA imposing glide paths for the reduction of termination paths, says the industry body.

Under ICASA regulation, it adds, call termination rates have been substantially reduced since 2014.

“Now, concerns are related to issues of parity and the sensible view is that there is simply no good reason for differences in fixed and mobile termination rates,” it says.

“Finally, when it comes to proposals to cap rates local operators can charge for terminating calls coming from international destinations, ISPA welcomes the proposal to curb excessive international termination rates which bear no relation to regulated rates or actual costs. ISPA will engage with ICASA to ensure it understands how this will be practically implemented.”