No silver bullet

Never has a technical issue, such as the interconnection rate, triggered such a groundswell of emotion from consumers, the industry and government. Yet, the not-so-secret fear is that not much will change.

The two days of public hearings, before the Parliamentary Portfolio Committee on Communications, were to establish three things: firstly, that the mobile network operators drop the interconnection rate of 125c per minute to 60c per minute from 1 November; secondly, that interconnection rates be reduced by 15c on that date until 2012; and, finally, that these reductions should yield equivalent reductions in the retail rates.

The overt theme of the hearings was that the mobile operators are ripping off the public with high interconnection costs. Actually, they are making millions and millions of rands by simply having to connect a person from one mobile operator's network to another. Benchmark after benchmark study, comparison after comparison with other countries was lit up on PowerPoint slides as if all this was new.

Just how the poor were being disadvantaged by this high cost was the more egalitarian theme of the hearings. Highway Africa deftly showed just how an economically disadvantaged community battled to communicate, as the cost to do so ate up more than a quarter of their disposable income.

A third theme, of course, is on the political delivery front. The politicians using their own simple arithmetic are quick to work out that, if 70% of the population has access to cellphones, this is an awful lot of voters. So the ANC, Independent Democrats, Democratic Alliance and Cope have to be seen to be seizing the moral high ground here.

Tied in with this last theme is the role of the executive arm of government, namely the Department of Communications (DOC). It has been quick to issue the regulator, ICASA, with a directive to have new interconnection regulations by 30 November. It appears that the embattled regulator has been set up to fail again, as this deadline is impossible to meet, if one reads the Electronic Communications Act.

DOC director-general Mamodupi Mohlala (a former ICASA councillor) assured me that it is achievable within the confines of the law. However, I sense that lawyers from other parties are sharpening their pencils as they look to see why it is not.

Out of these public hearings come several self-evident facts.

Paul Vecchiatto, ITWeb Cape Town correspondent

So, out of these public hearings come several self-evident facts. Firstly, the cost to communicate in this country is far too high and artificially so. Secondly, there is not enough real competition in the sector. Thirdly, the laws governing it are ambiguous and badly written. Fourthly, there has been a regulatory failure (not necessarily a market failure) and ICASA needs to be fixed urgently. Finally, government and the legislature have played a major role in allowing the current situation to exist.

But what is done is done. The mobile sector has developed into an ecosystem of its own. Many companies are doing well, some as subcontractors to the network operators (the retail sector has a major part of its revenue streaming from the sale of SIM cards). Other companies have developed niche markets where they can capitalise on inherent inefficiencies and arbitrage prices for their clients' benefit.

MTN and Vodacom are victims of their own success. Although one may question their ethical behaviour at times, such as their ability to intimidate ICASA, resources to lobby government and to fend off challengers. But they have worked within the law.

One must remember, as originally envisaged, cellphones were not seen as a medium for the poor to communicate. That is why the original licences had rather extensive provisions for social responsibility, such as community service telephones and a levy of 0.02% of turnover into the Universal Service and Access Fund (USAF).

The USAF was supposed to subsidise the cost of communications for the poor, but has never been used for its intended purpose. As far as I know, it is worth more than R1 billion and counting, as every new I-ECNS licensee has to contribute. Parliament has tried to ask about this and became bogged down in the red tape and stalling of the bureaucracy - maybe it should subpoena the USAF to explain.

So what now? Firstly, Parliament must make it very clear this was not an attempt by it to regulate prices, but to encourage discussion, despite any expectations that may have been generated by its original intent. Secondly, it must embark on its oversight role with ICASA and the DOC with vigour, and ensure they are properly capacitated and operate in an honest and transparent manner.

Thirdly, all constraints that are inhibiting a truly free market in telecommunications must be done away with. These include immediate implementation of geographic number portability and interconnect agreements, and a real examination as to why government should continue to be a shareholder in Telkom.

Finally, the sector must show some good faith by volunteering to cut some of its rates in the near-term. This does not have to be interconnection, but certainly somewhere near the retail levels that will give some relief to the poor, because they are not getting it from government.