The Independent Communications Authority of SA (ICASA) has tried to whip the rug out from under MTN and Vodacom's feet by amending mobile termination rates (MTRs) during an ongoing court battle.
Yesterday, new regulations governing the cost of interconnecting calls became law and are set to come into effect on Tuesday. The regulations amend the ones published earlier this year and essentially do away with the glide path, while ICASA reviews its previous standpoint.
As a result, from Tuesday, mobile interconnect is set to drop from 40c a call to 20c for Vodacom and MTN, but they will still have to pay Telkom Mobile and Cell C 40c a call. ICASA initially decreed rates would drop across the board to 10c by 2017, but has now put that decision on ice.
Smart move
MTN and Vodacom had approached the court on an urgent basis to stop ICASA from implementing the new rates. The matter entered its second and final day yesterday, and judgement is expected on Monday.
In the midst of the legal arguments yesterday, with respondents, including ICASA, Telkom and Cell C, putting forward their positions, the state published amended regulations, dropping the second and third years of the interconnect glide path.
This is in line with ICASA's statement that after an external expert economist reviewed the rates, it may have to reconsider the latter two years, mainly to "avert a very lengthy legal challenge". The regulator had also stated, in its responding affidavit, that it would take this step, its legal counsel says.
Dominic Cull, owner of Ellipsis Regulatory Solutions, says ICASA's move is a clever one to "try and take the carpet out from under MTN and Vodacom's feet". He says this removes the urgency basis of the application, which is a difficult legal hurdle to leap.
Cull says the review of the outer years' rates will be able to continue in the background, a process that would take at least eight months.
Stronger case
Independent telecoms lawyer Kathleen Rice says, however, ICASA's move does not take the urgency of the matter away, because the case hinges on an issue that is about to come into effect.
MTN and Vodacom have challenged ICASA's determination on the basis that it did not follow the correct procedure before decreeing the new rates. They have also taken umbrage with the asymmetry aspect, which gives a competitive-edge to the two smaller operators.
Rice says ICASA may be trying to make its case stronger by not having to defend years two and three, and feels confident it can defend the first step in the process. ICASA has said the external economic review found it could justify a termination rate of 20c.
Another interpretation of the new regulations is that ICASA is conceding it erred when determining the rates for the outer years, says Rice. However, Cull says this is a strategic legal move and not a "come down" as ICASA is trying to minimise potential damage.
It is not yet clear whether ICASA will bring the new rates into effect on Tuesday. It says, post the hearing, it may confirm whether implementation for the first year will continue as initially planned, or delayed further.
Cull notes the delivery of the verdict on Monday will leave operators in a "crazy" position as they will not know until then what termination rates are expected to come into effect the next day. He says, however, that should the judge throw out the regulations in their entirety, ICASA can simply extend the 2010 rules until the process is completed.
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