MTR court case to transform telecoms landscape
Regardless of the verdict of this week's court battle between the mobile duopoly and the regulator, the local telecoms landscape is set to change for good over the medium- to long-term, says a telecoms lawyer.
MTN and Vodacom have taken the Independent Communications Authority of SA (ICASA) on over its bid to drop mobile termination rates (MTRs) to 10c across the board by 2017, and introduce asymmetry to the benefit of Cell C and Telkom Mobile.
The two cellular giants presented their side of the argument yesterday and, according to several reports, MTN said it would lose R21 million a month if the cuts went through as ICASA has decided. Vodacom has said the shift could cost it up to R1 billion in lost revenue.
The operators are arguing, during the two-day hearing, that ICASA erred procedurally in determining the new rates. Today, the respondents, including ICASA, Telkom and Cell C, are set to put forward their arguments.
Depending on the court's ruling, South Africans may be able to soon benefit from lower call rates, which will indirectly come about because ICASA's move is a bid to foster competition. The rates were initially set to drop from March, and have been postponed to 1 April.
In addition, ICASA has said it will review the rates for years two and three of the glide path, while the first year's cut is dependent on the court's decision.
Winds of change
Dominic Cull, owner of Ellipsis Regulatory Solutions, explains the court case "will redraw the landscape of telecoms regulations, without a doubt," regardless of the short-term impact of the court's ruling.
He explains the case has made it clear that ICASA is too weak to do its job and the Department of Communications will have no option but to bolster it if government wants to take on giants like the operators and other dominant players, such as MultiChoice.
ICASA's new CEO, Pakamile Pongwana, has promised the regulator will have more bite, but has also conceded it is under-staffed and needs to be turned around; a situation he has been addressing.
In addition, operators will no longer be able to run to the minister if ICASA makes a decision they do not like, says Cull. He explains this is the first time "in living memory" that there is alignment on an issue between minister Yunus Carrrim, ICASA and the Parliamentary portfolio committee on communications.
Previously, running to the minister to have ICASA overturned has worked, says Cull. Communications minister Yunus Carrim has, on a few recent occasions, slammed Vodacom and MTN for taking to the court and delaying the new MTR regime - which he sees as a catalyst for lower mobile costs - from taking effect.
The battle will also redefine the relationships between the state and the incumbent operators, Cull adds. He explains there must be a better balance between the interests of business and of the country.
There is no mileage in the assertion that the revenue-maximisation model the operators use to benefit shareholders can sit comfortably with SA's socio-economic needs, Cull notes.
MTN has warned the aggressive cuts could lead to job losses, and Vodacom has said they may have an effect on its ability to roll out more infrastructure.
Cull expects to see more policies that allow for direct intervention in the sector. He notes ICASA will take the operators on, which it will do under the guise of its current probe into the cost of communications, as well as its inquiry into the state of competition in SA's ICT sector.
The latest public inquiry will see the regulator investigate aspects that directly concern the mobile operators, such as the role of fixed (fibre) and wireless (high-demand spectrum) in enabling competition.
Cull says there are four possible decisions that could be made by the court.
ICASA could win its interdict, which would mean the regulations would be implemented in April as they stand with a review of years two and three, says Cull. He sees the review as a legal strategy so that ICASA can minimise any damage of a loss.
ICASA says, based on input by an "external expert economist" it can justify a termination rate of 20c in year one, but the rates for the outer two years may need review. "In this case, we may review 2015 and 2016 mainly in trying to avert a very lengthy legal challenge. We will be re-consulting for those years."
Cull says, if ICASA wins, interconnect will drop from the current 40c to 20c, and the asymmetry that will benefit Telkom and Cell C will come into play.
However, if MTN wins in its bid to stop ICASA implementing the new rates, Cull expects ICASA to withdraw the regulations and start the process again. He adds there is an outside chance that the South Gauteng High Court will find the regulations unlawful and throw them out.
The fourth option is that of a settlement between the parties, says Cull. However, this would require some sort of give and take, which would likely involve asymmetry.