ICASA an "absolute disgrace"

A telecoms industry veteran delivered harsh criticism of the regulator while discussing telecoms competition at the MyBroadband conference

The fifth Annual MyBroadband conference began with John Holdsworth, CEO of ECN Telecoms, taking to the stage to talk about factors effecting the reduction of costs and the stimulation of competition in the South African telecoms market.

“We’re in a market that’s dominated by monopoly interests that have failed so badly, and we have a toothless regulator that doesn’t even have a bark, let alone a bite – clearly something needs to be done,” began Holdsworth.

“Clearly we need better services, and value for money. From [ECN’s] point of view, competition in the telecoms market is virtually non-existent. SA is not a mature telecoms market. There are two or three dominant providers with very large margins. There is plenty of room for newcomers to enter into the market and create a price war with incumbents.”

In regard to interconnect rates hindering competition, Holdsworth said “These rates act as an artificial price floor. They are so high, you can’t realistically price below it. The only way a new entrant will be able to come into the market, is to attack the incumbents. High interconnect rates act as a crude anti-competitive club. Until these rates drop, we won't see any shift in market share.”

“Every operator effectively has a monopoly on its own network. The existing regulations encapsulated in law for the past 5 years state that interconnect should be based on costs, but ICASA has done nothing about it. The [incumbents] have given their [interconnect] costs to ICASA, and they have simply gathered dust. It's an absolute disgrace,” said Holdsworth.

By way of example, Holdsworth discussed the costs that ECN incurs in delivering its voice services. The ECN selling cost is R1.40. Of this, R0.02 is core networking cost and ECNs margin is R0.13. This means that R1.25 goes toward interconnect, 89.3% of the total cost.

The way forward

Holdsworth outlined a number of key issues that must be addressed in order to open up the market to competition: Cost based telecoms pricing, the implementation of number portability and carrier pre-select, local loop unbundling, and interconnect rates.

“For the first time we’ve got the government, new entrants and even ICASA determined to do something. For the first time we are going to see changes in the market. This process doesn’t have to be destructive,” said Holdsworth.

"The DoC can deliver policy mandate to reduce interconnect rates. Please note, this rate should be cost, not cost plus a fair price. We need to make sure interconnect rates are set at cost using proper methodologies. This is a war we have to win,” Holdsworth stated emphatically.

In order to make sure this happens, the DoC has the power to change the law to accelerate the process, and they have indicated they are willing to do so. “For the first time the [incumbents] believed them - they mean business,” said Holdsworth.

“We want the regulator and the government – for the first time ever – to act on the behalf of the consumers. We think the interconnect rates should be dropped to 25 cents, and it should happen immediately.”

ICASA & lower interconnect rates - discussion