In a presentation in October 2012, Knott-Craig said that mobile termination rates (MTR) in South Africa must drop to 15c per minute.
Knott-Craig also argued that there should be significant and sustained MTR asymmetry to benefit new market entrants and boost competition in South Africa.
The Cell C CEO said that the incumbent operators – Vodacom and MTN – insulate themselves from effective competition through on-net tariffs that effectively discriminate against calling to the challenger networks.
Knott-Craig highlighted calling promotions such as MTN’s Mahala and Vodacom’s Nightshift which offer large discounts to on-net calls (hence Vodacom-to-Vodacom or MTN-to-MTN).
“The significance of off-net traffic is disproportionately greater for the challengers than for the incumbents,” said Knott-Craig.
Lower MTRs needed to reduce prices further
Knott-Craig showed that Cell C only makes 4.6c on a 1 minute call (priced at 99c per minute) to another mobile operator during peak times.
The majority of the money of a 99c peak time call (56c) goes to the mobile operator which is called – hence the MTR.
Knott-Craig pointed out that this minute portion of revenue must fund network costs, national roaming, admin costs, funding and the like.
Knott-Craig’s solution to rectify this situation is simple: lower mobile termination rates to 15%, have a significant (400%) and sustained MTR asymmetry and introduce regulation to prohibit on-net / off-net price discrimination (“flat rates”).