ICASA says 60c a likely interconnect fee

[rpm]

ICASA says 60c interconnect fee likely

The final wholesale termination rate is to be decided in the next few days; cost based mark-up should not exceed 50%

 

[Shake&Bake]

Some strong words from Icasa and Paris Mashile - Titanic vs an iceberg.
Do they (ICASA) realise that they are (or rather have been) the Titanic?

They've been pushed around all these years and it took Parliment and the DoC to get involved to get this ball rolling.

My praise goes to the Portfolio Committee and the DoC for the events which are transpiring. (Just got a cold shiver typing that)

ICASA still has a long way to go before it's seen to be a regulator which is effective in my eyes.

 

[krycor]

uhm how can the final rate be 60c if max is 50% markup on cost?

 

[Srack0verflow]

remember to put in the denture cream this time ICASA. you showed us just how toothless you are back when you took on ADSL

 

[pkid]

I want a promise from MyBroadband that there will be no more articles on this until something is done. The next article we read should be the one announcing that it has been done. Enough talk!

 

[Random717]

I want a promise from MyBroadband that there will be no more articles on this until something is done. The next article we read should be the one announcing that it has been done. Enough talk!

What's wrong with daily updates on an ongoing process?

 

[mikef]

My praise goes to the Portfolio Committee and the DoC for the events which are transpiring. (Just got a cold shiver typing that)

With respect I would like to differ with you about the praise. Although I agree that the interconnect rate is currently set far too high and should have been regulated to "cost plus fair profit" long ago I think the way they are going about it is going to do more harm than good to the industry. The interconnect debate is far more complicated than implying the interconnect rate is equal to a charge to the public. They are creating unrealistic expectations for cheap political gain. Secondly I am not sure if some of the motivation is not an attempt to shift profits back to Telkom now that they have sold their interest in VC.

The mobile call cost is not the most pressing issue facing SA telecommunications. Very few people are in a position that they do not own and use a cell phone in SA. Far larger are the issues relating to cheap broadband. The potential to benefit society through enhanced education, improved access to information and stimulation of the economy is through cheaper and more readily available access to the information super highway. Expecting the mobile operators to dramatically drop retail call costs is counterproductive in achieving this. Imagine the outcry from the public when interconnect rates go down and they see no or little reduction in retail rates. Once the dynamic of the interconnect fee debate is understood it is obvious that this rate is not directly linked to the retail pricing but more to do with infrastructure protection and restricting competition. That implies that any attempt to force the mobile operators to reduce retail pricing will impact directly on their ability to reduce data costs and expand infrastructure.

 

[magneto]

see the bigger picture. the only reason why JZ ( if forcing iscasa to do this ), becuase he's not getting any of $$'s from the elephant consortium. Why? mbeki and his friends own the elephant consortium.

 

[Speedster]

The reduction in interconnect rates will result in an immediate and equal reduction in retail prices - what don't you get about this?

 

[mikef]

The reduction in interconnect rates will result in an immediate and equal reduction in retail prices - what don't you get about this?

This type of comment is exactly what concerns me about the DoC approach

 

[Speedster]

This type of comment is exactly what concerns me about the DoC approach

Why does it concern you? It is a simple equation - pull the agreed pricing tariffs out of ICASA's file cabinet, see the following (estimated): Cost of call - R1.00, interconnect fee - R1.25 equals ICASA approved retail fee R2.25pm. Reduce the interconnect portion to 95c, the approved retail fee becomes R1.95. Where is the problem?

 

[entrepr]

People talk about charging interconnect at "cost" but there's a big assumption here - calculation of the cost. We are well behind other countries even in doing this calculation:

Cost in SA is measured using COACAM - calculated by dividing all of the operator's costs by the number of voice minutes. The operators can come up with many different numbers for this just by moving the costs around in the calculation. For example, they could include all the rural 3G site costs, even though these sites are used mainly for data. Only an expert could challenge these numbers by reviewin the 'costs' in detail.

More progressive countries use LRIC, which only looks at the future costs of carrying additional voice traffic on the network (hence LRIC: Long Range Incremental Costs). This typically comes up with a lower, more accurate value which is easier to review by outsiders.

We should use COACAM for now because the numbers are already in, and get the tarriff relief early, but let's now talk about 'costs' as if they are a number set in stone.

 

[Pitbull]

I think I just need to clarify this for the people who don't understand exactly what is happening.

Interconnect charges takes place on every call. Be it on net or off net. Telkom is always a carrier. That being said, the interconnect rates which is being reduced will effect only a part of the price make-up when it comes to cellphone rates. Remember this does not effect the profit margin generated by calls.

Think of a business where you buy and sell (Retail) You have a delivery fee included in your pricing. Now if the delivery fee is cut in 1/2 that means only a percentage of your cost is reduced by 1/2 this doesn't affect your profit margin.

Let's say a bread is R 8 per loaf. The supplier has a R 2 delivery fee added into that loaf. if the delivery fee is reduced to R 1 it means the bread will now cost R 7 the the supplier doesn't lose anything on his profit.

Now there is a very small gain from interconnect charges on certain providers depending on the traffic going through and to where. This doesn't even come close to the profit section of the pricing. So some cellular providers will lose out of the extra "income" from having interconnect surplace, but this is accross all networks and thus doesn't do anything inrelation to projected profits even though that extra income is gone.

Hope it makes a little sense

 

[mikef]

Sorry Pitbull - you have lost me totally on your explanation

My understanding is that the interconnection fees that the debate is about would more correctly be called call termination fees - on net calls should therefore not be affected - or am I being dense:erm:

 

[guest2013-1]

I found it funny, that on the news, they reported the DoC forcing the change and then ICASA saying they're enforcing the change. I laughed out loud when I heard it (and their interview with Paris)

It's funny how they spun it to be their idea when the DoC clearly said they're interjecting because of the incompetence of ICASA. lolzors.

Still can't keep this smile off my face as the DoC is doing what they were supposed to be doing 10 years ago already

Then again, we didn't have the soccer world cup here either so I'm wondering how much of these changes will still be in effect 3 years from now. It's all good trying to "show the world" but there's probably not going to be as much vigor from parliament's side for change once the world cup ends I believe. Only have to sit back and wait...

 

[guest2013-1]

Sorry Pitbull - you have lost me totally on your explanation

My understanding is that the interconnection fees that the debate is about would more correctly be called call termination fees - on net calls should therefore not be affected - or am I being dense:erm:

Yes

Basically what he's trying to say is that the interconnection rates getting charged all around does not effect their profit margin on normal usage of the network. BUT that the consumer is charged for the "delivery fee" anyway.

You run a shop that delivers bread to cafe's
Your bread costs R6, you already have your profit margin on it as it costs you R4 to produce
You charge a delivery fee of R2 to the shops (per bread)
The shop pays R8 for each loaf

If your delivery fee gets halved, you only charge R7 per loaf to the shop. It immediately then translates into a cut in bread pricing to the end consumer.

The end consumer being the cafe's
The bread maker/delivery guy (you) being the cellphone company

Understoods?

 

[Pitbull]

Sorry Pitbull - you have lost me totally on your explanation

My understanding is that the interconnection fees that the debate is about would more correctly be called call termination fees - on net calls should therefore not be affected - or am I being dense:erm:

From my understanding the Base stations in the majority of the cases are still connected via Telkom lines. Meaning all calls even on net routes via Telkom somewhere in the system. That is why you would see that Vodacom to Telkom would be the same price as Vodacom to Vodacom and so forth on any other network as an example. I don't have a pricelist infront of me but I'm sure that is how I recall it.

 

[mikef]

Yes

Basically what he's trying to say is that the interconnection rates getting charged all around does not effect their profit margin on normal usage of the network. BUT that the consumer is charged for the "delivery fee" anyway.

You run a shop that delivers bread to cafe's
Your bread costs R6, you already have your profit margin on it as it costs you R4 to produce
You charge a delivery fee of R2 to the shops (per bread)
The shop pays R8 for each loaf

If your delivery fee gets halved, you only charge R7 per loaf to the shop. It immediately then translates into a cut in bread pricing to the end consumer.

The end consumer being the cafe's
The bread maker/delivery guy (you) being the cellphone company

Understoods?

No - I can guarantee that if the interconnect fee drops by 30c and the retail price drops by 30c MTN's profits will reduce dramatically unless they find some otherway to increase revenue

 

[Pitbull]

No - I can guarantee that if the interconnect fee drops by 30c and the retail price drops by 30c MTN's profits will reduce dramatically unless they find some otherway to increase revenue

Not true.

End of the month or whenever all networks will meet and balance their Interconnect sheets. In some cases networks make a profit in some cases they break even meaning no one pays no one. In other cases that network who made a profit the last time round now needs to pay the other network and so forth.

That being said let's use another example:

I have R 300 pre-paid airtime. I will still phone and finish up that R 300 pre-paid airtime no matter what the reduced rates are. I'll just be able to use it more frequently. It will still be used and the netwrok will make a profit on that. With or without the reduced rate.

 

[Speedster]

No - I can guarantee that if the interconnect fee drops by 30c and the retail price drops by 30c MTN's profits will reduce dramatically unless they find some otherway to increase revenue

Guys mikef and I have been having this argument over a couple of threads this past week. He seems to think the operators are entitled to profits from interconnect fees without understanding that their profit is already built into the base fee (without interconnect). Interconnect is a BONUS they've been receiving up until now and parliament has finally decided to cut it out.