Outlaw Interconnect Rates Entirely

[Lightscribe]

One man has seen through the mist...Look people...See clearly...look "through" the mist of lies and obfuscation...

It is all quite messy. Maybe they should just outlaw interconnect rates entirely and make it a mandatory condition of all network licences that calls must be accepted from any other licensed network. That way there can be no question of collusion.

Who has Nyanda's email address? Let's send him a one sentence solution!

 

[The_Unbeliever]

I agree with this 100%

No doubt there will be drawbacks etc, but then again... what the hey...

 

[mikef]

Glad to see we are campaigning for an end to mobile broadband.

If the MTR was below cost please explain to me why anyone would invest in infrastructure.

 

[Lightscribe]

Yes there's a cost...and that cost is rather difficult to determine, when dealing with collusion and corruption...

Using the same principle, and in the absence of any historical costing, the mobile operators were allowed to charge their local rate for their own customers – which back then was lodged with the regulator and approved by the same – at R1,30/minute, less Telkom’s local rate of 21c/minute, or R1,09/minute for terminating a call from Telkom. In retrospect, dicey logic.

R1,09/minute was thus assumed (in the absence of any contrary evidence) to be a mobile operator’s cost of terminating another network’s call on their networks (which had yet to be built, never mind costed). But mobile operators had to start preparing COA/CAM (another stupid acronym for the cost of a call) and present these to the regulator, which they have done for some number of years already. Why? So that interconnect rates could be properly set when the regulator had a moment, between falling of his horse and snoozing on the couch. http://www.techcentral.co.za/interconnect-the-real-story-2/555/

Former Vodacom CEO Alan Knott-Craig recently said that only a fool would argue that interconnect is not too high. “Clearly it's too high,” said Knott-Craig. “You cannot have a tariff set 16 years ago, when you based that tariff on a market size of 500 000, a million people, and when you have a market size of around 40 million people and try and maintain that this is [fair].”

Knott-Craig further argued that the suggested interconnect rate will not have a material effect on the profits of Vodacom and MTN. “So I'm not sure why the heck people are fighting this. It's not going to have any impact on profits, it's not going to have a hell of a impact on tariffs either,” said Knott-Craig.

Uys however disputes Knott-Craig’s argument, saying that Vodacom stands to lose over R 1billion in profit should interconnect rates be reduced to 60c as suggested. “Maybe a billion rand is not much to Alan [Knott-Craig], but to me it is a lot,” said Uys.

When quizzed about the fact that Vodacom is making significant profits and should be able to absorb a R 1-billion reduction in earnings, Uys said that it is not as simple as it may sound. The Vodacom CEO pointed out that Vodacom’s EBITDA margins are already far lower than international norms, and further cuts may well reduce the interest in investing in South Africa’s mobile industry. http://mybroadband.co.za/news/Business/10061.html

"They" are making "profit" from the MTR rates. Plenty of it, since they are screwing over Cell C. Business as usual, right? For vodacon/mtn, it's NOT about covering costs.

If Cell C can live with 15c, then the vodacon/mtn BS sounds like more dicey logic, collusion and corruption.

Cell C is however keen to see significant mobile termination rate price cuts despite the fact that they stand to lose earnings in the short term. “The mobile termination rates in South Africa are unjustifiably high and this has led to high price levels which damage the entire economy and the poor disproportionately,” said Lars Reichelt, CEO of Cell C.

Cell C proposed that Vodacom and MTN pay the smaller operators a mobile termination rate of R0.75 per minute whilst the smaller operators, including Cell C, pay Vodacom and MTN a rate of R0.65. Also, that fixed termination rates be reduced concomitantly to R0.15.

Now, vodacon/mtn want to b*tch and moan, because they are going to be deprived of that "profit from collusion"?

We all know, that no matter what the price drops by, they will simply make up for losses elsewhere...

So, if it is 15c, it may as well be 0c. That "maintenance/infrastructure investment overhead" of 15c can be claimed from the client. As it is, it is simply a tool to squeeze out the smaller players.

Many industry experts have expressed doubts about call rates immediately dropping due to interconnect rate cuts. It was even suggested that prepaid call rates may increase to compensate for lost revenue.

Du Pont Telecoms CEO Graeme Victor said that a reduction in the mobile wholesale termination rate will not do much to reduce the cost of mobile calls. Victor warned that prepaid cellular customers may even find themselves paying more for calls.

Triple-W Strategy analyst Steven Ambrose agrees, saying that it is important to keep in mind that there will, in all likelihood, not be an automatic cut in cellular tariffs that is equivalent to the cut in interconnect rates. “There will not be immediate cost savings from the big networks - the price reductions will start from the smaller players who will be more competitive and flexible in their pricing, and this competition will result in a overall re-balancing of cellular costs over the next year.”

Thus, Cell C can now lower prices...mtn and vodacon will have to follow. telkom's mobile rates may surprise people too...

 

[Vrotappel]

The MTN/Vodacom coalition know that lower interconnect will assist their competitors. Obviously they want to squash all competition, that's what businesses do. The regulator must force them to do so. Strengthen the regulator (kick out all the ANC cronies) and then things will change.

 

[supersunbird]

Glad to see we are campaigning for an end to mobile broadband.

If the MTR was below cost please explain to me why anyone would invest in infrastructure.

Because they want to make profit by being in business?

 

[mikef]

Yes there's a cost...and that cost is rather difficult to determine, when dealing with collusion and corruption...



"They" are making "profit" from the MTR rates. Plenty of it, since they are screwing over Cell C. Business as usual, right? For vodacon/mtn, it's NOT about covering costs.

If Cell C can live with 15c, then the vodacon/mtn BS sounds like more dicey logic, collusion and corruption.



Now, vodacon/mtn want to b*tch and moan, because they are going to be deprived of that "profit from collusion"?

We all know, that no matter what the price drops by, they will simply make up for losses elsewhere...

So, if it is 15c, it may as well be 0c. That "maintenance/infrastructure investment overhead" of 15c can be claimed from the client. As it is, it is simply a tool to squeeze out the smaller players.


Thus, Cell C can now lower prices...mtn and vodacon will have to follow. telkom's mobile rates may surprise people too...

If CellC is not currently in a position to lower prices with the current MTR what makes you think this will improve if the MTR reduces - bearing in mind they are a net receiver of interconnect fees - so any reduction will reduce their profits. They are looking for MTR skewed in their favour (paying 65c vs receiving 75c)- even a difference of only 10c multiplied by billions of calls will be a major shifting of profits to them - without these asymmetrical rates I do not see them passing any saving on to the public because there would be no saving to pass on.

Because they want to make profit by being in business?

How will they make profits by paying their competitors to undercut their prices?

 

[mikef]

One man has seen through the mist...Look people...See clearly...look "through" the mist of lies and obfuscation...



Who has Nyanda's email address? Let's send him a one sentence solution!

BTW did Gatecrasher publish a news article that I missed - or is this thread in the wrong section. :erm:

 

[Lightscribe]

If CellC is not currently in a position to lower prices with the current MTR what makes you think this will improve if the MTR reduces - bearing in mind they are a net receiver of interconnect fees - so any reduction will reduce their profits. They are looking for MTR skewed in their favour (paying 65c vs receiving 75c)- even a difference of only 10c multiplied by billions of calls will be a major shifting of profits to them - without these asymmetrical rates I do not see them passing any saving on to the public.

When MTR is zero, they won't pay out more, than what comes in. You know the numbers.

Being a "net receiver" of R10, because all your 10 clients received calls from 10 of 30 other networks' clients, then having to pay out R20 for 20 calls from your clients, to other networks, since the larger number of clients are with the two other networks, does not equate to profit.

Vodacon/mtn colluded to use this MTR tool, to make tons of money, whilst stifling competition.

How will they make profits by paying their competitors to undercut their prices?

The question should be: "How will Cell C make profits by paying their competitors to undercut their prices?"

 

[mikef]

When MTR is zero, they won't pay out more, than what comes in. You know the numbers.

And as I pointed out before even if the MTR was R10 per call as long as the MTR is symmetrical, they won't pay out more than what comes in. (In theory at least)

Being a "net receiver" of R10, because all your 10 clients received calls from 10 of 30 other networks' clients, then having to pay out R20 for 20 calls from your clients, to other networks, since the larger number of clients are with the two other networks, does not equate to profit.

Currently Cell C is a net receiver (this has been stated on the forum as a fact) - i.e. they are receiving more money for competitors calls being terminated on their network than they are paying to their competitors to terminate CellC customers' calls on their competitors' networks. The situation you are describing implies they are a "net payer"

Vodacon/mtn colluded to use this MTR tool, to make tons of money, whilst stifling competition.

The "tons of money" is not necessarily from interconnect fees.

The question should be: "How will Cell C make profits by paying their competitors to undercut their prices?"

Please illustrate how this happens?

 

[Lightscribe]

And as I pointed out before even if the MTR was R10 per call as long as the MTR is symmetrical, they won't pay out more than what comes in. (In theory at least)

In a theory, that requires an exactly equal amount of clients, for each network...

Currently Cell C is a net receiver (this has been stated on the forum as a fact) - i.e. they are receiving more money for competitors calls being terminated on their network than they are paying to their competitors to terminate CellC customers' calls on their competitors' networks. The situation you are describing implies they are a "net payer"

I was not aware of that. Please supply a link, if at all possible.

The "tons of money" is not necessarily from interconnect fees.

Granted.

Please illustrate how this happens?

If Cell C receives more money for competitors calls, being terminated on their network, than they are paying to their competitors, then the question no longer applies.

However...

It's clear why Cell C wants this system, and an immediate implementation. It is a net payer as Cell C subscribers make more calls to other networks, than the amount of calls made to Cell C from Vodacom and MTN users. http://mybroadband.co.za/news/Business/10193.html

So, what's the truth?

 

[Syndyre]

In a theory, that requires an exactly equal amount of clients, for each network...

It doesn't, we've had a thread about this already. It does require them to have an equal propensity to make and receive calls though, which is a different issue.

 

[mikef]

In a theory, that requires an exactly equal amount of clients, for each network...

Your understanding is wrong - quoting from an earlier post of mine:

In the scenario where there is a single symmetrical interconnection rate between all operators in the telecommunication marketplace and on the assumption that calls get terminated on the individual operators networks in proportion to their respective subscriber market share percentage the net cash flow from interconnection charges would be zero for each operator. In other words, whether you are a small operator with one thousand subscribers or a large operator with sixty million subscribers or anything in between, your interconnect revenue due to you from your competitors for their subscribers calls terminating on your network would always exactly equal the amount you have to pay to them for your own subscribers calls terminating on their networks. At first glance this might not seem logical but it is a mathematical fact - the so called “Zero sum game”. (please do the maths if you wish to dispute this)
An example with amounts – if you assume that CellC has 5% of the total subscribers then yes 95% of their calls by average should terminate on their competitors networks. This equates to 4.75% of all calls made over all the networks(5% x 95%). However their competitors have 95% of total subscribers and using the same logic 5% of their competitor’s calls should terminate on Cell C's network, i.e. once again 4.75% of all calls made (95% x 5%). In other words if the assumptions were correct Cell C revenue would exactly equal their costs i.r.o. interconnection.

I was not aware of that. Please supply a link, if at all possible.

http://mybroadband.co.za/vb/showthread.php?p=3237434#post3237434

 

[Lightscribe]

Thanks for the info.

It's clear why Cell C wants this system, and an immediate implementation. It is a net payer as Cell C subscribers make more calls to other networks, than the amount of calls made to Cell C from Vodacom and MTN users. http://mybroadband.co.za/news/Business/10193.html

So, what's the truth?

 

[mikef]

Thanks for the info.



So, what's the truth?

Based on some of Hilton's other incorrect perceptions I tend to place more value on dominic's comment. It is of course possible that both are correct if one assumes dominic's comment to be due to the Telkom asymmetrical effect and Hilton to be ignoring the Telkom effect. However I suspect in any event that the net cashflows are negligible in relation to the total turnover of the operators.

 

[Lightscribe]

It may seem negligible, but I really feel that Cell C are being done in again.

We know they were done in by the raising of the rates. This 19% reduction is more smoke and mirrors.

Nyanda had better not accept it.

 

[rpm]

Bill and Keep: http://en.wikipedia.org/wiki/Bill_and_keep

Bill and keep (B&K or BAK),also known as net payment zero (NPZ), is a pricing arrangement for the interconnection (direct or indirect) of two telecommunications networks under which the reciprocal call termination charge is zero. That is, each network agrees to terminate calls from the other network at no charge.

 

[mikef]

Bill and Keep: http://en.wikipedia.org/wiki/Bill_and_keep

Bill and keep (B&K or BAK),also known as net payment zero (NPZ), is a pricing arrangement for the interconnection (direct or indirect) of two telecommunications networks under which the reciprocal call termination charge is zero. That is, each network agrees to terminate calls from the other network at no charge.

Such an arrangement acts to remove the wholesale cost barrier to the retail pricing for off-net calls and has been proven to result in significantly higher levels of calling activity

IMO it is debatable if SA should be aiming for higher levels of calling activity as against a more comprehensive infrastructure and cheaper broadband.

In addition I suspect if to much pressure is placed on the operators to reduce retail tariffs we will start seeing new approaches such as charging for receiving calls as opposed to just the calling party paying - once again not necessarily beneficial for the less privileged users.

 

[Lightscribe]

IMO it is debatable if SA should be aiming for higher levels of calling activity as against a more comprehensive infrastructure and cheaper broadband.

In addition I suspect if to much pressure is placed on the operators to reduce retail tariffs we will start seeing new approaches such as charging for receiving calls as opposed to just the calling party paying - once again not necessarily beneficial for the less privileged users.

Hehehe! Yes, at this moment in the history of SA telecoms, the operators will be allowed to start charging for receiving calls. Know any country where they do this? 'Cos then there's so much money to be made by call centres and scammers and any old con that simply wishes to call you for bucks!!!

I DARE YOU VODACOM AND MTN!!! I DARE YOU!!! I TRIPLE DARE YOU

 

[Lightscribe]

Bill and Keep: http://en.wikipedia.org/wiki/Bill_and_keep

Bill and keep (B&K or BAK),also known as net payment zero (NPZ), is a pricing arrangement for the interconnection (direct or indirect) of two telecommunications networks under which the reciprocal call termination charge is zero. That is, each network agrees to terminate calls from the other network at no charge.

Thanks for the link rpm. Bill and keep at zero is the solution.