We’re being treated unfairly: Telkom

Telkom’s regulatory affairs executive Izak Coetzee, said: “Only Telkom has been named a major operator for interconnection, but all public voice telecoms services licensees – Telkom, MTN, Vodacom, Cell C, under-serviced areas licence holders and the second network operator should be considered. Failure to apply similar principles in respect of other licensees is unconstitutional and without merit.”

According to the draft regulations – first published on January 19 last year – companies declared as major operators by Icasa would have to provide essential facilities (like call switching facilities) to other operators at prices that Icasa would regulate and that would not be allowed to exceed retail charges.

Also, interconnection providers (like Telkom – in the case of a fixed-line network – and the mobile operators) would have to treat those who apply for interconnection on a non-discriminatory basis, and would not be allowed to favour their affiliates, customers or customers of their subsidiaries. This also applies to the leasing of its facilities.

The Internet Service Provider’s Association (Ispa) agrees with Telkom, saying MTN and Vodacom should be declared major operators, as both have more than 35% of the South African mobile telecoms market and have control over essential services.

This would mean that smaller value-added network service (Vans) operators would get better rates from all the bigger players and that if they asked to be able to connect to any networks, they could not be turned away.

Besides interconnection, the amount charged for interconnecting is a big issue in SA. A report by telecoms consultancy Balancing Act Africa entitled Setting interconnection prices in Africa – released this week – found that in SA, 66% of the retail price of a call from a fixed line (Telkom) to a mobile phone goes towards paying the termination rate.

This exceeds the percentage in Kenya (37%), Tanzania (27%) and Ghana (43%). However, for calls made from mobile phones to a fixed-line number, the termination rate makes up only 11% of the retail price of the call in SA.

Retail and interconnection rates

In a separate discussion document on mobile pricing released last year, Icasa stated: “The only explanation that could be given for the difference in termination charges from mobile to mobile and from mobile to fixed is the use of more network intelligence, which does not justify the high difference between the two.”

Regarding the amount operators will charge each other to end a call on each other’s networks, Icasa stated: “The agreements on what these charges will be are commercial arrangements between operators, and the authority only ensures compliance with regulatory guidelines. The pricing mechanisms are essentially left to the discretion of the players.”

“It is the authority’s view that interconnection charges agreed through the negotiations between operators remains unclear as the operators cannot explain the rationale behind the setting of current rates.”

A ten-pound hammer to swat a fly, says MTN

MTN is vehemently opposed to being declared a major operator, and it has taken Icasa to the Supreme Court regarding the matter, which is still being considered. It says that if the guidelines are promulgated, they will be unlawful.

Both MTN and Telkom say that Icasa has not undertaken an appropriate economic analysis of the market so as to say why these companies are major operators.

MTN’s Graham de Vries said the “remedies deployed should be proportionate to the gravity of the problem. You take a fly-swatter to a fly, not a ten-pound hammer,” he said of what MTN terms Icasa’s “one-size fits all, indiscriminate approach of regulatory intervention”.

De Vries said the regulator would need to avoid a “waterbed effect”; if it removed inbound profits operators would rebalance by increasing connection or outbound prices. “Currently, operators receive as much as they pay; it’s a zero-sum game.”

Delays acknowledged

The deadline for people to submit their comments on the regulations was March 17 last year.

Icasa councillor Tracy Cohen (who is chairing the hearings) says the regulator “acknowledged the time lapse” between receiving submissions and holding the hearings. Icasa had been waiting for the new legislation governing telecommunications – which has gone through a protracted overhaul – to be passed.

The key piece of legislation is the Electronic Communications Act (previously known as the Convergence Bill), which has yet to be signed by the president. It was passed by parliament in December last year.

“As the promulgation of the Electronic Communications Bill has still not happened, and because this is in public interest, we have decided to carry on with the hearings,” said Cohen on behalf of Icasa.

Due to the state of legal play, MTN said the process “is premature and open to challenge”, adding that it will pursue a new process in the courts once bill becomes law”, as the regulations are based on the old Telecommunications Act.