Lower interconnect rates key – CEO
High interconnect rates, specifically associated with the cellular providers, is one of the biggest stumbling blocks to a more competitive telecoms environment. This is according to John Holdsworth, CEO of telecoms provider ECN.
Holdsworth said that the current cellular interconnect rate of R1.25 per minute was introduced by MTN and Vodacom shortly before the launch of Cell C as a way of making it tough for Cell C to get a foothold in the market and generate additional revenue.
Before Cell C’s entrance into the local mobile market the cellular interconnect rate was as low as 20c, which raised questions as to why ICASA allowed Vodacom and MTN to raise these fees by over 500% shortly before Cell C entered the market.
The high interconnect rates mean that on-net calls can be significantly discounted while off-net calls to other operators does not leave much room for competitive pricing. This typically benefits the larger operators while new market entrants struggle to compete to match the value proposition of the incumbents.
According to Holdsworth, both Cell C and ECN have committed to immediate drop their rates in the event of interconnect price cuts, but he expects Vodacom and MTN to fight any plan from ICASA to significantly reduce interconnect pricing.
Cell C CEO Jeffrey Hedberg is also an outspoken proponent of lower interconnect rates. "There needs to be someone to look at it from a customer perspective… The reason the tariffs can’t come down is because the interconnect [rate] is so high," Hedberg said in 2007 when discussing the interconnect issue.
Regulations out soon?
ICASA has previously released draft regulations on interconnection fees, proposing cost-based interconnection rates where the pricing must reflect the underlying costs. ICASA further recommended that interconnection fees must be unbundled to ensure that operators that interconnect with each other do not pay anything extra which it does not require for interconnection.
Since the release of the draft regulations and hearings not much appeared to have happened, but there may be light at the end of the tunnel. According to one telecoms expert, formal workshops involving all the large operators were held and proved to be very constructive with consensus being reached on many points which should form the foundations of widely accepted regulations.
The driving force behind these investigations and hearings – ICASA councilor Tracy Cohen – has however left the regulator which has had a negative impact on the progress of these investigations and the release of the regulations.
Good news for consumers and telecoms operators is that there seems to be progress again. When ICASA was asked about the status of these regulations the regulator said that the regulations were being finalised and would be published shortly. No specific dates were given.
MTN and Vodacom were asked for comment on the high interconnect pricing and whether it was done deliberately to make it difficult for Cell C to compete. While MTN did not provide any feedback Vodacom merely said that “this matter is currently under review with the competition commission and we are co-operating fully.”
Cellular interconnect pricing – give your views
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