Communication Minister’s interconnect blunders
Communications Minister Siphiwe Nyanda last week announced that an agreement has been reached with the country’s mobile operators which will see peak mobile termination rates reduced from R1.25 per minute to R0.89 per minute. According to the Minister Vodacom and Cell C agreed to reduce rates from February 2010 while MTN will implement the rate cut by March 2010.
MTN confirmed that they will apply the new interconnect rates on 1 March as announced by the Minister last week. The company said that they needed enough time to implement the changes and renegotiate contracts with service providers.
Vodacom and Cell C have now also confirmed that they will implement the lower interconnect rates on 1 March 2010, and not in February 2010 as stated by the Minister. MyBroadband contacted the DoC to ask for clarity on the Minister’s statements, but they did not respond to requests for information.
Blended interconnect rate
When it came to the current blended interconnect rate, Nyanda said that with the current peak rate of R1.25 and an off-peak rate of R0.77 the blended interconnect is ‘therefore’ R1.03 per minute. It is however unclear what the blended interconnect rate is or how it is calculated, and despite contacting the DoC they did not clarify the issue.
ECN CEO John Holdsworth says that in legal terms there is no such thing as a ‘blended interconnect rate’. “This is something that the mobile networks have invented for the purposes of the current debate. All interconnect agreements and prices lodged with Icasa have separate Peak and Off-Peak rates,” said Holdsworth.
Holdsworth explained the general understanding of a blended interconnect rate: “In essence the blended rate is the ‘average’ wholesale interconnect rate taking into account the proportion or volume of calls that take place during peak and off-peak periods. If we assume that the peak interconnect rate is R0.89 and the off-peak rate is R0.77, to arrive at the so called “blended interconnect rate” you would have to apply the following simple formula: If 40% of calls take place in Peak (0.89 / 100 * 40 = R0.356) … and … if 60% of calls take place in Off Peak (0.77 / 100 * 60 = R0.462) … add the two together and you get a “blended rate” of R0.82.”
Blinded interconnect rate
Using Holdsworth’s explanation there should be some conformity regarding the blended interconnect rate, but a recent statement by a well known telecoms expert that the term should be renamed ‘blinded interconnect rate” is becoming prophetic.
MTN has confirmed that their blended interconnect rate is calculated using peak, off-peak and community service telephones (CST) termination rates of 6c per minute. MTN further confirmed that they have a slightly higher percentage of peak rate calls than off-peak rate calls terminating on their network, substantiating the claim that their blended interconnect rate must include subsidized community service telephones (CST) call termination to bring the cost down to 96c.
Vodacom has however said that their current blended interconnect rate of just over R1.00 per minute only uses peak and off-peak termination rates, indicating that they have a slightly higher percentage of off-peak calls than peak calls terminating on their network. Cell C was asked as to what their current blended interconnect rate is, but Cell C CEO Lars P Reichelt said that this is company privileged information and therefore they can not disclose it.
The Minister’s blended interconnect rate clearly does not correspond with the figures supplied by the mobile operators, but if one assumes that 54% of calls to mobile phones are during peak times a blended interconnect rate, which excludes CST calls, will result in a blended interconnect rate of R1.03 per minute.
The Minister added that with the new agreed peak interconnect rate of R0.89 per minute, and an unchanged off-peak termination rate of R0.77 per minute, the “blended rate has been reduced to R0.77 cents”. This statement is clearly inaccurate, and the only question is how such a blunt error slipped into the Minister’s official statement.
The different ways in which the blended interconnect rate is calculated and the lack of clarity surrounding the figure is likely to confuse consumers and questions the value of using the blended interconnect rate in any meaningful way.
Stakeholders like consumers and the media are also not given accurate figures to calculate the ‘blended interconnect rate’, which means that the public is expected to blindly accept the word of mobile operators regarding blended interconnect rate cuts like the one announced recently by MTN and Vodacom.
Nyanda’s interconnect blunders – discussion
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