Surprise Cell C interconnect move

Cell C has asked the Independent Communications Authority of South Africa (ICASA) to hold off on dropping mobile termination rates (MTR) as planned for March 2013.

Cell C is calling for an urgent market review to determine the effectiveness of the call termination regulations and whether they have had the desired effect on reducing the cost to communicate in South Africa.

“We have asked ICASA to retain the current MTR levels pending the outcome of this urgent market review, because we are concerned that if the MTR drops to the proposed 44c rate for mobile operators without significant market power on 1 March 2013, then the ratio of asymmetry that smaller operators require to compete effectively with the dominant incumbents will not thereafter be realised,” Cell C said.

MTRs for larger operators are set to drop to 40c this year, which is the last round of cuts specified in current regulations.

“In order to increase competition and to bring down the cost to communicate, which will ultimately benefit consumers, Cell C’s view is that there needs to be significant further MTR reductions for the dominant mobile operators as well as a significant and sustained MTR asymmetry for smaller operators until they achieve a competitive degree of scale,” Cell C said.

Glide path for termination to a mobile location
Peak Off-peak
01-Mar-11 R0.73 R0.65
01-Mar-12 R0.56 R0.52
01-Mar-13 R0.40 R0.40

MTR cut opposition from Cell C surprising

Dominic Cull, regulatory advisor for the Internet Service Providers’ Association of South Africa (ISPA), said that this move from Cell C is “counter-intuitive” because it benefits their customers, and by extension, them.

He remarked that asymmetry is going to be the headline battle this year, with Vodacom and MTN in the one camp and Cell C and 8ta in the other.

The larger players will fight tooth and nail against allowing asymmetry for Cell C, Cull said, while the smaller players will argue that MTN and Vodacom were massively subsidised by Telkom.

Dominic Cull
Dominic Cull

This is because there was an even larger difference between the fixed-line and mobile termination rates in the the past than there is now, Cull explained.

According to Cull, Cell C will argue that MTN and Vodacom built their market share and networks with the large amounts of money the then-incumbent paid them in termination, and all they are doing is asking for the same thing.

Glide path for termination to a fixed location
Within ON area code Between ON area code
Peak Off-peak Peak Off-peak
01-Mar-11 R 0.20 R 0.12 R 0.28 R 0.19
01-Mar-12 R 0.15 R 0.12 R 0.25 R 0.19
01-Mar-13 R 0.12 R 0.12 R 0.19 R 0.19

Minimal chance of success

“You’re not going to sell that argument to me or ISPA,” Cull said, explaining that he believes the next rate cut will go through.

The reason for their position, Cull said, is that a cut that’s definitely coming is better than waiting for an undetermined period for ICASA to review the MTR regulations.

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Surprise Cell C interconnect move