Free Vodacom, MTN call specials not good: ICASA
The Independent Communications Authority of South Africa (ICASA) said that cheap or free on-net calls from Vodacom and MTN may represent margin squeeze and predatory pricing.
Mobile Termination Rates (MTRs) dropped to 40c per minute on Friday 1 March 2013, but the regulator said that this may not be enough.
According to ICASA there is no reason why mobile termination rates should not be in the region of R 0.15 to R 0.25, based on benchmarks set by South Africa’s peers in Africa and the rest of the world.
“It is also conceivable that termination rates should tend towards zero over time,” said ICASA.
ICASA argued that high termination rates prevent small and new entrants from being able to effectively compete against larger operators.
“High termination rates allow larger players to offer on-net voice prices that are lower than off-net voice prices that a smaller player may charge its customers. This may represent margin squeeze and predatory pricing,” said ICASA.
ICASA said it is concerned that the pricing of an on-net voice call may be below the termination rate, an indication that operators are pricing on-net calls at below the true cost of a call, or that the current termination rates are still considerably too high.
“Other jurisdictions have addressed such behaviour through regulations imposing flat rates across networks, a price floor for a product and/or anti-competitive penalties on operators found to be pricing in this manner,” said ICASA.
ICASA added that it intends to urgently review the structure of pricing, including transparency in the market and will examine the necessity for this form of intervention on an urgent basis.
This raises the question what the mobile operators have to say about ICASA’s accusations and potential solutions to this problem.
Giving cheaper call rates are good: Vodacom
Richard Boorman
Vodacom spokesperson Richard Boorman said that they support ICASA’s drive to ensure that South Africa gets first class affordable communications.
“However, experience in other markets suggests that implementing ultra-low termination rates may not achieve this result,” said Boorman.
Boorman added the it is hard to understand how offering customers better value for money could be construed as being negative and not in the best interests of SA’s consumers.
Our call rates are not anti-competitive: MTN
Robert Madzonga
Robert Madzonga, Chief Corporate Services Officer at MTN SA, said that their low on-net call prices are definitely not anti-competitive.
“By law operators are not permitted to price below cost and all prices must be filed with ICASA before they can be implemented,” said Madzonga.
“MTN continues to offer innovative competitive propositions that provide its customers with competitive rates that have decreased on a continuous basis. All of this activity is in the context of effective competitive activity.”
Madzonga added that MTN supports a mobile termination rate which is based on the cost of a reasonably efficient operator in the mobile market. “However, this cost is not zero,” he said.
MTN would also not support a price floor. “Competition legislation is very clear that retail price maintenance (i.e. price floors) are prohibited and deemed anti-competitive as they are not in the interest of consumers,” said Madzonga.
“Moreover, competition law dictates that operators are not permitted to price below cost so there is no need for such a proposal.”
When it comes to ICASA’s proposal of flat rates to all networks, Madzonga highlighted that flat rates have been present for many years in South Africa (for example MTN One Rate).
“Other operators have launched such pricing too, so there is no need to impose this price structure by regulation,” said Madzonga.
“MTN provides a rich choice of tariffs to suit the varying needs of customers. The success of MTN Zone shows that a substantial proportion of the market is attracted by dynamic pricing, rather than single rate pricing.”
Cell C and 8ta were asked about ICASA’s statements, but the two small operators did not provide feedback by the time of publication.
More ICASA and mobile termination rate articles
Termination rate cuts: who will drop prices?
Voice rates: who cut prices and who didn’t?
Mobile termination rates: How does SA compare?
Cell C surprise rate move blocked
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