In the end, we didn’t get the bluster and bravado we expected from Cell C and Telkom Mobile. Their statements following Judge Haseena Mayat’s ruling on March 31 were more measured than they’ve been in ages. In the end, the ‘victory’ in the South Gauteng High Court was hollow for all parties. Icasa won. MTN and Vodacom won. Cell C and Telkom Mobile won.
The judgment (available here on TechCentral) was damning of the regulator (the fact that the call termination regulations were “invalid and unlawful” I guess was evidence enough). The determination of the 20c per minute figure by Icasa was deemed “irrational and arbitrary”.
That’s the key in this whole review. Icasa could not prove how it had arrived at the “cost” figure it based its regulations on. It’s equally telling that Icasa repealed its own determinations for 2015 and 2016 halfway through the court case (and as for the right to judicial review, it was found MTN and Vodacom’s “right to fair administrative action in terms of section 33 of the constitution [has] been violated.”)
Businesses thrive on certainty. In a highly-regulated environment (mobile with few licences, limited spectrum and relatively high barriers to entry), certainty is even more important.
Operators make multi-year capital investment decisions based on regulations (including regulated rates). While slightly hyperbolic, MTN’s threats about lower investment in its network resulting in Eskom-style “blackouts” aren’t completely unrealistic. With Icasa’s original regulations over the next three years, a noticeable drop-off in capital spending by the two larger networks was a real prospect (especially as the asymmetry got more aggressive in 2015 and 2016).
That’s why we have glide paths for termination-rate declines in the first place (we had a previous three-year glide path, and the intention was for another three-year cycle). Icasa’s approach, which seems to be somewhere between regulate-so-we-can-be-seen-to-be-doing-something/anything and come-down-like-a-ton-of-bricks-and-we’ll-figure-out-later-if-we’ve-gone-overboard, is crazy.
A judgment that implements a halving (!) of termination rates for a six-month period within hours (which Judge Mayat’s ruling did) is, quite honestly, insanity. There’s no certainty around that decision. The ruling might be appealed (you can be sure half of the lawyers in Sandton have been poring over the judgment for the past week). What if the interim cut is undone? Do Cell C and Telkom Mobile have to payback the difference (i.e. what they benefited from the interim cut)? And who knows what might happen in six months’ time once Icasa actually does its job correctly (as required by the judgment)….
So we’re in a good old Mexican standoff. It does not make sense for Cell C or Telkom Mobile to cut call rates (even though they’re benefiting substantially from the interim cut) if there’s a real risk they’ll have to undo those cuts in six months time (or even sooner). What do we make now of Cell C’s swagger ahead of the court case and ruling? Are Cell C and Telkom Mobile in a position to substantially increase their investment in their networks based on this interim cut? Probably not. We’re in a mess that’s squarely Icasa’s doing. Stalemate. Nobody wins. Especially not consumers.
What everyone keeps missing in this whole drama is that MTN and Vodacom have both agreed that call termination rates should come down. They both have reservations about the “process” Icasa’s followed (no surprises there) and with the (very) aggressive asymmetry afforded to Cell C and Telkom Mobile.
We need a strong regulator (I wrote about this last month). We’ve needed a strong regulator for the past decade (at least). Sustained strong, effective and fair regulation would, in all likelihood, have meant a more competitive mobile market than we have now, with (probably) lower retail prices.
Icasa’s failed us.
* Hilton Tarrant contributes to ‘Broadband’, a column on Moneyweb covering the ICT sector in South Africa.