Massive interconnect rate cuts in store
ICASA today announced its proposed plans related to wholsale call termination rates. Voice call termination is the service one network offers another to carry voice traffic to its end-users.
Thabo Makhakhe from the Independent Communications Authority of South Africa (ICASA) pointed out that wholesale call termination rates has been the subject of much media attention, where it has been reported that the current charge is a constraint to effective competition as well as a driver of high retail prices in South Africa.
ICASA said that it views call termination as a ‘bottleneck service’ and that the current market for call termination is ‘ineffectively competitive’. “ICASA is obliged to ensure that remedies are proportionate to the scale of the market failure,” said Makhakhe.
New proposed pricing
ICASA is proposing aggressive wholsale call remination price cuts.
“The very characteristic of the call termination market means that there is very little incentive to compete on termination rates and that larger networks are in a position to be price-setters,” said ICASA. “ICASA therefore proposes that cost-orientation be introduced in the provision of call termination services.”
The regulator added that for those licensees with an established presence in the market it proposes the imposition of a single set termination rate, removing the distinction between peak and off-peak termination rates.
ICASA prosed the following pricing guidelines:
- Mobile termination rates are proposed to be reduced to R 0.65 from July 2010 and further reduced to R 0.40 from July 2012.
- Fixed termination rates are proposed to be reduced to R 0.15 from July 2010 and further reduced to R 0.10 from July 2010.
This equates to significant price reductions from the current 89c per minute for peak mobile call termination and 77c for off-peak mobile call termination.
The following table provides details about the proposed glide path.
| Mobile call termination rates | Fixed call termination rates | |
| From July 2010 | R0.65 | R0.15 |
| From July 2011 | R0.50 | R0.12 |
| From July 2012 | R0.40 | R0.10 |
ICASA wants to see retail price cuts
Makhakhe said that ICASA has two expectations regarding their proposed interventions.
“Firstly, we expect the fixed to mobile retail call rates to reduce as the mobile termination rates are reduced. We have already benefited from a 100% pass-through of the recent reduction in mobile call termination rates for fixed line subscribers and we would encourage this practice to continue,” said Makhakhe.
“Secondly we expect some measure of pass-through to a reduction in retail prices of calls between mobile networks. However, given the nature of product bundling in the provision of retail mobile services we expect that price reductions will be subject to dynamic competition.”
ICASA’s view is that a lack of effective pass-through to retail prices indicates that there may be a lack of effective competition in the retail market for mobile services.
ICASA added that it will monitor price movements in the retail market for mobile services vigilantly over the coming months to evaluate whether further action is required.
Massive interconnect rate cuts in store << Discussion
Related links
Interconnect rate draft regulations here on Friday
ICASA mum on interconnect regulations
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