Telecoms23.03.2015

MTN’s massive 1,500% interconnect price increase

By Staff Writer

On 20 March 2015 the Independent Communications Authority of South Africa ordered MTN to immediately cease collecting a US$0.25 (around R3.00) interconnect rate per minute for internationally-originating voice traffic.

This followed a complaint by the Internet Service Providers’ Association after MTN started charging the $0.25 tariff for voice traffic on 1 November 2014.

Icasa upheld the complaint, explaining that the current Call Termination Regulations make no distinction between termination services for voice calls originating within or outside South Africa.

Strange decision to increase rates by 1,500%

With strong resistance to this decision from MTN, it raises the question as to why MTN decided to increase its interconnect rate for international calls by 1,500%.

Gregory Massel, former ISPA chair and Switch Telecom CEO, speculated that MTN’s decision may have been because of its historical reliance on big profits from interconnect rates.

“MTN has become accustomed to profiteering off opportunistic greed, and to fighting and obstructing the regulator and fair competition,” said Massel.

He said MTN was complicit in increasing mobile termination rates (MTR) by over 500% before Cell C launched.

Massel said MTN profited greatly from these high termination rates, and when the latest MTR cuts kicked in the company tried “yet another approach to profiteer unfairly and unlawfully”.

Massel explained that prior to 1 November 2014, MTN charged the regulated termination rate of 20c per minute. This is the rate which became effective on 1 October 2014.

“From 1 November 2014, MTN started drawing an artificial distinction between calls that were originating from within SA versus those originating from outside SA.”

MTN then started charging US$0.25 per minute to terminate calls originating from outside of SA, notwithstanding that the calls were being passed to them within SA by other operators.

“The service that MTN was rendering was identical to the service they rendered for ZAR0.20. The only differentiating factor was the Caller ID number.”

Massel highlighted that they did not agree to the increase. MTN started applying it unilaterally, he said, which was in breach of:

Their existing interconnect agreements (that require changes to be agreed upon by both parties in writing)
The interconnection regulations (which require that such amendments be filed with Icasa for approval)
The Call Termination Regulations (which cap the allowed termination rate at ZAR0.20)

Massel said the fact that Icasa ruled in Ispa’s favour, and set down a clear and unambiguous ruling, means it has demonstrated a commitment to upholding the law, protecting consumers, and ensuring there is clarity in the market so that licensees can avoid disputes and compete fairly.

MTN explains

Graham de Vries, Chief Corporate Service Officer at MTN South Africa, said that at the outset, it should be understood that the international termination rate (“ITR”) addresses the rate charged by MTN on international traffic from International destinations to South Africa.

Operators in foreign countries charge MTN for delivering international calls from the MTN network to their networks.

“A large number of MTN’s international carrier partners charge ITR’s significantly more than the rate of USD 0.25 as charged by MTN prior to the decision taken by Icasa,” said de Vries.

He said that the ITR charged by MTN was an attempt to bring into equilibrium the significant outflows of money from South Africa.

“Icasa’s decision effectively now does not permit us to do this,” said de Vries. “This means that the ITR’s that international carriers are charging severely tilts pricing in favour of international carriers.”

“Any perception that this inter-operator cost affects the SA consumer is inaccurate. It should be understood a higher ITR charged to our international interconnect partners is an international inter-operator cost and does not impact or affect the retail rates charged to our MTN subscriber phoning international destinations,” he added.

“MTN is studying the decision taken by Icasa and will be engaging with Icasa on this matter in due course.”