ICASA’s plans to reduce prices: the way to go?

Last month (June 2013) the Independent Communications Authority of South Africa (ICASA) released details of its “Cost to Communicate” programme, which seeks to review regulations that impact on the cost of communications in South Africa, such as the call termination regulations and the local loop unbundling framework.

Presenting the programme to the media, ICASA’s Pieter Grootes said that the programme stems from concerns raised by various parties, including government, about the high cost to communicate. He said that the call to reduce communication costs is echoed in various platforms, including the minister of communication’s recent budget speech where Minister Dina Pule announced the intention to issue a policy directive on transparent pricing of services such as sms, voice and data, to ensure market pricing transparency for the benefit of customers.

ICASA says it will ensure implementation of open-access principles enshrined in the Electronic Communication Act (ECA), one of the ECA’s objectives being to promote and facilitate the development of interoperability and interconnected electronic networks. ICASA will enforce the provisions of Chapter 8 of the ECA regulating facilities leasing regulations, and ensure effective and efficient utilisation of local loop infrastructure.

While no one will object to reduction in the cost to communicate, the question must be asked: Is this ICASA’s role? If we are in a competitive market economy, then surely market forces should come into play, with no unduly restrictive pricing regulations?

Grootes said the goals of the programme are to:

• stimulate public debate around the cost to communicate in South Africa
• establish regulatory needs to address concerns regarding the cost to communicate in South Africa
• stimulate and enhance competition in the telecommunications sector

Looking at some statistics, when it comes to mobile tariffs South Africa’s prices are amongst the highest – 23rd from the top out of 140 countries, and 4th from the top out of 34 African countries – clearly not a good position.

The programme started on 14 June 2013 with a request for information, and is to be followed by a series of consultations which will lead to the release of draft regulations for public comment on 10 December 2013. ICASA says it will publish the final regulations on 14 April 2014.

But is it more regulations and price controls that we want? When Seacom announced its submarine cable project landing on South Africa’s east coast, the then minister of communications wanted to regulate the industry so that government could control interconnect costs, which at the time they considered to be too high and controlled by monopolies. After a lot of noise it did not happen – instead the market responded with several new cable initiatives which resulted in connection prices tumbling down.

In other parts of the world, market forces have brought down the cost of communication, but in South Africa this cannot happen until ICASA sorts out spectrum allocations. Until that happens, telcos cannot compete on level playing fields to build efficient, high-speed networks. When that happens, the cost to communicate will look after itself as competitive market forces take over.

While regulations are necessary, they must facilitate market growth without too much bureaucracy. ICASA must be able to play its independent role without ministerial interference. Over the past few years every new minister of communications has changed policy directions, with the result that we have a communications department that seems paralysed, and an independent regulator that is far from independent. In successful economies, market forces take care of what our government has been unsuccessfully attempting to do for years.

At its briefing, ICASA argued that both consumers and mobile operators have benefited from the reduction in the mobile termination rates, which saw an increase in termination minutes and revenue. “Because the rates were substantially reduced, customer’s made more calls”, said Grootes.

I am sure he was saying: “You see, regulations work to bring down the cost”. But I would ask whether market forces and competition could have done the same, if not more, had there been no regulation of the termination rates.

Or do the operators collude and fix prices?

Source: EngineerIT

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