Telecoms13.02.2014

Did Icasa mess up?

The Independent Communications Authority of South Africa (Icasa) released its “Call Termination Regulations, 2014” on 29 January 2014, which will see mobile termination rates (MTR) reduced from the current 40c per minute to 10c per minute over the next three years.

The regulations further call for significant asymmetry, up from the current 10% to 120% from March 2014, 180% from March 2015, and 300% from March 2016.

These regulations will benefit Telkom and Cell C, but will cost Vodacom and MTN hundreds of millions of rands in lost revenue.

Not unexpectedly, the two largest mobile operators threatened legal action. This did not go down well in the court of public opinion, but it raises the question – did Icasa mess up?

Did Icasa mess up?

Vodacom indicated that its legal challenge is based on the premise that the regulator did not follow due process to produce the regulations.

MTN confirmed on 11 February 2014 that it would also take Icasa to task over the planned rate cuts. MTN did not give details about its challenge.

One of the issues mentioned in MyBroadband’s discussions with industry players is that the regulator’s cost calculations may be flawed.

In its “Call Termination Regulations, 2014” ICASA states that:

“The Authority applied a LRIC-based financial model to determine the termination rates for both Markets 1 and 2. This was based on information available to the Authority.”

International best practice is that complicated cost models, like the LRIC-based financial model, should be shared with the operators, and they are then given a chance to comment on it.

MyBroadband established that the model was not shared with the operators by Icasa, and they weren’t given a chance to comment.

The LRIC model further requires very specific information, such as detailed network traffic profiles and other detailed cost information, to produce accurate results.

MyBroadband received feedback from industry sources that the regulator did not request all the required information, at least not current numbers, needed for the LRIC model.

According to these sources no cost information was requested from the network operators to put this model together.

Some high level information requests were made, but this information wouldn’t have been enough to populate a LRIC model.

If this is the case it means that the regulator may have used incomplete or outdated information in its calculations. This may include making incorrect assumptions where information was not available.

Icasa mum on process followed and calculations

Icasa said that MTN has served it with court papers, seeking relief on the regulations. This, the regulator said, makes the matter sub judice which limits its ability to comment on the matter.

Icasa therefore did not say whether it requested the relevant information from the mobile operators to apply to the LRIC-based financial model.

The regulator also did not say why it did not provide the mobile operators with an opportunity to interrogate the financial model before it was used.

However, Icasa spokesperson Paseka Maleka did say that the 2014 Call Termination Regulations remain until such time that the court decides otherwise in terms of the review process.