South Africa\u2019s third-largest mobile operator, Cell C, has expressed its dissatisfaction with and disappointment at regulator Icasa\u2019s revisions to its proposed mobile termination rates (MTRs).<\/p>\n
Cell C Ceo, Jose Dos Santos, has called the rate review \u201crushed\u201d and questioned the process itself, arguing that it entrenches the \u201cduopoly\u201d of incumbents Vodacom and MTN. But an analyst suggests that Icasa has done its homework this time around and that a legal challenge to the revised rates would likely be difficult and potentially fruitless.<\/p>\n
MTRs are the rates operators charge one another to field (or ‘terminate’) calls from other networks to theirs.<\/p>\n
These rates are set by the regulator and – in markets like South Africa where there are smaller, newer players competing with larger, olders ones – often include a system of asymmetry whereby smaller players pay larger ones lower rates than those the larger ones pay them. This isn\u2019t simply to stimulate competition, but because larger, more established networks are expected to be more efficient – thus fielding calls costs them less than it does newcomers.<\/p>\n
The regulator’s proposed new termination rates are for the period October 1 2014 to February 28 2018 and will see MTRs fall, albeit not as rapidly \u2013 and with less aggressive asymmetry \u2013 than the rates proposed last year. Vodacom and MTN contested those rates and a court ruled in their favour but allowed the original cuts to come into play for six months while forcing Icasa to review them.<\/p>\n
Under the original rates, Cell C and Telkom Mobile would\u2019ve benefited from higher asymmetry rates than they will under the new ones, something Cell C lauded at the time but which critics argued was tantamount to subsidising South Africa\u2019s third operator. An operator they argue has been in existence for over a decade and thus can hardly be classed as a \u201cnewcomer\u201d.<\/p>\n
\u201cCell C is disappointed by the dramatic U-turn Icasa has made in its approach to remedy the current market failure and promote competition in a duopolistic market,\u201d Dos Santos says. \u201cThe proposed regulations appear to be an acknowledgment by Icasa that the duopoly that exists in the South African market today is an acceptable state of affairs and will be allowed to continue. In the long term, this will be catastrophic to both the wider telecoms industry and to the South African consumer.\u201d<\/p>\n
Asked whether Icasa\u2019s second attempt at setting MTRs had corrected the errors of its first, Vodacom spokesman Richard Boorman says Vodacom is \u201cstudying the announcement\u201d and will be providing feedback in due course. \u201cAmong other points of discussion, we’d like to engage with Icasa to better understand the basis of the rates in the later years, particularly year four,” Boorman says.<\/p>\n
MTN, meanwhile, says only that it \u201cwill continue to engage constructively with Icasa, the regulator on this matter\u201d. Like Vodacom, MTN is \u201cstudying the proposed regulation and rates so as to respond to the authority at the appropriate time\u201d.<\/p>\n
Brian Neilson, research director and head of telecoms consulting at BMI-TechKnowledge (BMI-T) says the consumer may well have benefited more if Cell C had been given \u201cvery favourable asymmetry\u201d but adds that he thinks a legal challenge from Cell C is less likely because Icasa looks to have been \u201cmore rigourous\u201d and appears to \u201chave done its homework this time\u201d.<\/p>\n
Regarding the reduction in asymmetry, Neilson says it is \u201cmore in line with what would be done internationally\u201d and that, if it\u2019s been done with due process this too reduces the grounds for a legal challenge from Cell C.<\/p>\n
\u201cThe big change this time is that the operators have been forced to give Icasa statistics and figures on their actual costs,\u201d Neilson explains.<\/p>\n
He also points to the fact that in early 2017, fixed and mobile termination rates will be the same. \u201cOne could argue that fixed-line termination rates should now be given preference, and shouldn\u2019t necessarily be equal to mobile, because there are 50 million SIMs out there, but only 5 million \u2013 and falling \u2013 fixed lines, and Telkom\u2019s copper network is costly to maintain.\u201d<\/p>\n
When the mobile networks started out and infrastructure still had to be built, mobile was more expensive than fixed, Neilson says, adding that Icasa\u2019s cost study may have shown that the cost of fixed calls may actually outstrip those on mobile today. \u201cIn those early days, termination went up astronomically while fixed did not,\u201d Neilson says. \u201cNow Telkom is claiming an access-line deficit, but fixed and mobile termination rates are converging.\u201d<\/p>\n
Neilson says the world trend is towards zero termination rates, but explains that they are \u201cnotoriously difficult\u201d to implement. \u201cYou can get any number of consultants or accountants to look at the numbers and they\u2019ll all come out with different cost analyses. It\u2019s not easy to assess any more.\u201d<\/p>\n
Mobile operators are increasingly making inroads into the fixed space as they look to offer converged services to their customers. \u201c The zero termination scenario could be reinvented in a different way,\u201d Neilson says. \u201cNot as a termination agreement, per se, but as a facility leasing agreement. A commercially decided agreement, rather than regulatory based.\u201d<\/p>\n
It remains to be seen whether or not Cell C will contest Icasa\u2019s revised MTRs. If it does it\u2019s likely going to have a harder time of it than Vodacom and MTN did the first time around, because Icasa will likely have done its level best to ensure that this time around, its proposed rates are more watertight than they were on their first outing.<\/p>\n
Either way, with MTRs falling consumers are sure to benefit as operators cut prices and the next bout of the pricing battle begins.<\/p>\n
Source: Moneyweb<\/a><\/em><\/p>\n New termination rates \u2013 will you see lower prices?<\/strong><\/a><\/p>\nMore call termination rate articles<\/h3>\n