The deal between mobile operators to cut interconnect rates from March 1 has been scuppered by the Independent Communications Authority of South Africa (Icasa), which said on Monday that it would not consider the proposal put forward by the operators.<\/p>\n
Vodacom, MTN and Cell C agreed during discussions with Minister Siphiwe Nyanda to cut interconnect rates over the next three years. The first reduction was set to take the peak interconnect charge to 89c per minute on March 1 (from R1.25). It is believed that the operators and the minister had further agreed to reduce that amount to 85c in October 2011, and then to 80c in October 2012. The off-peak rate of 77c per minute will remain throughout.<\/p>\n
(Why government wants to regulate interconnect in the first place, seeing that it will not translate into lower retail tariffs (the price you and I pay for calls) is another argument altogether.)<\/p>\n
The announcement by Nyanda was unexpected and made in Parliament late one November afternoon. But Nyanda did not really have any authority to “agree” to anything.<\/p>\n
On Monday, Icasa said that “these agreements sought to bind the authority to an undertaking not to review mobile termination rates until March 1 2013. For this reason, the authority has decided not to review the interconnection amendment agreements as submitted.”<\/p>\n
The agreement between the operators and the minister was nothing but a delaying tactic. One wonders why Nyanda agreed to their proposal in the first place. They were making fairly small cuts in the interconnect charges, and had managed to keep off-peak rates static for the next three years.<\/p>\n
The operators don’t want Icasa to regulate these charges – and they had hoped to get a stay of execution.<\/p>\n
So in effect, we’ve had the heated public hearing process (circus?) in Parliament, the minister getting the Department of Communication involved when it shouldn’t theoretically have been, and a parallel investigation which Icasa’s been doing for years into interconnect tariffs. Add to this the Competition Commission investigation into interconnect and you’ve got a recipe for chaos.<\/p>\n
The only legally correct way to deal with interconnect (according to the Electronic Communications Act) is by Icasa following a defined process. Sceptics will argue that Icasa is “taking too long”, but the process involves jumping through a series of elaborate hoops including a complex market definition study.<\/p>\n
Icasa said as far back as last October that it “is convinced that the conclusion of its regulatory work, as outlined in the law, remains the most optimal way to the resolution of this matters”.<\/p>\n
It wants to finish this process by March 31. Lately Icasa has been surprisingly good at meeting deadlines.<\/p>\n
One gets the feeling that because the timing of the convenient agreement coming into effect and the regulator’s self-imposed deadline, it makes a tremendous amount of sense to conclude the regulatory process.<\/p>\n
Why agree to lock yourself out of being able to regulate for three years, when you’re going to be finished your work 30 days later anyway?<\/p>\n
We know Icasa says the cost of interconnect is closer to 40c per minute than 89c and this means we’re likely to see some aggressive regulations proposed. Don’t rule out the prospect of court challenges.<\/p>\n
During a trading update call Tuesday, Vodacom said simply “it is engaging with minister and Icasa to find a way forward”.<\/p>\n
And so the hot potato that is interconnect continues to be juggled… We can only suspect the Department of Communications will try and force its “agreement” with the operators through somehow. This puts Icasa and the minister on an interesting collision course.<\/p>\n
The fat lady has not sung. Not by a long stretch.<\/p>\n