{"id":83711,"date":"2013-08-18T12:04:38","date_gmt":"2013-08-18T10:04:38","guid":{"rendered":"http:\/\/mybroadband.co.za\/news\/?p=83711"},"modified":"2013-08-18T12:06:06","modified_gmt":"2013-08-18T10:06:06","slug":"wait-a-minute","status":"publish","type":"post","link":"https:\/\/mybroadband.co.za\/news\/columns\/83711-wait-a-minute.html","title":{"rendered":"Wait a minute…"},"content":{"rendered":"

Cell C<\/a> CEO Alan Knott-Craig<\/a> has been calling for asymmetric call termination rates (aka MTRs or interconnect rates), arguing that this is needed to increase competition in South Africa\u2019s telecoms market.<\/p>\n

According to Knott-Craig, smaller players (Cell C and Telkom<\/a>) should pay less to larger players (Vodacom<\/a> and MTN<\/a>) to terminate a call on their networks; with the inverse for calls made from the larger network to the smaller.<\/p>\n

\u201cThere needs to be significant further MTR (mobile termination rate) reductions for the dominant mobile operators as well as a significant and sustained MTR asymmetry for smaller operators until they achieve a competitive degree of scale,\u201d Knott-Craig said earlier this year.<\/p>\n

Size and not age<\/h3>\n

Many people questioned whether Cell C, which has been operating for over a decade, should enjoy asymmetric interconnect rates which are typically used to assist new market entrants.<\/p>\n

Knott-Craig argued that the size of the operator (hence subscriber numbers) should be the guiding factor to quality for asymmetric interconnect rates, and not the age of the operator.<\/p>\n

Knott-Craig\u2019s argument makes sense. Significant call termination rate asymmetry will make it possible for smaller players to compete more effectively with lower prices on on-net and off-net calls.<\/p>\n

Competition will drive down prices for consumers, and asymmetric MTRs will help to remove the benefit Vodacom and MTN has in offering massively reduced on-net call rates to their subscribers.<\/p>\n

History paints a different picture<\/h3>\n

When Cell C entered the market in 2001, the new competition had an adverse affect on pricing, and directly impacted consumers.<\/p>\n

When Vodacom and MTN launched mobile services in 1994 they agreed on an interconnect rate of 20c per minute. However, when talks started of introducing a third mobile player (Cell C) things changed quickly.<\/p>\n

In July 1999 Vodacom and MTN increased the MTR to 50c, and continued to increase this rate to R1.25 (for peak time calls) on 1 November 2001.<\/p>\n

Cell C and Telkom (the smaller players) therefore had to pay MTN and Vodacom (the larger players) R1.25 to terminate a call on their network. This regime continued for nearly a decade.<\/p>\n

\"Interconnect<\/a>

Interconnect rates in SA (Source: Lewis – Pricing and tariffs: principles)<\/p><\/div>\n

It was only after parliament and government got involved in 2009 when things started to change.<\/p>\n

At the time Vodacom and MTN vociferously opposed interconnect rate cuts, arguing that it will severely harm the industry and the ability to invest in infrastructure.<\/p>\n

The rate cuts happened despite Vodacom and MTN\u2019s objections. What followed were lower prices to consumers and a more competitive environment.<\/p>\n

Business is business<\/h3>\n

Knott-Craig was CEO for most of the time when Vodacom, as the largest telecoms player, charged smaller fixed line players much higher rates to terminate a call on the Vodacom network than vice versa.<\/p>\n

He was also CEO at the time when mobile termination rates were increased rapidly before Cell C entered the market. Cell C was therefore placed at a massive disadvantage from the start.<\/p>\n

The Cell C CEO is now on the other side of the fence, and is fighting hard to overturn a regime which he helped to create.<\/p>\n

The explanation for these seemingly conflicting decisions from Knott-Craig may be simple: doing what is best for shareholders.<\/p>\n

As Vodacom CEO, high interconnect rates made financial sense for the company and shareholders. As Cell C CEO, significantly lower asymmetric interconnect rates make sense.<\/p>\n

If it will help to argue that Cell C is doing it to help consumers to achieve his goals, Knott-Craig will may not let that opportunity slip.<\/p>\n

Knott-Craig is undeniably one of the most successful telecoms CEOs globally. The good news for consumers is that, as Cell C CEO, he is now on their side – fighting for more competition and lower prices.<\/p>\n

More on interconnect rates<\/h3>\n

Surprise Cell C interconnect move<\/strong><\/a><\/p>\n

Termination rate cuts: who will drop prices?<\/strong><\/a><\/p>\n

Interconnect price cuts and mobile call rates<\/strong><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Alan Knott-Craig is asking for asymmetric interconnect rates because Cell C is smaller than their competitors, but is this not hypocritical?<\/p>\n","protected":false},"author":2,"featured_media":74325,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[21],"tags":[681,355,35,42,109,41],"class_list":["post-83711","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-columns","tag-alan-knott-craig","tag-cell-c","tag-headline","tag-mtn","tag-telkom","tag-vodacom"],"_links":{"self":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/83711"}],"collection":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/comments?post=83711"}],"version-history":[{"count":2,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/83711\/revisions"}],"predecessor-version":[{"id":83759,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/83711\/revisions\/83759"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media\/74325"}],"wp:attachment":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media?parent=83711"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/categories?post=83711"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/tags?post=83711"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}