This past Friday, the 4th of October, the Independent Communications Authority of South Africa (ICASA) released new draft call termination regulations. In draft form, the document calls for lower termination fees between networks: the fee that one network pays to another, when handling a cross-network call.
With South Africa’s arrangement of calling party pays, MTN would, for instance, pay Vodacom a small fee for connecting a call when an MTN subscriber phones a Vodacom subscriber.
A few years ago the fees were absurdly high – R1.25 per minute – but over time ICASA’s regulations have driven them down. The draft submitted on Friday proposes a cut from the current 40c per minute to just 10c, three years from now. But, more interestingly, the draft regulation suggests asymmetric call termination fees to help encourage competition. In its draft ICASA says that there is still “ineffective competition in the market”.
The asymmetric fees will favour smaller network operators, namely Cell C and Telkom Mobile. With MTN and Vodacom controlling more than 90% of the local mobile market, ICASA’s proposal says that any network with less than 20% market share will benefit from different call termination fees. In this case, smaller networks will be allowed to charge more for terminating calls. Fees will still drop to 10c per minute, but over a longer time.
Termination fees for Vodacom and MTN will drop from the current 40c per minute to 20c per minute, as of March 2014. Then 15c per minute in 2015, and finally 10c per minute in 2016. The asymmetric rates call for drops to 39c per minute, 33c, 26c, 20c, 14c, and 10c – the last of which will become active in March 2019.
But is this all just inter-network politics? Will these fees, if accepted, matter at all, or affect end-users?
Given that call fees have dropped significantly since the fees were lowered from R1.25 per minute, the answer would seem to be yes.
We asked each of the networks what they thought.
Vodacom, with a press release this afternoon, said that it supports the reduction in mobile termination rates, but does have concerns about asymmetry. In the statement the company says that the glide path – reductions over several years – is good, but the initial 50% drop in fees (from 40c/min to 20c/min) is too steep, and could have serious negative impacts. It doesn’t elaborate on what those impacts are, though.
On the asymmetry, Vodacom Group CEO, Shameel Joosub, says, “Asymmetry means that Vodacom pays more to connect a voice call to someone on Cell C or Telkom Mobile than these networks pay to connect to someone using Vodacom.”
“The accepted practice worldwide is declining asymmetry for a limited period for new entrants at a fraction of the levels proposed. We intend to engage with ICASA on this point to motivate for a more reasonable outcome. We see this proposed asymmetry as placing Vodacom (and by extension, our customers) in the position of effectively subsidising our competitors.”
MTN also had little to say right now, with the company’s chief corporate service officer, Fusi Mokoena, saying, “MTN will closely examine the contents of the proposed Regulations and analyse its potential regulatory and economic impact.”
Telkom, which has an interest through both its Telkom Mobile and Telkom landline divisions, said, “Telkom is of the view that the current termination rates are prejudicial to Telkom and welcomes the review of the termination rate regulations.”
Of course, the company pays operators both when its users phone from landlines as well as making calls from Telkom Mobile numbers. Telkom was hesitant to comment on whether consumers would benefit, though, choosing to withhold comment until “an appropriate time”.
Cell C, though, had a very clear view on the draft bill and rate cuts. It was a vocal proponent of the asymmetric fees, and CEO Alan Knott-Craig had a lot to say on the matter, this morning.
“It is really encouraging to see ICASA work quickly and efficiently, favouring neither friend nor foe,” he said in his statement. While it could be argued that ICASA’s asymmetric rates favour his company, it also favours Telkom, who hasn’t always seen eye-to-eye with the communications watchdog.
“Whilst in actual terms (cents) the asymmetry is lower than what was hoped for, ICASA has been smart in providing asymmetry over a longer period with a relatively gentle glide path.”
Knott-Craig also said that the new regulations “blasted the way open” for a more competitive communications market. He acknowledges that Telkom benefits the most from the asymmetric fee structure, but adds that the company was also instrumental in establishing a healthy mobile industry. He says that ICASA’s decision on the new rates is fair, and well-considered.
Will it make things cheaper for consumers, though?
htxt.africa asked, and Alan responded, saying, “Should the draft regulations be implemented as is, it will enable the smaller players to compete on price for market share, which will ultimately benefit the consumer.”
Granted, and as he says, that is if the regulations are implemented as is. And even then, the soonest we’d see any changes would be from April 2014, the month after the draft regulations are set to go into effect.
