Cellphone operators set to rumbleComment on this story
Johannesburg - Vodacom and MTN have asked the South Gauteng High Court, in separate applications, to review the 2014 call termination regulations, which were published in the Government Gazette on February 4.
The regulations determine the fees that cellular operators are allowed to charge for connecting calls to each other’s networks and have an indirect impact on retail prices that are charged to consumers.
The Independent Communications Authority of SA (Icasa) is the main defendant in the matter, which is being heard in court today and tomorrow.
Icasa has proposed that the termination rates that big players can charge be halved to 20c a minute this year, dropped to 15c on April 1 next year and 10c from April 1, 2016, onwards. It has also set an asymmetric rate that smaller operators will be able to charge their larger competitors at 44c a minute.
Vodacom and MTN have previously said that they support call termination rate cuts but they have questioned the validity of the process that Icasa followed to arrive at the steep rate decline. Below is a summary of the arguments they have advanced:
- The 2014 regulations are unlawful and irregular.
- Seeks an interim order for each party to pay and receive calls according to rates in the 2010 regulations.
- No cost basis for new rates.
- If Cell C and Telkom Mobile were to reduce their retail prices during the period before the review is determined, it would cause a permanent change to the market that would be irreversible even if the review was to succeed.
- Success of a competitor should depend on the correct and most efficient use of resources and not on regulatory interventions.
- Icasa’s determinations go beyond the powers bestowed on the regulator as prescribed by section 67 of the Electronic Communications Act, which renders the regulations void or reviewable.
- The regulations are in several material aspects reviewable for being irrational or arbitrary.
- The international norm is that the connection fee should be based on how much it costs the receiving network to carry the call.
- Icasa should have conducted a detailed cost study.
- Vodacom was not given sight of the methodology to arrive at the tariff reduction nor given a chance to comment.
- Icasa has imposed an unprecedented level of asymmetry, meaning that by 2016 Vodacom will have to pay four times more to connect to smaller networks than they pay to connect to Vodacom.
- This is a make or break for affordable communications in South Africa.
- The bottom line is that even Vodacom and MTN acknowledge privately that reductions in termination rates are fair, reasonable and inevitable.
- They acknowledge that their costs are lower than the current 40c and their true costs are far lower than 20c.
- Prices to communicate in South Africa are abnormally high compared with similar operators elsewhere in Africa, research has shown.
- Despite its previous protests MTN grew its operating cash flow margins over the initial three-year period when call termination regulations were introduced.
- MTN only wants to stop Icasa from regulating the rates even though the same process was followed to determine the fixed termination rates.
- Asymmetry is a common remedy to ensure competition.