Cell giants fire opening shots as Icasa case starts

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IOL pic mar26 justice scales file Independent Newspapers .

Johannesburg - Cell C’s market position was the product of the industry regulator’s previous call termination regulations, which were published in 2010 when the authority decided that an interconnection rate of 40c between the operators was cost based, Vodacom argued in court yesterday in an effort to keep the rate at 40c.

The Independent Communications Authority of SA (Icasa) said earlier this year that it would halve rates from 40c to 20c this year. Next year the rates were expected to decline to 15c, and to 10c from 2016.

The interconnection rate is the rate cellular network operators pay each other to receive calls on each other’s networks.

The case went before court yesterday after Vodacom and MTN, the two largest operators in the country, launched separate applications last month asking the court to set aside the implementation of the new rates from April 1. The two operators labelled the rates as unlawful and want the court to order a review of the rates and of the process that Icasa used to arrive at those rates.

Frank Snyckers, one of two senior counsel for Vodacom, argued that between 2010 and now Icasa had deemed a 40c interconnection rate proportional in terms of the conditions of market competition.

In addition, Icasa has proposed an increase in the asymmetric rate to 44c this year.

Asymmetric rates are paid to small operators, usually new entrants, with less than 20 percent market share. Telkom Mobile and Cell C can apply asymmetry against their larger competitors.

Snyckers said Cell C argued in its papers that it would “be in trouble” if it did not get the asymmetry. Further funding from its investors also depended on its receiving greater asymmetry as part of this year’s regulations.

Vodacom and MTN argued that Cell C could no longer be considered a new entrant as it had been operating for more than 10 years.

Cell C also stated previously it would use savings from asymmetry to launch aggressive competition against the bigger telecoms companies.

Alfred Cockrill, counsel for MTN, said rough calculations indicated Cell C would gain about a R300 million competitive subsidy from the rates its competitors would have to pay when their customers called onto Cell C’s network.

MTN would lose about R450m in revenue over six months and Vodacom would lose more than R1 billion in six months if the new regulations were implemented.

Cell C also asked for more than 100 percent asymmetry, which was unprecedented Vodacom argued.

The operators blamed Icasa, which at the last minute earlier this month said it would review the fees for next year and 2016 because it could not defend them. They were initially planned after it consulted an external economist.

Wim Trengrove, for MTN, argued that Icasa was breaking the law by requiring operators to discriminate against each other by paying different rates.

He argued that there was procedural unfairness towards the larger operators, adding that the rate of 10c initially planned for 2016 was a “thumbsuck” because no economic study had been done.

He added that because Icasa could not justify its rates for next year and 2016, a reduction to 20c this year was unjustified.

The rate was simply a “stepping stone” to 10c, Trengrove argued.

Icasa claimed in its affidavit that its external economist did a study on data it had from 2007, which was used to determine the 2010 call termination regulations. This was why it had not consulted the operators on an economic study.

Both operators said that if a review of the regulations was not in their favour, they would backpay competitors the difference of fees owed on 2014 regulations as of April 1.

The case continues. - Business Report



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