Asha Speckman

Last month Telkom’s 8ta arm was the cheapest cellular network operator in the country, according to data presented in Parliament by Research ICT Africa (RIA) last week.

It was not the cheapest based on tariffs but because of its “100 percent free airtime for every recharge”, according to the research organisation.

The research firm said regardless of whether the 8ta product was a temporary promotion or long-term feature, it moved South Africa’s ranking in terms of the cheapest product available in the country to 19th out of 46 African countries surveyed, up from a position of 30th in January this year.

The cost of local telecommunications came under scrutiny last week at hearings held by the portfolio committee on communications from Wednesday to Friday.

Eric Kholwane, the committee chairman, said on Friday that there was evidence that regulatory intervention had resulted in lower call costs.

However, RIA argued in its policy brief document that, overall, South African prepaid cellphone prices were still high relative to other countries.

The average affordability of cellphones in South Africa is ranked 33rd out of 46 African countries.

Two years ago the Independent Communications Authority of SA (Icasa) introduced a sliding scale reduction in interconnection or mobile termination rates over three years.

This period ends in March next year, when the rate will be cut to 40c for all calls, from the current 56c for calls at peak times and 52c for off-peak calls.

Interconnection rates are the tariffs cellular network operators and fixed-line operators charge each other to accept calls on each other’s networks. During this period, the smaller operators could also implement an asymmetrical rate allowing them to charge dominant players more to carry their calls.

This regulatory intervention was intended to level the playing field between operators and introduce competition. It was expected that it would encourage operators to reduce prices for end-consumers.

RIA said only this year, when the interconnection rates dropped a second time, did retail prepaid cellphone prices begin to drop overall.

As a result Cell C, the country’s third operator, lowered off-net rates (for calls from Cell C to other networks) to 99c to match its on-net (Cell C to Cell C) rates, after the second interconnection reduction. This was briefly matched by Vodacom.

RIA argued that Icasa’s sliding scale “is too slow and will not take [interconnection rates] down to the cost of an efficient operator”.

Alison Gillwald, RIA’s executive director, said: “We are not really seeing the competitive effects yet because we’re still so far off cost. Rates haven’t been brought down sufficiently.”

Gillwald said it was difficult to determine what the cost price for operators was because her organisation did not have access to that information from the companies.

RIA had also discovered that, while operators had pleaded dire consequences should the regulator implement lower interconnection fees, Vodacom netted R66 million more from interconnection fees between 2011 and 2012 than in the previous year.

At the time that Icasa threatened the cuts, the firm said it would suffer a R500m loss.

Vodacom has the most subscribers in the country and, therefore, receives more interconnection fees for calls to its network from other networks.

Kholwane said the operators acknowledged that there was room to further reduce prices. “All of them are saying that prices are still high. Operators are saying we are not in the least the cheapest.”

He added that the committee would present a report on its findings and recommendations following a second round of hearings during the first quarter of next year.

The Department of Communications is considering policy interventions that include a fixed cellphone flat rate with greater transparency on the structure of cellphone tariffs and packages.

Gillwald said a fixed cellphone rate was inevitable and the publication of retail prices was “absolutely critical”.

Spiwe Chireka, the programme manager for telecoms in Africa at the International Data Corporation, said operators had implemented numerous voice tariff packages and promotions, making it more difficult for consumers to know how they were being charged.

She said data prices were competitive relative to other African countries. However, using data when roaming outside of South Africa was expensive.

Chireka said price elasticity in the local market was not compelling enough for consumers to change to another service provider. Operators needed to begin to adopt a long-term view on the market rather than the short-term perspective of competing on pricing.