We’ve dropped our prices 22%: Vodacom
While Vodacom has instituted legal action against the Independent Communications Authority of South Africa (Icasa) over mobile termination rates, the group says it has reduced its average effective price per minute by 22% over the past year.
Vodacom is taking Icasa to court for not following a fair and objective process to determine the final termination rates in its call termination regulations 2014.
Mobile termination rates refer to the fee that one network charges another for receiving and terminating calls on its network. These rates have declined from R1.25, in 2009, to a current price of 40 cents.
According to the new regulations, the rate will drop to R0.20, with a further drop to R0.15 in 2015, and R0.10 the following year.
In an opinion piece featured on BusinessDay, Vodacom Group CEO, Shameel Joosub, stressed that the operator supports lower connection fees between the mobile networks.
“The only caveat is that the correct process must be followed. Indeed, I’d like to reiterate our previous proposal to the industry regulator that interim cuts are implemented immediately.”
“If they agree, we then have some breathing space to calmly and thoroughly deal with the process issues holding things up,” Joosub said.
He said that Vodacom also supports the Minister of Communications, Yunus Carrim, in his drive to reduce the cost to communicate.
“That’s easy to say, but the evidence is that we’ve reduced our average effective price per minute by 22% over the past year. Prepaid, which is typically used more by the lower income segment, has come down even further: 25% in the last year, and 50% over the past three years,” the mobile operator lead said.
He continued that the significant reductions in price have been enabled by a large investment programme in SA including R30 billion into infrastructure over the past six years, with more than R7 billion spent per year over the last two years and a projected spend of R9 billion in the coming year.
“By investing in capacity, we’re able to offset lower prices with higher volumes. Crucially, we can do this without impacting network quality,” Joosub said.
“We’ve also achieved these price reductions against a rising inflationary tide of electricity and fuel price hikes which are key input costs for us, and also the weaker currency which drives up the cost of imported equipment. In short, we’ve put a huge amount of effort into delivering sustainable reductions in communications costs.”
Joosub pointed to an ‘inaccurate narrative’ created by the media showing how big operators are against cuts, “and therefore, anti-consumer, while the small networks are pro-cuts. The truth, as is often the case, is far more complicated,” Joosub said.
He said that the international norm is that a connection fee should be based on how much it costs the receiving network to carry this call. These costs naturally come down over time with advances in technology and with the benefit of increasing economies of scale.
“To determine the current number, regulatory best practice is to conduct a detailed cost study. This is also something that is required in terms of South African law. We believe we’re being entirely reasonable in expecting that the regulator respects this process,” Joosub said.
He said that this process has not happened, because Vodacom has not been asked to provide the detailed information necessary to complete this type of study.
“On top of this, we were not given sight of whatever model may have been constructed, nor given the chance to comment on it. That we ought to have been consulted is a fundamental requirement under the law. It is also a standard step taken by regulators across the world to ensure the accuracy, credibility and validity of their models,” Joosub said.
He noted that Icasa has also imposed an unprecedented level of asymmetry. “This means that by 2016, Vodacom will have to pay four times more to connect a call to the smaller networks than they will pay to connect to Vodacom.”
“Legal action should always be a last resort and we’re not happy that we’ve reached this situation. The fact that we’ve proposed that an interim cut is enacted immediately shows clearly that for us, the issue isn’t about fighting lower rates.”
“It’s about making sure that the right process is followed and that the rates ultimately imposed are objectively and fairly determined,” Joosub said.
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