Make or break moment for mobile: Knott-Craig

Cell C CEO, Alan Knott-Craig has waded into the ongoing battle within the mobile industry in South Africa, ahead of a landmark court case between operators Vodacom and MTN and regulator, the Independent Communications Authority of South Africa (Icasa).

Vodacom and MTN believe that Icasa has not followed a fair and objective process to determine the final termination rates in its call termination regulations 2014.

The case is expected to be heard in the South Gauteng High Court in Johannesburg on Tuesday.

Termination rates are the fees that telecommunications operators pay one another to connect calls to each other’s networks.

Icasa released its “Call Termination Regulations, 2014” on 29 January 2014, which would see mobile termination rates (MTR) reduced from the current 40 cents per minute to 10 cents per minute over the next three years.

The regulations further call for significant asymmetry, up from the current 10% to 120% from March 2014, 180% from March 2015, and 300% from March 2016.

The new call termination rates were set to kick in on 1 March 2014, but after both Vodacom and MTN initiated court proceedings against Icasa in February, the regulator postponed the implementation date to 1 April 2014.

In a statement released by Cell C on Monday (24 March), Knott-Craig, who suffered a stroke in November last year and has taken time to recover, said it is no exaggeration to claim that the coming week will be make or break for affordable mobile communications in South Africa – “quite possibly for the next twenty years”.

Knott-Craig said he is in the final stages of his recovery and should be “back in the saddle soon”.

He said that Vodacom and MTN are the dominant telecommunications operators in the country, having eclipsed Telkom with the massive assistance of a R1.00 asymmetry with Telkom for the first 15 years of their operations.

Knott-Craig said that the new asymmetry afforded by Icasa, is “sufficient to provide a fighting chance that will see a long term and sustainable shift in the established duopoly of the past 10 years”.

“Such a shift would mean a profound change in retail prices and could deliver enormous benefit to all customers (not just Cell C’s), the South African economy as a whole and, yes, Cell C,” the chief executive said.

Knott Craig’s statement read:

The legal points will be heard this week and Cell C believes that it is in the interest of the public to be clear about what this fight is about. The bottom line is that even Vodacom and MTN acknowledge privately that reductions in termination rates are fair, reasonable and inevitable. They also acknowledge that their “costs” are far lower than the current termination rate of 40 cents.

In fact, based on Vodacom’s assertions about their retail tariffs it is clear that their true costs are substantially below the 20 cents that ICASA has prescribed from 1 April 2014. If a change is inevitable, the only option left to Vodacom and MTN is to delay – and that is exactly what this fight is about.

I am proud that our Regulator had come up with something that would give consumers and the SA economy a bit of hope for affordable mobile communications in the future.

As the founding CEO of Vodacom, I know that I had a hand in creating the environment we find ourselves in now. I accept that I helped build an industry dominated by a duopoly. At the time, and during the first ten years of the industry, it was the right thing and the industry was about building high quality networks. But it should never have lasted this long – the second ten years of the industry appears to have been more about reaping extraordinary profit than about telecommunications.

Having said that, I have also made the commitment to fix things as they stand now. When I joined Cell C, the first thing I did was reduce prepaid call rates to bring them in line with contract tariffs, which have traditionally been much lower than prepaid tariffs (and which continues to be the case for the dominant operators).

Cell C introduced a simple concept. Flat rates – one rate that applies to all calls, to any network, at any time; thus taking out the dizzying complexity of the traditional mobile space. And Cell C continues to do that even though we don’t have the scale and financial muscle that our competitors have.

I have not stopped believing in what I started when I joined Cell C, even while I have been recovering from the stroke I suffered late last year. I am in the final stages of my recovery and should be back in the saddle soon.

It is my fervent hope that I return to an industry that looks very different from what it has for the last 20 years. I want to come back to an industry that reflects our 20 years of democracy. I want to come back to a competitive industry, an industry ready to provide services to everyone, at a good rate. I would like the next ten years of the industry to be about honest, good value service, delivered in a way that consumers understand – a fair price for a good service.

I believe that 1 April 2014 could prove to be almost as significant as 1 April 1994 – both pivotal moments in the history of our industry and our country.

More on mobile termination rates

Alan Knott-Craig back at Cell C soon

Icasa caves to Vodacom, MTN pressure: report

Carrim questions MTR impact on MTN, Vodacom

MTR spat tarnishing mobile industry: Vodacom

MTN makes good on legal threats against Icasa

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Make or break moment for mobile: Knott-Craig