MTR decision “catastrophic” for SA consumer: Cell C

Cell C has lashed out at Icasa’s new draft call termination regulations (CTRs) in a statement issued on Tuesday, 9 September 2014, saying that the about-face of the industry regulator will entrench the duopoly of Vodacom and MTN.

The Independent Communications Authority of South Africa (Icasa) revealed its new proposed CTRs at an emergency press briefing on Thursday, 4 September 2014.

These come after the regulator’s previous regulations were struck down by the South Gauteng High Court as unlawful and invalid.

However, the judge suspended the declaration of invalidity for six months, giving Icasa until the end of September to produce new regulations.

Call termination rates are the fees telecommunications operators charge each other to connect calls to one another’s networks.

Definition shift

Among the changes in Icasa’s new draft regulations was a dramatic reduction in asymmetric rates for smaller mobile networks, and a change in the way operators qualify for asymmetry.

Networks now qualify for asymmetry based on the share of terminated voice minutes on their network, where previously Icasa was going to use market share by revenue.

Asymmetric rates means that smaller players such as Cell C and Telkom Mobile may charge more for connecting a call to their networks than Vodacom and MTN is allowed to.

Year Old mobile termination rates New mobile termination rates
Regulated rate Asymmetry Regulated rate Asymmetry
2013 R0.40 R0.44 (10%)
2014 R0.20 R0.44 (120%) R0.20 R0.30 (50%)
2015 R0.15 R0.42 (180%) R0.16 R0.22 (38%)
2016 R0.10 R0.40 (300%) R0.12 R0.16 (33%)
2017 R0.10 R0.20 (100%) R0.08 R0.10 (25%)

“Cell C is disappointed by the dramatic U-turn Icasa has made in its approach to remedy the current market failure and promote competition in a duopolistic market,” Cell C CEO Jose Dos Santos said in a statement on Tuesday.

According to Cell C, there are two distinct issues that Icasa has pronounced upon:

  1. The level of mobile termination rates (MTRs) that may be charged by the two dominant mobile operators.
  2. the level of pro-competitive remedy that is appropriate to provide to challenger operators to assist in creating a reasonable degree of competition in the market (asymmetry).

“Without such pro-competitive remedy, the South African market will remain a duopoly,” Dos Santos argued.

In its statement, Cell C briefly mentions that Icasa has stuck with its bold decision from earlier in 2014 to reduce mobile termination rates (MTRs) from 40c to 20c.

“This was a positive adjustment and no serious argument was presented in court papers from the duopolists that this figure is unreasonable,” Dos Santos said. “Consequently, it is unsurprising that this rate has remained unchanged in the latest draft regulations from Icasa.”

Asymmetry

On the matter of asymmetry, however, Cell C was less than flattering.

Its full statement on Icasa’s decisions to drop the level of asymmetry is reproduced below:

Icasa is now proposing a complete U-turn in its implementation of Government policy in respect of pro-competitive regulations and reducing the cost to communicate.

The massive proposed reduction in Asymmetry completely eliminates any pro-competitive remedy.

Icasa is now only proposing a marginal cost recovery, which is not, in terms of many international benchmarks and literature, the basis on which asymmetry is determined, and which will have the effect of entrenching the duopoly in the South African market today.

This is a different proposition to the pro-competitive remedy that was gazetted in the original regulations and is particularly puzzling when the number of mobile network operators has reduced from four to a de-facto three in the intervening period.

It is not clear whether Cell C is referring to the announcement of the acquisition of Neotel by Vodacom; or the radio network sharing Heads of Agreement between MTN and Telkom above.

The proposed regulations appears to be an acknowledgment by Icasa that the duopoly that exists in the South African market today is an acceptable state of affairs and will be allowed to continue.

In the long term this will be catastrophic to both the wider telecommunications industry and to the South African consumer.

The significant reduction in the cost to communicate over the past 18 months was entirely brought about by competition from Cell C.

Should the South African market return to the duopoly of old, all South African consumers will suffer regardless of which network they use.

Cell C is disappointed with these rushed regulations arising from a process about which we also have concerns.

Cell C will engage the Regulator during this short consultation period to ensure that a pro-competitive environment is established.

We are further considering all of our options.

Cell C seeks a remedy of the current market failure and the establishment of a pro-competitive environment that allows all players to offer logical pricing, improved quality of service and attract further investment.

This article was first published on MyBroadband.

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MTR decision “catastrophic” for SA consumer: Cell C