Anti-competitive telecoms industry

[I Robot]

Independent Communications Authority of South Africa (Icasa) publishes interconnection and facilities leasing draft regulations

27 July 2007

The Independent Communications Authority of South Africa (Icasa) has published interconnection and facilities leasing draft regulations for public comment. Interconnection is the physical and logical linking of telecommunications systems in order to enable any user of one network to communicate with a user of another network

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[Dave A]

Ever wondered why the introduction of new companies in the cellular field hasn't really reduced prices?

Interconnection tariffs are the portion of a cellphone call rate that the major networks charge one another for callers to make contact with their networks. For example, a call from a Cell C subscriber to an MTN subscriber will net MTN R1.25 in interconnection revenue.

Where South African interconnection tariffs are R1,25 per cellphone call, in India, by comparison, this fee is just $0.03 (about 20c).

Interconnection fees were 20c in 1994, but were raised by MTN and Vodacom by a whopping 635% to R1,25 shortly before Cell C entered the market.
full story from M&G here

Is the service supporting the recipient of the call worth about two thirds of the call value? How much more evidence of anti-competitive behaviour against new entrants do you need?

I'm amazed the competition board wasn't all over that one like a rash.

[SilverNodashi]

Dave, how do you think MTN can afford their fancy new buildings every 2 years, and fancy new cars for the "top of the food-chain" bosses without this increase?

[Dave A]

It looks like Patricia is taking the issue up:

Cellphone call costs in South Africa are among the highest in the world and need investigating, Independent Democrats leader Patricia de Lille said on Wednesday.

In a statement, De Lille said she had lodged a complaint with the Competition Commission to investigate whether local cellphone service providers were "acting anti-competitively or are guilty of any prohibited practices".

Among other things, the complaint calls on the commission to investigate "possible collusion between the dominant operators, particularly with regards to interconnection fees".
full story from M&G here

[Dave A]

Sometimes raising issues bears fruit:

The Independent Communications Authority of South African (Icasa) and telecommunications companies will embark on a process to cut call termination rates, the authority said on Tuesday.

Following a meeting between Icasa, Vodacom, MTN, Cell C, Telkom, Neotel and the Internet Service Providers' Association, Icasa said the interconnect rate had been discussed.

Interconnect rates are the amounts charged by networks for carrying calls on behalf of one another, with South Africa having exorbitant interconnect fees when compared with most other countries.

"The meeting was necessitated by the ongoing public discussions around the cost of call termination in the country," Icasa said in a statement.

After deliberations, the meeting had resolved to embark on an industry-led process to reduce termination -- or interconnection -- rates, with Icasa exercising an oversight responsibility.

The meeting resolved to ensure that in negotiating a new termination rate regime they took into account competition law requirements.

The meeting decided to conclude negotiations between the operators by the end of December 2009, with Icasa proposing an implementation date of February 1 2010.
full story from M&G here

[Dave A]

Well here is some good news:

Vodacom on Wednesday denied that it was against the reduction of interconnection rates by the Independent Communications Authority of South Africa.

"We are ready to reduce these mobile terminating rates as long as the cost of terminating another party's call plus a fair profit is demonstrated," Vodacom's Bob Collymore said.

Collymore said it would be unfair for Vodacom to reduce its rates, as it would cause damage to their business, whereas other operators were reluctant to do so.

"Icasa must orchestrate the rate cut. Last week they initiated such talks, and strong progress is being made," Collymore said. Vodacom also said it sent Icasa its cost structure in order for them to ascertain how to decrease the rate, including the termination costs.

Collymore urged Icasa to apply its mind in determining the cut, so that it did not financially damage any operator.
full story from Business Report here

[Dave A]

I see all the recent media excitement about an imminent reduction in interconnection fees is smoke. At least the reason why the competitions board never tackled the issue has become evident - government is/was the major stakeholder.

Talk about self-interest

What is needed to move this forward is to disconnect interconnection fees and final-charge-to-client as issues. Keep the final fee to client the same for the transition. Just have it so that less money is going to the network supporting the recipient's call and more money goes to the service supporting the person making the call.

All the recipient network has to do is put the call through, using much the same technical infrastructure as has to be in place for their clients to make calls in the first place.

The calling network has the same technical infrastructure costs plus the marketing and distribution channel costs, and the job of collecting the money.

How the service providers can put on a straight face and claim the interconnection fee as a proportion of total charge is anywhere near related to actual cost portioning is beyond me.

[Pap_sak]

I see all the recent media excitement about an imminent reduction in interconnection fees is smoke. At least the reason why the competitions board never tackled the issue has become evident - government is/was the major stakeholder.

Talk about self-interest

What is needed to move this forward is to disconnect interconnection fees and final-charge-to-client as issues. Keep the final fee to client the same for the transition. Just have it so that less money is going to the network supporting the recipient's call and more money goes to the service supporting the person making the call.

All the recipient network has to do is put the call through, using much the same technical infrastructure as has to be in place for their clients to make calls in the first place.

The calling network has the same technical infrastructure costs plus the marketing and distribution channel costs, and the job of collecting the money.

How the service providers can put on a straight face and claim the interconnection fee as a proportion of total charge is anywhere near related to actual cost portioning is beyond me.

Yup. Same as banks adverts and how they are "there for you"...Then hit you for R14 for Debt Orders - which, in this country, you can only cancel for 3 months - if the supplier wants to put it through again,it will go through, not the banks problem. Anyway R14 for an automated process??? How many debit orders go through a month anyway...millions.

[Dave A]

At last, real action!

South Africa's telecoms regulator has finally taken the bull by the horns and announced its plan to regulate interconnection rates.

The Independent Communication Authority of South Africa (Icasa) announced on Thursday that it would be slashing interconnection rates by 27% in July this year -- from the current rate of 89c per minute -- to 65c.

It also announced a "glide path" that would see the interconnect rate cut to 50c in July 2011 and 40c in July 2012
full story from M&G here

[Dave A]

Unsurprisingly MTN and Vodacom are claiming changing the interconnection fee is going to harm the future of the industry. However, this is worth highlighting:

The company (MTN) added its margins in South Africa compared poorly within Africa, and any reduction in interconnection prices would need to be recovered in other parts of its business.
from M&G story here

Yep - that would probably be the way to go.