Cut interconnect rates to 25c per minute: ECN

ECN suggests setting the final interconnection rate at 25 cents as opposed to 40 cents.

The Independent Communications Authority of South Africa (ICASA) recently said that they will publish their much anticipated wholesale call termination rate regulations next week.

Techcentral reported that “the long-awaited regulations that will determine wholesale call termination rates in SA are ready and will be published next Friday [29 October 2010].”

This announcement came shortly after ECN CEO John Holdsworth slated ICASA at the 2010 MyBroadband conference on 20 October for not doing enough to bring about a more reasonable interconnect regime in South Africa.

Not low enough, says ECN

In April this year ICASA was applauded for suggesting significant interconnect rate cuts which were supposed to kick in during July 2010:

- Mobile termination rates were proposed to be reduced to R 0.65 from July 2010 and further reduced to R 0.40 from July 2012.
- Fixed termination rates were proposed to be reduced to R 0.15 from July 2010 and further reduced to R 0.10 from July 2012.

The July deadline came and went and apart from public hearings into the matter ICASA has not said much about the interconnect issue.

Holdsworth feels that ICASA should not only be more proactive to lower interconnect rates, but also that an ultimate mobile interconnect rate of 40c is just not low enough.

“The proposed interconnection rates may not be low enough. ECN suggests setting the final interconnection rate at 25 cents as opposed to 40 cents,” said Holdsworth at the 2010 MyBroadband Conference.
Holdsworth further feels that a distinction between fixed line and mobile termination rates is unnecessary. “This target rate [25c per minute] should be applicable for any voice service regardless of the protocol and/or technology used,” said Holdsworth.

“ECN also supports the removal of peak and off peak interconnect rates – this is a retail issue,” Holdsworth said.

Incumbent operators however argued that a drastic intervention in interconnect rates can hurt current business models and will not give them time to adapt. This in turn, they argue, will hurt the industry as a whole.

Other arguments include that there will be a Waterbed effect where profits will simply be made elsewhere to make up for lost revenue and that poor rural cellular users, who typically only receive calls, may suffer because of lower interconnect rates which subsidize their connections.

Holdsworth however said these arguments should be dismissed as the benefits of lower interconnect rates and increased competition far outweigh any negative effects.

- compliments of My Broadband