The Independent Communications Authority of South Africa (ICASA) has rejected Cell C’s proposed delay the mobile termination rate (MTR) cuts, although the regulator will carry out the suggested market review.
ICASA announced today the scheduled cut of MTRs to 40 cents will take place as planned on Friday, March 1, despite a proposal submitted by Cell C for a delay pending a market review, which the operator urged the regulator to conduct.
“Since the introduction of the three-year glide path is contained in the [Call Termination Rate] Regulations, any changes to such a regulatory matter would require a public process that will afford all relevant stakeholders an opportunity to make their comments,” ICASA explained.
However, the proposed urgent market review will take place, with the potential to lead to further cuts in MTRs to as little as between 15 and 25 cents, ICASA spokesperson Paseka Maleka told HumanIPO.
“Other countries have gone as low as 15 cents or 25 cents, so we are not opposed to such cuts,” said Maleka.
“We don’t see any problems with making such cuts, however we need to do a market review to establish whether we could make such a cut.”
Cell C has welcomed the decision by ICASA to conduct the review, highlighting the importance of establishing whether the current regulations are the most conducive to establishing a competitive mobile network operating market.
“We trust that the regulator will also use the opportunity of the market review to make a determination on whether on-net vs off-net tariff differentiation and high national roaming charges contribute to the lack of effective competition,” Cell C said to HumanIPO.
“Cell C believes that lower call termination rates will benefit the country, but only if there is a greater asymmetry for smaller players and new entrants, which will enable them as sustainable competitors, as was the case with Vodacom and MTN during their first ten years of operations against the then-incumbent, Telkom. In fact the asymmetry between the dominant mobile operators and Telkom remains at approximately 400% to this day,” the operator added.
The regulator’s announcement does refer to the potential for high termination rates to prevent smaller players from effectively competing on the market, particularly when faced with very low calling tariffs implemented by larger players.
“High termination rates prevent small and new entrants from being able to effectively compete and allow larger players to offer on-net voice prices that are lower than off-net voice prices a smaller player may charge its customers. This may represent margin squeeze and predatory pricing,” ICASA acknowledged, noting the urgent review will consider possible forms of intervention against this type of activity.
Reports have subsequently pinpointed Vodacom’s Free4Sho calling plan as one plan which may be considered anti-competitive in this context, and have suggested ICASA is directly referring to this plan in its above comment.
However, Maleka has confirmed that there is no such correlation, and the regulator is yet to determine which price plans may come under scrutiny.
