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Icasa slashes interconnect fee

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In a move that will see phone call costs plummet in the next three years, Icasa has announced that the interconnect fee for calls between mobile networks will drop to 10c a call by 2016.

South Africa’s telecommunications regulator Icasa announced on Friday afternoon that the interconnect fee for calls between mobile networks would drop from the current 40c per call to only 10c by 2016. The biggest drop will occur in March 2014, when it will fall by half, to 20c.

Interconnect fees to and from fixed lines have also been slashed.

The result is likely to be a significant drop in the cost of mobile calls by 2016, with the new rates making it possible to provide call rates of 55c per minute, or less. In other words, mobile call costs may well drop below those of fixed lines. The full Icasa statement reads as follows:

The Independent Communications Authority of South Africa has made its determinations on the future of both mobile and fixed termination rates for the next three years, based on a review of industry conditions.

The revised rates are outlined in the tables below:

Table 1: Termination to a mobile location, 2014-2016

R 0.15

Table 2: Termination to a fixed location: 2014-2016

The Authority makes this determination based on a review of the effectiveness of competition in the market for call termination.

In 2010 the Authority determined that ineffective competition existed in the provision of call termination because of, amongst others, inefficient pricing. The Authority imposed cost-oriented pricing on Vodacom and MTN for mobile termination and Telkom for fixed termination.

The Authority finds that the market remains ineffective with extremely high levels of concentration, where the market for termination to a mobile location and the market for termination to fixed and mobile locations have a Herfindahl-Hirschman Index of greater than 4000, where 1800 is the estimated highest value before a market exhibits ineffective competition.

The revised termination rates apply to Vodacom and MTN for mobile termination and Telkom for fixed termination. The Authority further determines that there is a need for further asymmetry based on:

The level of asymmetry available to licensees offering termination to a mobile location is outlined in the table below:

Table 3: Maximum asymmetric termination rate which a qualifying licensee may charge for termination in Market 1

Licensees may qualify for this asymmetric rate if they have a market share of less than 20% of total minutes terminated to a mobile location. In effect, Cell C and Telkom Mobile qualify to charge these asymmetric rates.

The Authority finds no need to change the current asymmetric termination rates for fixed termination, meaning that asymmetric termination to a fixed location remains at 10%.

Stakeholders will have 14 working days following the publication of the Government Gazette to submit written comments on the draft regulations.

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