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Interconnect drops to 40c

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Icasa has confirmed that the mobile ternination rate the interconnect fee for connecting calls between networks will drop to 40c tomorrow. And Icasa sees room for further falls.

The Independent Communications Authority of South Africa has confirmed that the ‚”glide path‚” for termination rates will continue as provided for in the Call Termination Regulations, despite calls for it to be suspended. And it has suggested that it could potentially drop further, to 25c or even 15c.

The mobile termination rate (MTR) will drop to 40c on 01 March 2013, completing the glide path that brought it down from a high of R1.25 per call just three years ago.

‚”When publishing the Wholesale Voice Call Termination Regulations in 2010, the Authority set out the three-year glide path and its expectations that over time, a more dynamic pricing environment including lower retail rates, would develop, ultimately leading to the benefit of the consumer,‚” Icasa said in a statement today.

‚”Since the introduction of the three-year glide path is contained in the 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. Further, any changes would need to be informed by a comprehensive study or market review.

‚”The Authority has noted the concerns raised by various parties and will be initiating a review of the call termination market and look into the matter of price transparency on an urgent basis.

‚”The Authority acknowledges that some reductions in the retail price have taken place, however the Authority is concerned that there has been an insufficient increase in competition over the past few years. ‚”

Further calls have been made for the reduction of the MTR to as low as 25c, or even to drop it altogether. However, Alan Knott-Craig, CEO of Cell C, made a late bid to halt the drop to 40c, suggesting that it would disadvantage smaller players. Icasa disagreed.

‚”The Authority’s goal is to promote effective competition and is of the view that the cause or barrier to a lack of effective competition is the high termination rate. High termination rates are a barrier to reduced off-net call prices and therefore prevent effective retail price competition.

‚”To this end, the Authority sees no reason why mobile termination rates should not be in the region of R 0.15 to R 0.25, based on benchmarks set by South Africa’s peers in Africa and the rest of the world. It is also conceivable that termination rates should tend towards zero over time. The upcoming market review will, inter alia, address the above issues.‚”

According to Icasa, 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.

‚”The Authority is concerned that the pricing of an on-net voice call may be below the termination rate, an indication that operators are pricing on-net calls at below the true cost of a call, or that the current termination rates are still considerably too high.

‚”Other jurisdictions have addressed such behaviour through regulations imposing flat rates across networks, a price floor for a product and/or anti-competitive penalties on operators found to be pricing in this manner.

‚”The Authority intends to urgently review the structure of pricing, including transparency in the market and will examine the necessity for this form of intervention on an urgent basis. The Authority will soon unveil its plan of action to address all these matters. ‚”

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