Interconnect fee drop does little for subscribers

"Du Pont is in the business of managing and analysing cellphone packages on behalf of our customers, the majority of whom are large corporates running fleets of cellphones on business contracts. We were keen to see how much our customers who subscribe to its two most popular business packages - Talk 500 S and Talk 1000 S - were likely to save with the new tariffs. We were hugely disappointed at what we found," says Graeme Victor, CEO of the voice-based telecommunications solutions company.

The new charges - the first for contract subscribers from any of the networks since the drop in the interconnect rate - came into effect on 1 May.

Pressure needed on networks

Victor believes that the evaluation exercise once again underscores the need to move away from focusing on interconnect rates to putting pressure on networks to reduce the actual retail cost of calls as the only way to achieve a meaningful, across the board decline in cellular call charges.

"Last year, we warned that a drop in interconnect rates would not necessarily lead to a reduction in retail call charges. This was the case in Kenya, Tanzania and Ghana, while in Israel, call charges increased.

"So far we have unfortunately been proved correct. The networks have tinkered with some - but not all - pre-paid packages but we believe that the majority of pre-paid users have not benefited to any great extent by the lower interconnection rates," he adds.

Off-peak no benefit to business

Benefits for existing contact users have largely been limited to having more off-peak 'free minutes' being bundled into their packages.

Victor points out that as most businesses and high-volume contract users already waste a high proportion of their off-peak 'free minutes', the availability of even more 'free minutes' for use outside of business hours is likely to exacerbate the wastage problem.

However with the elimination of off-peak rates by Vodacom in its new pricing structure, business contract consumers could find that they actually end up with less 'free' off peak talk time than they had before.

Meanwhile neither MTN nor CellC has announced any reduction in the per-minute rate for contract subscribers since the lower interconnect rate came into effect.

Call to government

In terms of the new Vodacom tariffs, peak hour on-network calls (Vodacom to Vodacom) and peak off-network calls have been reduced by 3.5% and 16% respectively. However, formerly off-peak and happy hour calls now cost between 33% and 54% more.

"When averaged out over the cellphone call usage of 'typical' Talk 500 S and Talk 1000 S users, we found that the contract subscribers' monthly bill barely changed.

"This clearly indicates that if the government and regulatory authorities are serious about reducing the cost of mobile telephony, they need to turn their attention to the retail costs of calls across the board - including for contract/post-paid subscribers," Victor concludes.