Icasa's final regulations on mobile termination rates

Termination rates for calls carried on competing networks have been reduced and large operators will have to pay increased fees to smaller networks that carry their calls. Image: Wiki Images

The termination rate - the fee that mobile operators pay to carry each other's calls - is currently 40c/minute and will be reduced to 20c/minute from March.

However‚ MTN and Vodacom‚ who are the biggest operators‚ will pay an extra 24c/minute above the normal rate to small operators in a system called an asymmetric termination rate. Small operators such as Cell C and Telkom Mobile will pay 20c/minute to MTN and Vodacom. This is expected to help the small operators grow their businesses.

High termination rates are seen as keeping small and new entrants from competing on price because they have fewer customers‚ and most of their customers' calls are made to other networks‚ which results in them paying more in termination fees to bigger operators.

Icasa councillor Nomvuyiso Batyi said the decision to reduce termination rates and increase the asymmetric rate was to provide an environment that was conducive to smaller operators investing in infrastructure.

Cell C welcomed the increased asymmetric termination rate‚ saying it was critical to help smaller operators grow.

"These are bold regulations that we fully support. This will go a long way to shape the future for competition‚" said Mothibi Ramusi‚ head of regulations at Cell C.

New rates

The termination rates will decline gradually over the next three years. Next year‚ the rate will reduce to 15c/minute and in 2016 to 10c/minute. The asymmetric rate will be 42c/minute next year‚ 40c/minute in 2016 and 20c/minute in 2017.

MTN previously warned that the aggressive reduction could result in a cutback on capital expenditure‚ while Vodacom criticised a call from small operators for the regulator to introduce an asymmetric rate‚ saying that such a move could undermine network quality and be counterproductive.

On Wednesday‚ Vodacom said in a statement that it supported lower mobile termination rates‚ but its request to Icasa for a "reasonable" reduction scale had not been accepted.

"We will be reviewing the potential impact both internally and externally. We will be in a better position to comment on the steps we will need to take to adjust our business model once that review has been completed‚" spokesman Richard Boorman said.

"We believe that the outcome today has been reached without following due process. A cost-based study‚ which is a prerequisite before reaching this type of decision‚ has not been conducted and shared with us," he said.

Vodacom opposed to rates

Further‚ Vodacom said the asymmetry structure was more aggressive and would be to the detriment of Vodacom's customers and business.

"We feel that the level of asymmetry is unjustified and that there is no clear basis for the differential. This asymmetry is clearly a subsidy for the smaller operators‚" it said.

Vodacom's chief executive Shameel Joosub reiterated this‚ saying the rates were a "subsidy which in effect means that Vodacom will be charged more to call Cell C and Telkom Mobile than the latter will be charged to call Vodacom.

"This prejudices Vodacom's customers‚ and rewards those who have not invested in their networks at the expense of those who have," Joosub said.

According to Telkom‚ the revised termination rates would substantially contribute to reducing the cost of communication and the consumer would be the biggest beneficiary.

"This brings the market closer to parity in termination rates‚ supporting the move to convergence between fixed and mobile services.

"Telkom has for many years subsidised the dominant mobile operators‚ and this move will begin to level the playing field. Telkom will pass on reductions to consumers and will communicate these savings once it has fully assessed the impact of the regulations‚" said Miriam Altman‚ head of strategy at Telkom.