Business Day (Johannesburg)
Lesley Stones
2 February 2007
Johannesburg — A FRESH attempt to force down the cost of phone calls is being made by the industry regulator, with a move to slash the fees local operators charge to route calls from one network to another.
High interconnection fees are the main reason why calls are so expensive in SA, with the cellular operators adding R1,25 a minute to calls made to a rival network. That fee is passed straight on to consumers.
Genesis Analytics estimates that the fees are at least 30% pure profit, and says 75% of the cost of a Telkom call to a cellphone goes straight to the cellular operators.
Now the Independent Communications Authority of SA (Icasa) wants to force them to charge a fee that maps out the cost of making the connection, with no massive profit margin.
Icasa tried to force that move in 2005, but was stymied by changing legislation. It is now using its powers under the new Electronic Communications Act to reinstate the battle.
"Cost-based pricing is a market remedy that will begin to reduce the costs of calls," Icasa says.
Icasa has issued a discussion document proposing that Telkom, Vodacom, MTN and Cell C have "significant market power" over call termination. That step would mark them out as monopolies and let Icasa force them to charge a cost-based interconnection fee.
Since Icasa can only intervene if it can prove that insufficient competition exists, the operators are likely to take legal action to oppose Icasa's attempt to dub them dominant players.
Icasa says regulators in many other countries support cost-based call termination. It has also studied Tanzania, Nigeria and Uganda, where Vodacom and MTN operate, and found that call termination there was cheaper than in SA.
"SA's rates are at least double the actual cost of making the connection and are well above most other Africa countries," it says.
The Communications Users Association of SA has long railed against high call fees, complaining that it is cheaper to make a Telkom call overseas than to call a neighbour's cellphone.
"We welcome any serious attempt to try to bring down the cost," spokesman Ray Webber said yesterday. "The mobile guys are putting more money in their pockets for every call that's made. They have to have their wings clipped."
The cellular networks pumped up the interconnection fee from 20c a minute in 1999 to a punishing R1,23 in 2001, a rise of 515%. It is now R1,25. Telkom charges just 31c to receive a call from a mobile network, only a quarter of the fee users pay for a call going in the other direction, or for a mobile-to-mobile call on rival networks.
The mobile operators argue that lower interconnection fees will not cut the cost for consumers as the operators pay out as much as they receive. But it would leave them unable to recoup the costs of expanding their networks, they claim.
Last month JPMorgan issued a report predicting regulatory and consumer pressures could result in lower interconnection fees.
"We believe such action will result in lower retail prices," said analyst Johan Snyman. When similar regulatory intervention occurred in Nigeria last year, MTN cut its fees to consumers an average of 20%.
Be the first to Write a Comment!
Copyright © 2007 Business Day. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com).
AllAfrica aggregates and indexes content from over 125 African news organizations, plus more than 200 other sources, who are responsible for their own reporting and views. Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica.
