Mobile operators respond to Icasa’s termination rates plan

Telkom and Cell C have raised concerns with the Independent Communications Authority of South Africa’s (Icasa) proposed changes to call termination rates.

Telkom has welcomed the decrease in call termination rates proposed by Icasa. However, it says that asymmetry between mobile and fixed-line termination rates doesn’t make sense.

Cell C added that charging small and large networks the same mobile termination rates does not encourage competition and will disadvantage smaller operators.

Call termination rates are the fees operators charge one another to connect a call from a rival network to a subscriber on their own.

If a Cell C subscriber calls a Vodacom number, Cell C pays Vodacom a fee.

These rates apply to both mobile and fixed services.

Icasa’s proposed amendment will decrease call termination rates across the board.

At the moment, small operators can charge large operators R0.13 per minute, whereas large operators charge R0.09/min in return.

These asymmetric rates are determined based on mobile operators’ market share.

Icasa’s proposed termination rates for mobile and fixed devices are summarised in the table below.

Telkom supports the decrease in interconnection tariffs, saying that because it is more aligned with costs, “[it will] enable smaller mobile operators like Telkom to compete more effectively in the provision of voice services.”

However, Telkom is concerned about the significant decrease in fixed device termination rates.

The Internet Service Providers’ Association of South Africa has echoed Telkom’s concerns.

“This is especially concerning at a time when the distinction between fixed and mobile calls, from both operator and consumer perspectives, is blurring; and fixed-mobile substitution in the voice market is increasing,” Telkom said.

According to its 2023 interim financial results, Telkom had 690,000 fixed access lines as of September 2023, a decrease from 882,000 the previous year.

At the same time, Telkom had 18.29 million mobile subscribers, which was roughly half of what MTN had. Vodacom had 47.26 million subscribers as of September last year.

This means Telkom could end up paying rival mobile networks significantly more than it receives from these networks.

No more asymmetry

The second part of the amendment aims to ultimately phase out asymmetric rates between mobile operators.

However, new entrants will still be able to charge asymmetric rates for three years after launch.

“By phasing out asymmetry and providing a transitionary period for new entrants, we aim to empower operators to adapt gradually, all while maximising benefits for consumers”, said Icasa council committee chairperson, Nompucuko Nontombana.

Icasa said its goal in decreasing termination rates is to reduce the cost of communication for consumers.

However, Cell C told MyBroadband that decreasing rates without maintaining asymmetry, “would disproportionately benefit the already dominant players, leading to revenue loss for smaller operators like Cell C, with no direct benefit to the end consumer.”

Thus, the mobile operator believes Icasa must phase out the asymmetry over three years instead of immediately implementing the change.

The reason for this would be to “safeguard the interests of smaller operators [and] uphold the principles of fair competition, benefiting consumers and the industry as a whole.”

MyBroadband contacted MTN and Vodacom and both responded saying that they were reviewing the impact that the amendment would have on their respective businesses.