Evidence from a benchmarking study conducted last year for the Namibian regulator to determine their cellular interconnection rates, shows that the cost-based interconnect costs of efficient operators are probably lower than 25 cents, a far cry from the 89c peak rate operators have proposed this month to the Independent Communications Authority of South Africa (ICASA).
While in South Africa by law the regulator is required to conduct complex and lengthy studies before it can set the interconnection rate, in Namibia the regulator was able to move swiftly on the basis of benchmarking studies to reduce the interconnection rate between its operators by nearly 50%.
This is according to Alison Gillwald, director of Research ICT Africa and convenor of the UCT course Connectivity and Convergence: Alternative Regulatory Strategies for Telecommunications, a programme designed to provide alternative regulatory strategies for resource constrained developing countries. The programme will be offered by LIRNE.net, an international applied research collaborative which has offered similar programmes in Europe, Asia and Latin America. It is run in South Africa by the UCT Graduate School of Business (GSB) Executive Education unit from 12 to 16 April.
While the decision by cellphone operators Cell C, MTN and Vodacom to lower their interconnection rates in the coming weeks has been welcomed, the size of the proposed cut has drawn some sharp criticism.
The rate is what telecommunication companies charge each other when a call from another network is terminated on their own network. ICASA turned down a proposed voluntary reduction in interconnection rates received from the three operators on January 25, which was offered on condition the regulator did not try to regulate the price further until 2013. This condition was dropped by the operators and ICASA subsequently accepted the cut – but said this would not stop them from continuing with their investigations in what cost-based interconnection charges should be.
Gillwald says that, while it was understood that operators needed time to adjust their business models to cost based interconnection, the cuts proposed were way off the globally benchmarked price of an efficient operator.
“The reductions proposed by the networks are not nearly cost based prices and threaten to continue to inhibit competition in the market and constrain the reduction of end user prices in South Africa, which are high by global standards,” she says.
“It is thus critical that not just ICASA, but policy makers and key decision-makers entrusted with resolving these issues, are equipped to deal with these growing demands in the policy and regulatory space, more often than not with somewhat limited resources.”
She says learning from our African neighbours and other emerging markets can help address these challenges.