The Internet Service Providers Association (ISPA) has questioned recently-announced aggressive reductions in fixed call termination rates.

The industry representative body is also calling for implementation of the planned convergence of mobile and fixed call termination rates towards eventual parity.

Call termination rates are fees charged by telecoms networks to ensure calls originally placed by a subscriber on one network can reach, or terminate, a subscriber on another network. These costs are worthy of interrogation as they are almost always passed on to the end telecoms consumer.

The Independent Communications Authority of South Africa (ICASA) has decided not to align South Africa’s fixed termination rate with the mobile termination rate in a move that goes against its own findings that acknowledge the convergence between fixed and mobile, driven largely by the Covid-19 pandemic.

The regulator said in a recent notice that it wants mobile termination rates slashed from 9c/minute ex VAT (13c for smaller operators) to 7c (9c) on 1 July 2024 and 4c (4c) on 1 July 2025. The proposed cuts to fixed-line termination rates are more aggressive: from 6c/minute now, ICASA wants these reduced to 4c from 1 July 2024 and to just 1c from 1 July 2025.

ISPA member Switch Telecom comments that R0.01 is an extraordinarily low fixed termination rate (FTR) by global standards. In addition to South Africa’s FTR being just a fraction of that in highly developed markets, South Africa is a geographically large country with relatively low population density.

The company estimates that the real-world cost of deploying fixed lines is far higher than in Europe, for instance, where the FTR is 40% higher than ICASA is proposing. Furthermore, South Africa has unique challenges relating to unreliable power which adds to the cost of providing reliable services.

Telkom, South Africa’s fixed line operator, has already expressed dismay at ICASA’s decision to cut fixed call termination rates and mobile termination rates asymmetrically. For their part, many of ISPA’s members provide voice services and their experience is that fixed-mobile substitution in the voice market is increasing. This is a worldwide trend.

According to ISPA chair, Sasha Booth-Beharilal: “The argument for parity has little to do with interconnection revenue, but rests on the fact that the distinction between fixed and mobile calls is blurring. The result is that the average cost of terminating a fixed call is now the same, if not more expensive, than terminating a mobile call.”

The first call termination review took place around 2010, resulting in ICASA imposing glide paths for the reduction of termination paths. Under ICASA regulation, call termination rates have been substantially reduced since 2014. Now, concerns are related to issues of parity and the view is that there is simply no good reason for differences in fixed and mobile termination rates.

When it comes to proposals to cap rates local operators can charge for terminating calls coming from international destinations, ISPA welcomes the proposal to curb excessive international termination rates which bear no relation to regulated rates or actual costs. ISPA will engage with ICASA to ensure it understands how this will be practically implemented.