ECN Telecommunications CEO John Holdsworth says there is no reason mobile interconnection rates should not come down in one fell swoop rather than over a period of years.
MTN, Vodacom and Cell C have all argued that the rates should come down on a “glide path” over a number of years to avoid what is known as the “waterbed effect” where retail prices rise in other areas to compensate for a too-sudden reduction in interconnection rates.
Mobile interconnection rates, also known as termination rates, are the fees the mobile operators charge one another and other operators to carry calls on their networks. The rate is set at a high R1,25/minute in peak times.
“The waterbed effect is a myth,” Holdsworth says. “It hasn’t happened in any other market in the world.”
He says he does not agree there should be a glide path for interconnection rates. In a competitive market, the big operators don’t have the latitude to increase prices in other areas, he adds. “If they increase their prices, they will lose large amounts of business.”
Despite his objections to a glide path, Holdsworth says it appears inevitable that the Independent Communications Authority of SA (Icasa) will adopt this approach.
He says the mobile operators are guilty of “sabre-rattling” over interconnect. He says their warnings that they may cut back on spending on new network infrastructure in outlying areas is a red herring.
“There is a sufficient number of competitors who would be quite happy to pick those customers up,” Holdsworth says. “I don’t think there’s any threat of service delivery obligations falling by the wayside. If the incumbents don’t serve these customers, others will.”
He says incumbents the world over put these arguments forward when regulators intervene to force down interconnection rates.
Holdsworth also dismisses the contention by the incumbent mobile operators that retail prices won’t necessarily fall, even if interconnection rates are cut. Retail mobile rates will fall sharply, provided the sector is properly regulated, he says.
“If Icasa does its work and introduces cost-based interconnect and commences facilities leasing regulations, mobile tariffs will decline dramatically.”
Holdsworth expects new competitors to emerge and says SA can realistically sustain between six and eight mobile network operators.
ECN wants to be one of them. The company plans to build its own mobile network and is in talks with a number of international mobile operators that are said to be interested in investing in the country.
“There’s a lot at stake for incumbents and new entrants and quite literally anything is possible right now,” Holdsworth says. — Duncan McLeod, TechCentral
