The Internet Service Providers’ Association (Ispa) has raised concerns about what it has described as the “aggressive” proposed cut in fixed-line call termination rates.

These wholesale rates, charged by operators for calls carried between their networks, have come down sharply over the past decade as Icasa has moved to reduce the cost to communicate in South Africa.

But Ispa has now warned that the regulator may have gone too far in proposing that fixed call termination rates be reduced to just 1c/minute by next year.

Last month, Icasa said in a notice published in the Government Gazette that it wants mobile termination rates slashed from the current 9c/minute (13c/minute “asymmetry” for smaller operator) to 7c (9c asymmetry) by July and to 4c (4c asymmetry) by next July.

In fixed lines, Icasa wants termination rates to decline from 6c/minute now to 4c from 1 July and to 1c by next July – a cut of 83% in just 15 months. (There is no asymmetry in fixed call termination rates.)

Under Icasa’s plan, smaller players Telkom and Cell C will no longer enjoy asymmetry with bigger rivals Vodacom and MTN from next year, meaning that from that 1 July 2025 they won’t receive a higher rand amount for incoming wholesale calls from other networks than outgoing calls.

Now Ispa has questioned why Icasa hasn’t moved to converge fixed and mobile call termination rates.

‘Unique challenges’

“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,” Ispa said in a statement on Tuesday.

Ispa member Switch Telecom said the 1c/minute proposed fixed termination rate (FTR) from July 2025 is “extraordinarily low” by global standards.

“In addition to South Africa’s FTR being just a fraction of the FTR in highly developed markets, South Africa is a geographically large country with relatively low population density. 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.”

Read: Icasa moves to slash wholesale call rates – again

According to Ispa chairman Sasha Booth-Beharilal, the argument for parity between the mobile and fixed rates 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.”

Ispa isn’t alone in criticising the proposed new rates. Telkom last month also expressed dismay at the “drastic” reductions in the fixed-line termination rate, and also called for parity between fixed and mobile.

“Telkom is concerned by the authority’s decision not to align the fixed termination rate with the mobile termination rate, but rather to drastically reduce the fixed termination rate to an amount that is drastically lower than the mobile termination rate,” the company said in response to a query from TechCentral about the draft regulations.

The argument for parity is based on the notion that the distinction between fixed and mobile calls is “blurring”, with fixed-mobile substitution in the voice market increasing. “These trends make the average cost of terminating a fixed call the same, if not more expensive, than terminating a mobile call,” Telkom said. – © 2024 NewsCentral Media