The Independent Communications Authority of SA (Icasa) has dropped a bombshell on SA’s telecommunications industry. It wants mobile termination rates slashed to just 40c/minute by July 2012, from 89c/minute during peak calling time now.

Fixed-line rates will also be cut and Icasa has warned operators that it expects them to pass on the benefits in the form of lower retail tariffs for consumers.

Icasa, which is to begin regulating termination rates for the first time, wants the fees dropped from 89c/minute now to 65c in July.

It then proposes further reductions, to 50c in July 2011 and 40c in July 2012.

The distinction between peak and off-peak rates is to be scrapped as this is “more beneficial in terms of tariff transparency as well as a lighter regulatory burden”. The off-peak mobile termination rate is currently 77c/minute.

In a surprise move, the regulatory authority has also proposed a reduction in fixed-line termination rates, from a new rate of 15c/minute in July 2010, falling to 12c a year later and to 10c in July 2012.

Fees for call termination, which is a category of network interconnection, are the fees the operators charge one another to carry calls onto their networks.

Icasa chairman Paris Mashile (pictured) outlined the new rates at a press conference at its offices in Sandton on Thursday morning.

ECN Telecommunications CEO John Holdsworth, who has been at the forefront of the fight to have mobile termination rates reduced, has expressed delight at Icasa’s announcement. “This is meaningful and far-reaching,” Holdsworth says. “This is effectively a set of regulations for consumers and new market entrants.”

Mashile says both fixed-line and mobile operators must pass on the benefits of lower termination rates to consumers.

“We expect fixed-to-mobile call rates to reduce as the mobile termination rates are reduced,” he says. “We have already benefited from a 100% pass-through of the recent reduction in mobile call termination rates for fixed-line subscribers and we would encourage this practice to continue.”

Mashile says Icasa also expects “some measure of pass-through [leading] to a reduction in retail prices of calls between mobile networks”.

“Given the nature of product bundling in the provision of retail mobile services, we expect that price reductions will be subject to dynamic competition,” he says. “Icasa’s view is that a lack of effective pass-through to retail prices [will] indicate there may be a lack of effective competition in the retail market for mobile services.”

Mashile says Icasa will “monitor price movements in the retail market for mobile services vigilantly over the coming months to evaluate whether further action is required”.

Icasa will hold further hearings on the proposed reduction in tariffs. These are scheduled for 9, 10 and 11 June. — Duncan McLeod, TechCentral