The Independent Communications Authority of South Africa (Icasa) said on Wednesday that it sees “no reason” why mobile termination rates, the wholesale fees operators charge to carry calls between their networks, should not fall to between 15c and 25c/minute from the 40c they will be cut to this Friday.

The authority’s comments are contained in a statement in which it explains why it has turned down a request from Cell C for a suspension of this Friday’s cut in the rates so that there can be an urgent market review of the efficacy of the regulations governing them.

Cell C has said it wants a continuation or even a strengthening of “asymmetrical” termination rate regime whereby smaller operators pay less to terminate calls on bigger rivals’ networks than the other way around. MTN on Monday tore into Cell C, saying asymmetry doesn’t encourage smaller players to become more efficient and instead simply increases bigger operators’ costs.

Termination rates have been coming down over a three-year glide path — from a high of R1,25/minute in peak times a few years ago — but Icasa has now said it’s far from convinced that the cuts have been sufficient and plans to conduct an urgent market review to determine if further cuts should follow again in 2014 and beyond and, if so, the size of the reductions.

“Icasa acknowledges that some reductions in the retail price have taken place. However, it is concerned that there has been an insufficient increase in competition over the past few years,” it says in a statement. “Icasa’s goal is to promote effective competition and is of the view that the cause or barrier to a lack of effective competition is the high termination rate…

“To this end, the authority sees no reason why mobile termination rates should not be in the region of 15c to 25c, based on benchmarks set by South Africa’s peers in Africa and the rest of the world,” the statement says. “It is also conceivable that termination rates should tend towards zero over time.”

According to Icasa, high termination rates prevent smaller players and new entrants from competing effectively. Rather, they allow large players to offer on-net voice prices that are lower than the off-net calls a smaller player may charge its customers. “This may represent margin squeeze and predatory pricing.”

Icasa is “concerned” that the price of some on-net calls is below the termination rate. This would indicate that operators are pricing on-net calls at below the true cost of a call, or that current termination rates are “still considerably too high”.

Although Icasa doesn’t mention the operator by name, Vodacom recently introduced a new on-net calling plan whereby customers who make a three-minute metered call, billed at R3,60, to another Vodacom number are then given next 57 minutes of that call free of charge. For a 60-minute call, that works out to an effective 6c/minute — far below the termination rate.

“Other jurisdictions have addressed such behaviour through regulations imposing flat rates across networks, a price floor for a product, and/or anticompetitive penalties on operators found to be pricing in this manner,” Icasa says.

“The authority intends urgently to review the structure of pricing, including transparency in the market, and will examine the necessity for this form of intervention on an urgent basis.” — (c) 2013 NewsCentral Media