Communications regulator Icasa will hold public hearings into contentious proposed changes to wholesale call termination rates in South Africa on 13 June 2024.

In March, the regulator proposed slashing mobile call termination rates – or the fees operators charge each other to carry calls between their networks – by more than half by next year.

It said it wants mobile termination rates reduced from 9c/minute today (13c for smaller operators) to 7c (9c) on 1 July 2024 and 4c (4c) on 1 July 2025. The rates have been coming down for the past decade, from an historic high of R1.25/minute.

In terms of the proposals, smaller players Telkom and Cell C will no longer enjoy “asymmetry” with bigger rivals Vodacom and MTN from next year, meaning that from that date they won’t receive a higher rand amount for incoming wholesale calls from other networks than outgoing calls.

The proposed cuts to fixed-line termination rates are even more aggressive: from 6c/minute now, Icasa wants these reduced to 4c from 1 July 2024 and to just 1c from 1 July 2025 – a cut of 83% in just 15 months. (There is no asymmetry in fixed call termination.)

Although Cell C and Telkom will no longer enjoy asymmetry in termination rates, future entrants into the voice services market will qualify for a limited, three-year period of asymmetry from launch.

Vodacom Group CEO Shameel Joosub told TechCentral in mid-May that the planned cuts will have no real impact on the retail prices paid by consumers.

‘Think differently’

“Regulators should start to think differently on MTRs; they are so low today that it is not helping anyone,” Joosub told TechCentral, referring to mobile network termination rates. “The rates are low enough, and there is no consumer benefit from cutting them further.”

Telkom, meanwhile, criticised the lack of alignment between fixed and mobile termination rates in the new regulations, arguing that the distinction between fixed and mobile calls is blurring as fixed-mobile substitution in the voice market is on the rise. “The trends make the average cost of terminating a fixed call the same, if not more expensive, than a mobile call,” said Telkom.

Read: Icasa moves to slash wholesale call rates – again

“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 Internet Service Providers’ Association echoed Telkom’s concerns surrounding fixed-mobile substitution, also questioning why Icasa neglected the move to converge fixed and mobile call termination rates.

“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 at the time.

Icasa said, however, that the draft rates “emanate from an intensive cost-modelling process involving the development of an iterative, multi-input, bottom-up cost model, accompanied by extensive engagement with the main voice operators”.

“The central feature of this cost model has been the adoption of a ‘long-run incremental cost’ approach in line with global international good practice,” it said. “The outcome of this consultative process has allowed the authority to deduce the appropriate cost levels of wholesale voice call termination services, and therefore to specify what operators should be able to charge.”